3. Costs of Implementation

The implementation costs of the Nitrate Directive have are related to the following main measures in Latvia:

I. Implementation of the Action Programme:

2. Preparation and implementation of water monitoring programmes relevant to

3.  Support (subsidies ) for the implementation of GAP Code for Latvia in the vulnerable zones.

3.1. Estimated costs of implementation under the proposed scenario

3.1.1. Improvement of the manure holding in farms

Costs of the Action Programme are the most expensive in the implementation of the Nitrate Directive in Latvia. The highest costs will be associated with the improvement of manure handling in the farms, especially construction of manure storages. Generally, with the exception of some farms, there are no manure storages appropriate to the western standards in Latvia. Most of the existing solid manure storages need reconstruction, enlargement, and construction of urine storages. Slurry storages do not have the appropriate waterproof construction that would prevent leakages.

Our calculations on the number of farms in the vulnerable zones are based on the data sets on livestock farms (cattle, pigs, and poultry) of the Ministry of Agriculture. All registered farms with 5 and more livestock units (LU) are included. .Farms were divided in 4 groups according to their size (LU):

Table 6 depicts the number of livestock farms in the vulnerable zones.

Table 6. Livestock farms in the vulnerable zones

The conditions of manure handling in farms with 250 LU and more animals (Figure 4) were investigated in November -December 2000. The calculation of costs necessary for construction and improvement of storages was performed according to the data. The necessary investments for a storage capacity of 6 months for solid manure and 8 months for slurry were calculated for every farm taking into account the available capacity and construction quality of the existing storages. In all other farms the calculations were based on costs of new constructions, considering that generally storages do not correspond to the requirements of GAP Code for Latvia. The storage capacity was estimated using Annex 3 of the GAP Code for Latvia. Recommendations on capacity of urine storages were not included in GAP Code for Latvia. Therefore, a necessary storage volume was calculated using recommendations for urine storage from the Good Agricultural Practice Code for Finland.

Figure 4. Locations of large livestock farms (>250 LU) in the vulnerable zones.

An average cost for 1 m3 of storage capacity of concrete manure storage constructed in Saldus district in 1997 was used to evaluate the investments necessary for construction of manure storages. Costs of this project included the preparation of construction site, construction materials, and labour of the contractor company (labour costs were revised in 2000), as well as 18% V AT tax. The Alfa Laval (tractor powered equipment) costs from the same farm in Saldus district were used for the evaluation of the price of pumps and other necessary manure holding equipment. The investments for 1 m3 of solid manure storages were calculated reducing the costs of slurry storage by 2.

The cattle farms (Table 7) for milk and meat production are the largest group of farms in the vulnerable zones. There is however a large number of farms with a smaller number of animals. Therefore, the total construction costs in this group are high. Investments per one LU are 8 times higher for farms with 5-50 LU than for farms with more than 250 LU. It should be considered that farms with 5-50 LU include about half of the total number of cattle.

Table 7. Cost of manure storages in cattle farms in the vulnerable zones

High concentration of animals (Table 8) in large farms is typical for pig production. About 75% of all pigs in the vulnerable zones are produced in 5 large farms. However, if the number of animals is less than 100 LU (800-1000 fattening pigs), a considerable increase of the construction costs for manure storage should be expected. Assessing the environmental consequences the hard problems in large pig farms to find the necessary acreage of agricultural land (1.7 LU per ha) for manure disposal should always be considered. Therefore, some of these farms are likely to be closed or their production decreased, if environmental regulations will be introduced.

Table 8. Cost ofmanure storages in pig farms in the vulnerable zones.

The poultry farms (Table 9) have the highest concentration of production. 7 farms account for 98 % of the total poultry production. Composting is the most common manure handling system that could be considered as the less harmful manure handling system for the environment.

Table 9. Cost of manure storages in poultry farms in the vulnerable zones

Total investments for improvement of manure holding in the farms are depicted in Table 10. With regard to the table data, the most expensive part of the investment programme will be related with the small farms (5 -50 LU). The number of these farms in the vulnerable zones is larger than 1800.

Table 10. The necessary investments for improvement of manure holding in farms in thevulnerable zones

3.1.2. Reduction of Agricultural Run-off

The construction of protection belts and renovation or construction of the wetlands is the most important water protection measures in agricultural soils. The construction of the protection belts along channels and streams in the fields intensively used for arable crops is especially important. The introduction of the protection belts will result in the loss of acreage of arable land. Therefore compensation payments should be introduced to cover such losses and maintenance costs.

The necessary area for the construction of protection belts (Table 11) was calculated considering the length of watercourses within arable land in vulnerable zones. The length of rivers, streams, and drainage channels was determined with the GIS application using the digital map of Latvia and data basis (1:50000, data source from 1993-1996). However, small channels of the drainage systems were not included in the data. Therefore, they are not included in our calculations (Table 11 ). Corine Land Cover Latvia (1: 100000, data source from 1994-1995) was used for the identification of the arable land area in the vulnerable zones.

Table 11. The maximal values for the construction of protection belts in the vulnerable zones

The construction cost was calculated according to the recommendations of the Ministry of Agriculture for financing the measure 5.3 "Reduction of agricultural run-off' of SAP ARD programme. Payment of 1,77 EUR/ha per point of soil fertility is planned for the construction of protection belts. Costs of construction and maintenance of the protection belts are shown in the Table 12. The width of the belts according the Law on Protection Belts is 10 m as depicted in the Table 12. There are no regulations on the width of belts for streams that are less than 10 km long, and for drainage channels. In this case the width of 1 and 3 m is used to calculate the necessary area and costs of belts.

Table 12. Construction and maintenance costs of protection belts in vulnerable zones

However, the constructed area and costs could differ from the estimations in the Table 12 due to the difference of land fertility in farms that can range from 30 to 70 points. In the case of low land evaluation the payment (1,77 EUR/ha per point) will not cover maintenance expenses for farmers. Expenses could be 124 EUR/ha (including V AT tax) according the data from Dobele's region. Moreover, farmers are losing yield (exception is grass for forage) in the areas covered by belts. Therefore, it is hard to predict the number of the farms that would like to participate in the implementation of this measure of SAP ARD programme. An assumption that 1000 ha (costs 0,12 million BUR) of protection belts will be constructed in the vulnerable zones using SAP ARD payment could be close to reality.

Wetlands (small, shallow water reservoirs) could be constructed in the areas of arable land in the upper parts of river basins, streams, and main channels of drainage systems. To achieve higher efficiency the surface area of a wetland shall correspond to 0,1-0,5 % catchments areas. Theoretically, the total area of wetlands would include 2160­ 10800 ha to cover all arable land area (21 590 ha) in a vulnerable zone. The compensation for wetland construction is 1,85 BUR per m2 (18500 BUR per ha) of the constructed wetland according the recommendations of the Ministry of Agriculture to finance the measure 5.3 "Reduction of agricultural run-off' of the SAP ARD programme. The construction of one square meter of a wetland might cost the farmer 0,67-1,06 BUR assuming that an average (optimal) depth ofa wetland could be 1.5 m. (The construction company price incl. taxes is: for excavator -0,78 BUR/m3, for caterpillar -0,44 BUR/m3 in Dobeles district. ) The market price of agricultural land in the districts within vulnerable zone ranges from 355 to 710 BUR/ha or 0,35-0,71 BUR/m2. Therefore, SAPARD payments (1.85 BUR) fully cover the highest land price and construction costs (1,06 BUR+ 0,71 BUR =1,77 BUR). However, the construction costs ofa simple earth dam with flood structure, if it was necessary, are not included in our estimations. Construction possibilities and costs in each case will depend on topography, stream conditions, and drainage system in the catchments of the wetland. Theoretically, the maximal investments for wetland construction, calculated from the total area of arable land in vulnerable zone could be 46 -234 million BUR. It cannot be covered from SAP ARD programme. Most likely, it is also not possible in reality because of technical reasons in wetland construction. The assumption of a construction of 70 ha wetlands in the vulnerable zone using SAP ARD 1,51 million BUR funds could be close to the reality during the implementation of the Action Programme.

3.1.3. Introduction of an Optimal Crop Rotation and Plant Nutrient Balance Calculations

SAP ARD payments include support for the introduction of plant nutrient balance calculations. A farmer could receive 8,88 BUR for nutrient balance plan per one field of crop rotation. The total arable land in vulnerable zone consists of 216 thous. ha (Table 11 ). According to the estimations plant nutrient balance calculations could be prepared for one fourth of the arable land (farms using intensive technology with average size of field 20 ha). It would require 24 thous. BUR in SAPARD funds.

3.1.4. Preparation and Implementation of Water Monitoring Programme

Monitoring Programme to control the agricultural pollution consists of the following:

The implementation of surveillance monitoring is performed and financed from the respective state budget means by the aforementioned institutions. The VGD should start or re­establish groundwater monitoring in the sites of agricultural diffuse pollution monitoring in addition to its main task of groundwater surveillance monitoring. The necessary investments for the improvement of monitoring stations are estimated 14000 BUR

The measures for implementation of operational monitoring should be planed as follows:

Total investments to improve the monitoring station network could be 50­ 72 thousands of BUR. The running costs of current agricultural run-off monitoring programme is 23-27 thousands of BUR per year .Costs generally depend on the number of collected water samples (water balance of the year). Costs could increase up to 35 thousands of BUR per year after the construction of a new monitoring station and implementation of groundwater monitoring in stations.

3.2. Timetable of Implementation

The full implementation of the Nitrate Directive will be started after accession of Latvia to the BU, most likely in 2004. The legislative transposition should be completed before accession with the adoption of regulations on nitrate pollution from agricultural sources and allocation of vulnerable zones. The Action Programme will be prepared, the monitoring network improved and implementation of the monitoring programme started no later than 2004.

3.3. Annual Costs of Investment Capital, Operation and Maintenance Costs over the Proposed Period of Implementation

Implementation costs of the Nitrate Directive are depicted in Table 13.

Table 13.Implementation costs of the Nitrate Directive

* SAPARD programme

3.4. Sources of Finance

The decrease in agricultural production, low income of farms, and uncertainty of future agricultural development could be obstacles for substantial farm investments to implement measures proposed by the Nitrate Directive. The most probable source of finance for the implementation of the Action Programme could be SAP ARD programme and its national co­financing. The main sources of finance for the Nitrate Directive are as follows:

The implementation of the Nitrate Directive could be supported by several projects, e.g. World Bank and GEF project (Baltic Sea Regional Project), the Danish­ Latvian project on groundwater monitoring (Agricultural Influence on Ground Water in Latvia), EU PHARE project, etc.

3.5. Analysis of Affordability on National, Municipal, and Private Sector Levels

State financial assistance and subsidies for agriculture in 2000 are depicted in Table 14. State financial support for agriculture is about 3 % of the total state budget expenses in Latvia.

Table 14. State financial support for agriculture in 2000

State financial support for agriculture should be considered as the main financial source for the implementation of the Action Programme of the Nitrate directive.

The SAPARD funds will be available in Latvia during the accession process to the EU. Farmers will be able to obtain funds from this source after the accreditation of the Rural Support Service (SAPARD Agency), most likely in 2001-2002 (Table 15).

Table 15. SAPARD funds available in Latvia.

The SAP ARD programme includes several measures aimed to improve environment protection and reduce agricultural impact. Construction of manure storages is a mandatory part in the modernisation projects of agricultural machinery, equipment, and construction of livestock buildings (Table 16).

Table 16. Distribution of financial sources of SAP ARD measure: Modernization of agricultural machinery , equipment and construction.

The measures for reduction of agricultural run-off (Table 17) include support for construction of wetlands and protection belts in intensively used agricultural land.

Table 17. Distribution of financial sources of SAPARD measure: Reduction of agricultural run-off

This measure should be implemented after 2001 according to the agreement with the EU Commission. Regulations on state co­ financing will be determined according the EU legislation.

Implementation of the Action Programme and SAP ARD supported measures includes education and training of the staff of agricultural advisory services, regional agricultural boards, regional environmental boards, as well as education of farmers. Educational measures include seminars, preparation of educational material, organization of the field days, etc. This measure is supported by SAP ARD and state payments (Table 18).

Table 18. Distribution of financial sources of SAP ARD measure: Education