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.
Highlights
The world is facing serious water shortages and millions in the world are suffering from water pollution with large health risk, for the poor and for children (Shaw 2005)
The objective of this study is to present an integrated modelling framework that can deal with efficient allocation and management of water quantity and quality
The economic mechanisms were explored in welfare programs of managing the water quantity as a rivalrous good and water quality as a non-rivalrous good
Summary
The world is facing serious water shortages and millions in the world are suffering from water pollution with large health risk, for the poor and for children (Shaw 2005). Hydro-economic models represent spatially distributed water resource systems, infrastructure, management options and economic values in an integrated manner (Harou et al 2009) They integrate the economic processes with the hydrological processes and maximise the economic benefit from water supply and hydroelectricity generation to examine some specific “what-if” scenarios. We capture the interactions between the economic and the water system considering the feedback effects, the economic functions of water as inputs and amenity services, and the environmental services in a welfare program This allows us to explicitly consider water quantity and quality in a general equilibrium setting. This prepares us to address the economic mechanisms of dealing with water use efficiency and water quality in different situations.
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
