Urban water management: optimal price and investment policy under climate variability

Neal Hughes (), Ahmed Hafi and Tim Goesch

Australian Journal of Agricultural and Resource Economics, 2009, vol. 53, issue 2, 18

Abstract: Australian urban water utilities face a significant challenge in designing appropriate demand management and supply augmentation policies in the presence of significant water scarcity and climate variability. This article considers the design of optimal demand management and supply augmentation policies for urban water. In particular, scarcity pricing is considered as a potential alternative to the predominant demand management policy of water restrictions. A stochastic dynamic programming model of an urban water market is developed based on data from the ACT region. Given a specification of the demand and supply for urban water state dependent optimal price and investment policies are estimated. The results illustrate how the optimal urban water price varies inversely with the prevailing storage level and how the optimal timing of investment differs significantly between rain dependent and rain independent augmentation options.

Keywords: Demand and Price Analysis; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (9)

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Journal Article: Urban water management: optimal price and investment policy under climate variability * (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aareaj:161920

DOI: 10.22004/ag.econ.161920

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