Integrated Groundwater Resource Management

James Roumasset and Christopher Wada

No 201414, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: General principles of groundwater management for a single aquifer are extended to the management of multiple water resources, including additional aquifers, recycled wastewater, and desalinated seawater. Optimal groundwater extraction can be incentivized by pricing according to the Pearce equation for renewable resources, although the standard version of the equation must be modified in certain situations, e.g. to accommodate corner solutions or governance costs. Groundwater management and pricing must be coordinated with the management of watershed and related resources lest the benefits of conservation are squandered by wasting the water saved. Joint optimization also provides the basis for correctly pricing ecosystem services such as groundwater recharge. From the models and examples discussed, one can conclude that a systems approach is necessary, and ad hoc rules-of-thumb such as maximum-sustainable-yield are welfare reducing. Inasmuch as actual groundwater management may be far from efficient, the Gisser-Sanchez effect notwithstanding, we discuss the problem of optimal resource governance.

Keywords: Groundwater; renewable resources; dynamic optimization; sustainable yield; Pearce equation; marginal user cost; conjunctive use; water institutions; Gisser-Sanchez effect; governance; natural capital (search for similar items in EconPapers)
JEL-codes: Q20 Q25 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2014-05
New Economics Papers: this item is included in nep-agr, nep-env and nep-reg
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