Economic Modelling for Water Quantity and Quality Management: A Welfare Program Approach

Xueqin Zhu () and Ekko van Ierland

Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), 2012, vol. 26, issue 9, 2511 pages

Abstract: This paper presents an integrated economic model which is able to explicitly address both water quantity and quality. We use a welfare program to maximize social welfare subject to the economic and ecological constraints, where interactions, emissions and environmental impacts are incorporated. Such a welfare program can provide the marginal values of commodities and therefore can price water by means of shadow pricing. The optimal solution to a specified program provides the optimal response strategies, i.e. the efficient allocation of resources in the economy including water use and the efficient level of water quality. We illustrate the mechanism in a numerical example and show, as an example, how we can achieve efficiency by reserving water in the high season for times of high demand in the low season and by introducing price differentiation between the two seasons. Copyright The Author(s) 2012

Keywords: Water management; Economic models; Welfare program; Water pricing; Water reservation; Efficiency (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/s11269-012-0029-x

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