The purpose of this article is to calculate cost-effective spatial and dynamic allocations of nutrient abatement for reaching targets in a large sea with different and interlinked marine basins. A discrete dynamic model was constructed to account for measures affecting both nitrogen and phosphorus and heterogeneous and coupled marine basins within the sea. Theoretical results revealed that positive decay rates of nutrient pools in the marine basins reduce abatement costs by delaying abatement over time. The results also showed that simultaneous management of both nutrients reduces overall abatement costs as compared with separate management. An empirical application to the intergovernmental agreement on nutrient pool targets in the Baltic Sea was made by combining results from an oceanographic model with an economic model of abatement costs. The results indicate that modest changes in decay rates make a significant impact on abatement costs and that simultaneous implementation of targets for both nutrients can reduce total cost by approximately 15% compared with separate treatment. A robust result is the finding that one country, Poland, faces much higher abatement costs than the other eight riparian countries because of its relatively large discharges into a marine basin with a stringent phosphorus target and slow response to load changes.

JEL Classification Codes: Q25, Q28, Q23