Water Pollution Abatement in Olive Oil Industry in Morocco: Cost Estimates and Policy Implications

Abstract

This article discusses the challenges of water scarcity and industrial water pollution in developing countries, specifically in Morocco, where the olive oil industry is a significant contributor to organic water pollution. The Moroccan government has implemented regulations and economic incentives to address this issue, but enforcement has been hindered by a lack of information on environmental damage and pollution abatement costs. This study aims to improve the knowledge of public decision makers on the costs of the depollution of oil mills and to use this information to develop tools for the reinforcement of the current regulation mechanism. To meet our research objective, the Translog hyperbolic distance function is used to represent the environmental technology generating three undesirable outputs (SS, BOD, and COD) and to estimate the olive oil mills’ specific pollution abatement cost (shadow price). Finally, pollutant-specific taxes are computed using the tax-standard method. The results showed that oil mills must renounce the production of olive oil totaling MAD 13,314, MAD 4706, and MAD 5786 for the reduction of one ton of SS, BOD, and COD, respectively, and that there are economies of scale in the treatment of olive mill wastewater. After calculating the rate of the environmental tax, we conclude that implementing the tax according to current emission standards can be very restrictive for oil mills, as it would represent 22% of the total annual turnover of the olive oil industry. These findings suggest a redesign of the regulation mechanism, including the implementation of environmental monitoring systems, the consideration of economies of scale in pollution control, and the use of better-targeted green subsidies and effective environmental tax. However, further research is needed to understand the impact of these measures on the economic performance of the olive oil industry.