Routledge Handbook of Water Economics and Institutions

427 Pages·2015·4.018 MB·English

by  Kimberly Burnett, Richard Howitt, James A. Roumasset, Christopher A. Wada

Routledge Handbook
of WateR economics
and institutions
Growing scarcity of freshwater worldwide brings to light the need for sound water
resource modeling and policy analysis. While a solid foundation has been established for
many specific water management problems, combining those methods and principles
in a unified framework remains an ongoing challenge. This Handbook aims to expand
the scope of efficient water use to include allocation of sources and quantities across
uses and time, as well as integrating demand-management with supply-side substitutes.
Socially efficient water use does not generally coincide with private decisions in the
real world, however. Examples of mechanisms designed to incentivize efficient behavior
are drawn from agricultural water use, municipal water regulation, and externalities
linked to water resources. Water management is further complicated when information
is costly and/or imperfect. Standard optimization frameworks are extended to allow
for coordination costs, games and cooperation, and risk allocation. When operating
efficiently, water markets are often viewed as a desirable means of allocation because
a market price incentivizes users to move resources from low to high value activities.
However, early attempts at water trading have run into many obstacles. Case studies
from the United States, Australia, Europe, and Canada highlight the successes and
remaining challenges of establishing efficient water markets.
Kimberly Burnett is an Associate Specialist with the University of Hawaii Economic
Research Organization, USA.
Richard Howitt is currently Professor Emeritus in Agricultural and Resource
Economics at the University of California at Davis, USA.
James A. Roumasset is a Professor in the Department of Economics at the University
of Hawaii, Manoa, USA.
Christopher A. Wada is a Research Economist with the University of Hawaii Economic
Research Organization, USA.
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Routled ge
Handb o ok of
WateR ec onomics
and institutions
Edited by Kimberly Burnett, Richard Howitt,
James A. Roumasset and Christopher A. Wada
First published 2015
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN
And by Routledge
711 Third Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2015 Kimberly Burnett, Richard Howitt, James A. Roumasset
and Christopher A. Wada, selection and editorial material; individual
chapters, the authors
The right of the editors to be identified as the authors of the
editorial material, and of the authors for their individual chapters,
has been asserted in accordance with sections 77 and 78 of the
Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or
reproduced or utilised in any form or by any electronic, mechanical,
or other means, now known or hereafter invented, including
photocopying and recording, or in any information storage or
retrieval system, without permission in writing from the publishers.
Trademark notice: Product or corporate names may be trademarks
or registered trademarks, and are used only for identification and
explanation without intent to infringe.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
Routledge handbook of water economics and institutions /
edited by Kimberly Burnett, Richard Howitt, James A. Roumasset
and Christopher A. Wada.
pages cm
Includes bibliographical references and index.
1. Water-supply – Management. 2. Water-supply – Management –
Case studies. 3. Water-supply – Economic aspects. 4. Water-supply –
Economic aspects – Case studies. 5. Water resources development.
6. Water resources development – Case studies.
I. Burnett, Kimberly M., editor of compilation.
II. Title: Handbook of water economics and institutions.
HD1691.R69 2014
333.91–dc23
2014022742
ISBN: 978-0-415-72856-0 (hbk)
ISBN: 978-1-315-85162-4 (ebk)
Typeset in Bembo
by HWA Text and Data Management, London
contents
List of figures viii
List of tables x
List of contributors xii
Part I
Principles and overview 1
1 Global outlook for water scarcity, food security, and hydropower 3
Mark W. Rosegrant
2 Water scarcity and the demand for water markets 30
Richard Howitt
3 Ordering extraction from multiple aquifers 40
James A. Roumasset and Christopher A. Wada
4 Integrating demand-management with development of supply-side
substitutes 50
James A. Roumasset and Christopher A. Wada
5 Optimal conjunctive water use over space and time 61
Sittidaj Pongkijvorasin and James A. Roumasset
Part II
Private behavior and regulatory design 77
6 Strategic behavior and regulation over time and space 79
C.-Y. Cynthia Lin and Lisa Pfeiffer
v
Contents
7 Water allocation under distribution losses: a perspective 91
Ujjayant Chakravorty and Yazhen Gong
8 The good, bad, and ugly of watershed management 100
Kimberly Burnett, James A. Roumasset, and Christopher A. Wada
9 Externalities and water quality 111
Renan-Ulrich Goetz and Àngels Xabadia
10 Groundwater use and irrigated agriculture in California: dynamics,
uncertainty, and conjunctive use 134
Keith Knapp and Kurt Schwabe
Part III
Institutions and information 163
11 Institutions for managing ground and surface water and the theory
of the second-best 165
Karl Jandoc, Richard Howitt, James A. Roumasset, and Christopher A. Wada
12 Towards an economics of irrigation networks 181
Karl Jandoc, Ruben Juarez, and James A. Roumasset
13 Real-time information and consumption: what can water demand
programs learn from electricity demand programs? 201
John Lynham and Nori Tarui
14 Water scarcity and water institutions 218
Ariel Dinar and Yacov Tsur
15 Managing climate risks through water trading 236
Bonnie Colby, George Frisvold, and Matthew Mealy
Part IV
Water markets and institutions around the world 251
16 A California postcard: lessons for a maturing water market 253
Ellen Hanak
17 Water trading opportunities and challenges in Europe 281
Gonzalo Delacámara, Carlos Mario Gómez, and Josefina Maestu
18 Water trading in Australia: understanding the role of policy and
serendipity 296
Lin Crase, Sue O’Keefe, Sarah Wheeler, and Yukio Kinoshita
vi
Contents
19 Tradeoffs: fish, farmers, and energy on the Columbia 314
Ray G. Huffaker
20 Water sales, pecuniary externalities and local development:
Chinatown revisited 325
Gary D. Libecap
21 Agricultural water management at the village level in northern
China 341
Qiuqiong Huang, Jinxia Wang, Siwa Msangi, Scott Rozelle,
and Jikun Huang
22 Implementing the European Water Framework Directive in Greece:
an integrated socio-economic approach and remaining obstacles 363
Phoebe Koundouri and Osiel González Dávila
23 Water conservation and trading: policy challenges in Alberta, Canada 381
Henning Bjornlund and K.K. Klein
Index 397
vii
figuRes
1.1 Projected water stress level in different regions of the world by 2050 5
1.2 Percentage change in average annual runoff across the regions of the world 6
1.3 Percentage change in total water consumption in Green Growth Scenario
compared to BAU, 2030 and 2050 9
1.4 Percentage change in irrigation water consumption under the Green
Growth Scenario compared to BAU, 2030 and 2050 10
1.5 Irrigation water supply reliability under BAU and the Green Growth
Scenario in 2000 and 2050 10
1.6 Percentage change in world prices of cereals between BAU and the Green
Growth Scenario, 2050) 11
1.7 Percentage change in world prices of meat between BAU and the Green
Growth Scenario, 2050 11
1.8 Percentage change in per capita cereal consumption between BAU and
the Green Growth Scenario, 2050 12
1.9 Percentage change in per capita meat consumption between BAU and
Green Growth Scenario, 2050 12
1.10 Percentage change in population at risk of hunger between BAU and the
Green Growth Scenario, 2050 13
2.1 Estimated water Kuznets curve for 13 Asian countries 37
3.1 Hypothetical price path 44
4.1 Demand and supply of recharge 53
4.2 Hypothetical time paths of MOCs 55
4.3 Increasing block pricing structure 57
5.1 Shadow prices of surface and groundwater over space 65
5.2 The shadow prices of ground and surface water over space and time 66
5.3 The critical distance of surface water over time 68
5.4 Phase diagram for the head level and groundwater extraction 73
6.1 Predevelopment saturated thickness of the Kansas portion of the High
Plains Aquifer 81
viii
List of figures
6.2 Average 2004–2006 depth to groundwater in the Kansas portion of the
High Plains Aquifer 82
7.1 Surface and groundwater price paths 95
7.2 Equilibrium price and quantity under social planner, competitive and
producer cartel 97
8.1 Supply and demand for recharge 104
9.1 Water pollution in Europe 112
10.1 Regional agricultural production with surface water supply and overlying
an aquifer system. 135
10.2 Cotton-furrow half-mile production function 138
10.3 Regional agricultural programming model for Kern County, California 140
10.4 Common property (CP) and efficiency (PV) for the standard model 143
10.5 Common property (CP) usage with stochastic surface supplies 150
10.6 Optimal decision rules for the conjunctive use mode 151
10.7 Alternative climate-related water supply impacts on time profiles 155
11.1 Full marginal benefit and shadow price under transition to governance 172
11.2 Evolution of groundwater governance 173
12.1 Linear network with one source and seven farms 184
12.2 A network with two sources and three farms and two economically
integrated subnetworks 186
12.3 A network with two sources and three farms 191
12.4 The block pricing mechanism 195
16.1 County ordinances restrict groundwater export from many rural
counties 260
16.2 California’s water market has grown substantially since the early 1980s 262
16.3 Environmental concerns shifted the composition of purchases in the
1990s 264
17.1 Focus on the environment: water trading in environmentally neutral
markets 287
18.1 The Murray-Darling Basin 297
18.2 Water trade in the southern MDB from 1983–84 to 2012–13 302
19.1 The Columbia River Basin 315
20.1 Percent of water transferred over time 329
20.2 Water: acre-feet per acre 330
20.3 Water prices paid, sellers pools, non-pool members, and Los Angeles’
willingness to pay 337
21.1 Changes in available water resource and water use over time in China 342
21.2 Sample provinces of survey data referred to in the chapter 345
21.3 Changes in surface water management institutions 346
21.4 Changes in groundwater management institutions 353
22.1 Greek river basins 371
22.2 Greek river basin districts 371
23.1 Changes in irrigation system use in Alberta from 1965 to 2012 390
ix