Welfare analysis of wastewater treatment charges : a case study of the bangkok metropolitan administration wastewater management system

Abstract

This study objects to introduce the analysis framework of determining and emphasizing the total effects of the environmental policy on net social welfare which is defined as the changes in consumer surplus in household sector together with gains in governmental sector (Bangkok Metropolitan Administration). The study uses Linear Expenditure System (LES) to estimate households demand patterns and Stochastic Frontier Analysis (SFA) to estimate abatement cost of Bangkok’s wastewater treatment plants. The results prove that any policy scenarios encourage net social welfare gains. The author finds that the policy, imposing the charge at 2 baht per m3 without any compensation, creates the most net social welfare gain (4.577 million baht per month) when compared to other scenarios and affects decreasing of wastewater discharged the most equalling to 3.338 percent. Moreover, the revenue neutral scenario that reduces other taxes to compensate households is the most efficiency scenario while using the revenue to fund lump sum transfers actually creates better equity to the society In addition, the results show that BMA designed policy, imposing the charge at 2 baht per m3 without any compensation, impacts lose in household sector 42.579 baht per household per month or the total is 85.159 million baht per month. BMA sector gains from this new source of revenues about 83.870 million baht per month. BMA also benefits from decreasing wastewater discharged by saving its abatement cost about 5.865 million baht per month. Indeed, the wastewater treatment charge creates net social welfare gain in a case study of Bangkok Metropolitan Administration’s wastewater management system.