Exploring the economic viability of using constructed wetlands to manage waste-water in the dairy industry

Industry faces increasing problems in dealing with waste products resulting from production processes. One specific problem is that of waste-water, where the management of production process waste often imposes costs, not only to the firm, but also to society. This article addresses the management of industry waste-water, from the perspective of both the individual firm and society in general, by analysing a case study of a dairy factory. Construction costs of horizontal subsurface flow wetlands of a sufficient size to treat a dairy factory’s process waste-waters are estimated. Short-term profitability objectives do not prompt project development, however, over the long term, some of the project options modelled reveal both a net private benefit and a net social benefit. In the absence of estimated externalities, projects become viable after 11 years (2 per cent discount rate), and 16 years (7 per cent discount rate). Without some form of environmental policy, no project options will be considered because of the company’s four-year return on investment rule. This highlights the policy dilemma associated with sharing the burden of the costs of improved environmental outcomes between the private and public sectors.