Intersectoral Allocation Research Articles

The role of hydrogen in a net-zero emission economy under alternative policy scenarios

Low emission and green hydrogen as a carbon-free energy carrier has attracted worldwide attention in decarbonizing the energy system and meeting the Paris agreement target of limiting warming to 2 °C or below. This study investigates the contribution of different hydrogen pathways to the energy transition and sheds light on adopting different decarbonization scenarios for Quebec, Canada, while including biogenic emissions from forest-based biomass consumption. We assess various alternative policy scenarios using a TIMES model for North America (NATEM), a bottom-up techno-economic approach. This study examines the role of various hydrogen pathways in Quebec's energy transition by considering different net-zero policy scenarios and an additional set of “green” scenarios, which prohibit the use of fossil fuel-based hydrogen. The results show that varying the penetration of hydrogen provides a key trade-off between reliance on direct air capture, reliance on carbon storage, reliance on wind and solar buildout, the inter-sector allocation of residual emissions, and the overall cost of achieving emission targets. In particular, the use of hydrogen in the industrial sector, a sector known to be difficult to decarbonize, reduces industrial emissions and reliance on direct air capture (DAC). Clustering industrial plants to use captured CO2 as a feedstock for synthetic fuel production may not reduce industrial GHG emissions by 2050, but it offers the opportunity to use captured CO2 instead of sequestering it in deep saline aquifers. Even though increasing industrial green hydrogen penetration increases marginal GHG abatement costs in the green net-zero scenario by 2050, it further minimizes industrial GHG emissions and the need for DAC among all net-zero scenarios by 2050. Hydrogen plays a significant role in achieving ambitious net-zero emission target, especially where electrification is not feasible, or electricitystorage is required.

Impacts of Water and Energy Sector Reforms in Gujarat: The Case of Expansion of Micro Irrigation Schemes and Rationalisation of Agricultural Power Tariff

Against the backdrop of the water and energy sector reforms enunciated by the state government in Gujarat, this paper reviews the important policy changes and outcomes of farm-level adoption of water-saving technologies, on the one hand, and the effective implementation of energy tariff policies, on the other hand. Following an assessment of the water and energy policy and regulatory interventions, the paper provides an overview of the farm-level adoption micro irrigation (sprinkler and drip irrigation) systems over the past one decade of the policy reforms. The paper then examines the case of energy sector reforms enunciated by the state in coordination with the energy regulator through establishment of the distribution companies (DISCOMs). The paper brings out that the policy and regulatory interventions in the water and energy (power) sectors have been successful in terms of wider promotion of micro irrigation systems and deregulation of power generation and distribution activities by establishing dedicated DISCOMs. Thus, the policy initiatives were able to address several challenges facing the water and energy sectors in the state. Firstly, the wide-scale promotion of micro irrigation schemes has significantly reduced the groundwater over-extraction for agriculture. Second, the energy sector reforms have shown a significant progress towards rationalisation of tariffs across sectors. However, it emerges that the policy and regulatory reforms need to (i) go beyond the narrow confines of promotion of micro irrigation systems towards sustainable management of water resources and (ii) move beyond rationalisation of power tariffs by offering sustainable solutions to the problems of water and energy security amidst increasing competition for inter-sectoral allocations. Essentially, the energy sector policies and reforms may explore the potential of renewable energy sources through decentralised investments in solar and wind energy systems in the rural areas involving different public–private community partnership models.

Macro policy responses to natural resource windfalls and the crash in commodity prices

Policy prescriptions for managing natural resource windfalls are based on the permanent income hypothesis: none of the windfall is invested at home and saving in an intergenerational SWF is dictated by smoothing consumption across different generations. Furthermore, with Dutch disease effects the optimal response is to intertemporally smooth the real exchange rate, smooth public and private consumption, and limit sharp fluctuations in the intersectoral allocation of production factors. We show that these prescriptions need to be modified for the following reasons. First, to cope with volatile commodity prices precautionary buffers should be put in a stabilisation fund. Second, with imperfect access to capital markets the windfall must be used to curb capital scarcity, invest domestically and bring consumption forward. Third, with real wage rigidity consumption must also be brought forward to mitigate transient unemployment. Fourth, the real exchange rate has to temporarily appreciate to signal the need to invest in the domestic economy to gradually improve the ability to absorb the extra spending from the windfall. Fifth, with finite lives the timing of handing back the windfall to the private sector matters and consumption and the real exchange rate will be volatile. Finally, with nominal wage rigidity we show that a Taylor rule is a better short-run response to a crash in commodity prices than a nominal exchange rate peg.

Water allocation and management along the Santa Cruz border region

Abstract Water management along the transboundary Santa Cruz River basin overlapping Arizona and Mexico, faces a host of physical, economic and institutional challenges. The situation is worsened by a failure of bilateral strategies to achieve an administratively feasible solution to these problems. The current study, utilizing data from the Santa Cruz Active Management Area in Arizona and from Nogales in Sonora, Mexico, builds an integrated framework of intersectoral water allocation within each region, incorporating relevant economic, physical and institutional constraints. Results from the baseline model and from three scenarios representing population growth and water scarcity, suggest higher optimal water use and net benefits in the urban residential sector for both regions. The outcomes conform to previous studies emphasizing the need for better water supply infrastructure and reuse of treated wastewater to counter demand from a growing population and climate induced water shortages in the region.

An optimization model and policy analysis of water allocation for a river basin

The problem of inter-sectoral water allocation is investigated for the utilizable water in the Cauvery river basin in the state of Karnataka, India. This paper aims to maximize the total benefit of available and utilizable water while trying to ensure a certain basic water right for every individual. It also aims to meet irrigation requirements as put forward by government (central or state) in drought contingency plan. In this context, a novel nonlinear optimization model is developed which utilizes hydro-agro-economic data collected from multiple sources. This optimization model allocates the available water among different competing sectors which includes municipality, industries and agriculture. Furthermore, the sensitivity analysis evaluates the economic impact of different parameters of competing demands such as water availability, population and basic water right (quantity). The results of this study reveal that the basic water right for essential needs can be ensured with integrated management of available surface water resources. This novel optimization model and policy analysis can be readily applied to other river basins across the globe.

Sustainable Development Goal 6: watering down justice concerns

The Sustainable Development Goals (SDGs) give much greater attention to environmental concerns than the Millennium Development Goals. SDG6, the water sector goal, is also more broadly framed, as it recognizes conservation needs in addition to drinking water and sanitation. However, normatively speaking, SDG6 is still framed in adequacy and sustainability terms, downplaying the goal of justice. This is a serious lacuna. Intragenerational justice is fundamental to many environmental problems, and especially to water, because water is a common‐pool, multiple‐use and unidirectionally flowing resource. Most debates in the water sector—upstream–downstream sharing, intersectoral allocations and specifically allocation to in‐stream conservation, water pollution, and even groundwater depletion—are about the ‘biophysical (in)justice’ caused by these characteristics of the resource. The debates then focus on how the outcomes may be made more equitable (within sectors) or fair (across sectors). Large interventions, such as big dams, create multiple benefits and costs across multiple users and sectors, focusing attention on procedural justice. Social inequities may add another layer, as they often correlate with biophysical injustice. While SDG6 recognizes conservation and public health needs, it fails to recognize the fundamental tension between these needs and other uses of water, and therefore the issues of equity, fairness, and/or procedural justice in allocating between them. Policy makers may be more comfortable with framing environmental problems as sustainability problems. However, researchers have contributed to this narrowing by framing environmental problems along disciplinarily fragmented lines. The idea of biophysical justice offers an interdisciplinary bridge that may help broaden the discourse. WIREs Water 2017, 4:e1224. doi: 10.1002/wat2.1224This article is categorized under: Engineering Water > Planning Water Human Water > Rights to Water Human Water > Water Governance

Evaluation of Technology Change Effects on Quantitative Assessment of Water, Energy and Food Nexus

The quantitative assessment framework of the water, energy and food (WEF) nexus proposed by [1] permits the analysis of the WEF as an interconnected system of resources that directly and indirectly affect one another. The model performs simulation of policy options and scenarios that respond to quantitative variations of the use of WEF resources. One of the key outcomes of the mathematical formulation of the model is the WEF nexus intersectoral technology matrix. In order to take advantages and analyzing policy options of adopting high efficient intersectoral use technologies, WEF intersectoral use intensities and intersectoral allocation coefficients are introduced to the technology matrix of the nexus model proposed in [1]. The developed method is then applied to evaluate the WEF nexus case study of Lebanon. Lastly, the conclusions and further developments are presented.

Refinements to harvest strategies to enable effective implementation of Ecosystem Based Fisheries Management for the multi-sector, multi-species fisheries of Western Australia

To address increasing community expectations and deliver the ‘social licence to operate’, fisheries management in Western Australia (WA) has been systematically adopting a suite of reforms termed Ecosystem Based Fisheries Management (EBFM). EBFM extends beyond the fishery-level ‘ecosystem approach’ of considering ecological, social and economic objectives by taking a resource-level approach to coordinate management of all fishing sectors that capture a ‘resource’ (which can be defined as one or more species) to better deliver overall community outcomes. This initiative required refinements to harvest strategies to cover the broader EBFM scope and also to deal with the challenges associated with their application to the multi-sector, multi-species fisheries common in WA. The efficacy of these EBFM-based harvest strategies was assessed using four case study resources that cover the diversity of fishery management systems applied in WA. Key refinements include the use of indicator species for multi-species resources and establishing appropriate tolerance levels to determine the acceptable range of annual deviations in catch/effort that meet the levels specified by the harvest control rules or sectoral allocation decisions. While some refinements are ongoing, the case studies demonstrate that a single, comprehensive harvest strategy can collectively address all target species objectives and intra and inter-sectoral allocations at the resource-level plus any other relevant economic, social or ecological objectives (e.g. habitat and protected species interactions) at the appropriate level (resource or activity/sector). This holistic approach is already generating efficiency dividends through the adoption of tolerance levels that are minimising unnecessary management interventions. Similarly, fewer management elements now require pre-season negotiation which is also reducing administrative costs. The comprehensive but agile approach adopted by WA is likely to be especially relevant for other coastal jurisdictions with highly variable environments where fisheries often have multiple sectors, species, stakeholders and objectives that need to be considered.

Непрямое государственное управление и некоммерческий сектор: российские практики в контексте зарубежного опыта

According to research by foreign scientists in the past two decades in international de-sign practices is a change of government, that is the methodological foundation in the concept of indirect government. The article reveals the essence of indirect instruments and government. Described positioning of the nonprofit sector in the indirect public admini-stration. The results of empirical testing types and forms of inter-sectoral allocation of so-cial partnership with the positioning of the nonprofit sector and research sustainability of NGOs in the Russian Federation.

Fighting Over a Red Herring: The Role of Economics in Recreational-Commercial Allocation Disputes

ABSTRACT This article turns a critical eye on the current role of economics in informing inter-sector allocation disputes. I argue that much of this analysis relies on a notion of efficiency that is flawed on both static and dynamic grounds and fails to address the inefficiencies of existing management institutions. I propose that real-location is rarely a first-order concern. Rather, it is a “red herring” that detracts from far more necessary fundamental reforms within the recreational sector. These reforms would significantly improve the accountability and efficiency of the sector and establish the necessary institutions to resolve allocation disputes in an adaptive, efficient manner through arms-length transactions. I propose a general framework for reform of mixed recreational-commercial fisheries and discuss realistic rights-based policies to better manage fishing mortality for private recreational anglers and facilitate transferability across sectors. I close with an appeal for more policy-relevant ...

A Circular Causation Model of the Oil and Gas Sector Relative to the Nonoil Sector in the Sultanate of Oman

The goal of Omanization as a comprehensive focus of the productive and social transformation of the Omani economy with the retention of her domestic output and labour component in total national economic activity is studied by using the methodology of circular feedback between some critical macroeconomic variables that relate to oil and non-oil sectoral development. The existing scenario points out that the structural shape of inter-sectoral allocation of resources and their socio-economic results is based on marginal rates of substitutions. Contrarily, the development structure based on inter-sectoral and inter-variable causality leads to the suggestion of the complementary (participatory) development outlook. The emergent model of circular causation is used to study both cases; the ‘as is’ estimation case and the ‘as it ought to be’ simulation case in view of eff ective Omanization taken up in its broad defi nition of socio-economic sustainability. The simulation results that give rise to fresh directions on socio-economic structures and policy-making are further studied by the method of Spatial Domain Analysis of the GIS method. Keywords: Economic development, development planning, sectoral planning, Oman development policies.

Does financial development help to align growth opportunities with growth? Evidence from industry-level data

Financial institutions are expected to play a crucial role in reallocating resources in favor of industries facing greater global and local shocks to growth opportunities. Fisman and Love, in their paper entitled “Financial development and intersectoral allocation: A new approach”, argue that growth opportunities are unobservable and propose a new methodology to test the capital allocation hypothesis. The methodology is based on correlations in the patterns of intra-industry growth between two countries and similarities in the level of financial development and income. This paper extends their methodology by proposing direct and forward-looking measures of local and global growth opportunities, obtained by interacting the country’s patterns of industrial specialization with industry-level price-earnings ratios, as in the paper “Global growth opportunities and market integration” by Bekaert et al. The results, obtained in a cross-section framework including 37 developed and developing countries over the period 1992–2006, confirm the relevance of financial development to promote economic growth and to help industries in taking advantage of global and local growth opportunities. They also show that the methodology developed by Fisman and Love can be extended to include direct measures of growth opportunities.

The long-run macroeconomic impacts of fuel subsidies

Many developing and emerging market countries have subsidies on fuel products. Using a small open economy model with a non-traded sector, I show how these subsidies impact the steady state levels of macroeconomic aggregates such as consumption, labor supply, and aggregate welfare. These subsidies can lead to crowding out of non-oil consumption, inefficient inter-sectoral allocations of labor, and other distortions in macroeconomic variables. Across steady states, aggregate welfare is reduced by these subsidies. This result holds for a country with no oil production and for a net exporter of oil. The distortions in relative prices introduced by the subsidy create most of the welfare losses. How the subsidy is financed is of secondary importance. Aggregate welfare is significantly higher if the subsidies are replaced by lump-sum transfers of equal value.

The Long-Run Macroeconomic Impacts of Fuel Subsidies

Many developing and emerging market countries have subsidies on fuel products. Using a small open economy model with a non-traded sector I show how these subsidies impact the steady state levels of macroeconomic aggregates such as consumption, labor supply, and aggregate welfare. These subsidies can lead to crowding out of non-oil consumption, inefficient inter-sectoral allocations of labor, and other distortions in macroeconomic variables. Across steady states aggregate welfare is reduced by these subsidies. This result holds for a country with no oil production and for a net exporter of oil. The distortions in relative prices introduced by the subsidy create most of the welfare losses. How the subsidy is financed is of secondary importance. Aggregate welfare is significantly higher if the subsidies are replaced by lump-sum transfers of equal value.

The Long–run Macroeconomic Impacts of Fuel Subsidies

Many developing and emerging market countries have subsidies on fuel products. Using a small open economy model with a non-traded sector I show how these subsidies impact the steady state levels of macroeconomic aggregates such as consumption, labor supply, and aggregate welfare. These subsidies can lead to crowding out of non-oil consumption, inefficient inter-sectoral allocations of labor, and other distortions in macroeconomic variables. Across steady states aggregate welfare is reduced by these subsidies. This result holds for a country with no oil production and for a net exporter of oil. The distortions in relative prices introduced by the subsidy create most of the welfare losses. How the subsidy is financed is of secondary importance. Aggregate welfare is significantly higher if the subsidies are replaced by lump-sum transfers of equal value.

Taxation In The Two-Sector Neoclassical Growth Model With Sector-Specific Externalities And Endogenous Labour Supply*

This paper examines the long-run impacts of selective (or sector-specific) commodity, payroll, and profit taxes in a two-sector endogenous growth model with sector-specific production externalities, in which one sector produces consumption goods and the other produces investment goods. The novelty of the model is that it allows not only for endogenous labour supply but also for the intersectoral allocation of resources, which may together lead to indeterminacy. We analytically show that the stability properties of the long-run equilibrium critically affect the long-run effects of these selective taxes, which may reverse the standard results of the growth effects of distortionary taxes.

Endogenous Effort and Intersectoral Labour Transfers Under Industrialization

This paper takes as its point of departure the claim in the literature that strong Asian growth performance is accounted for largely by the accumulation of factor inputs (financial savings and human capital accumulation). This stands in sharp contrast to Polanyi’s (1944) interpretation of European growth being a “great transformation” from an agricultural to an industrial economy. Our objective is to find models in which intersectoral transfers in Asia do account for significant portions of observed growth performance, besides factor input growth and residually calculated productivity growth. We begin with traditional Lewis models, where an efficiency gain results from transferring labour from the traditional (family based) agricultural sector, in which labour receives its average product, to the modern (industrial) sector in which labourers are paid their marginal product. We show that as one moves closer to Pareto Optimality in this system (say bytaxing the traditional sector’s output), there is a gain but this is typically small. We then formulate Lewis type models in which the product of effort and labour enters each sector’s production function, and individuals in the traditional sector only receive a fraction of the return to their incremental effort due to average product pricing of labour. In this case, the level of effort in each sector, is endogenously determined along with the intersectoral allocation of labour, since the representative household is modeled as having a utility function defined over goods along with the disutility of effort. Differences in effort levels across sectors support accompanying differences in average and marginal products of labour. We use this model to analyze growth processes in Thailand and South Korea over the period between the 1960s and 1990s. Results suggest significant contributions to growth from intersectoral labour transfers in Lewis models with endogenous effort, and negligible contributions from models without endogenous effort

Integrated modelling for river basin management: the influence of temporal and spatial scale in economic models of water allocation

The increasing use of integrated optimization or simulation models to guide river basin management has placed greater attention on the roles that the temporal and spatial scale of each model play in determining a model's suitability and effectiveness. This is especially the case in "economic" models that incorporate monetary incentives and the optimizing behaviour of economic agents to address decisions about the sources and levels of consumptive and non-consumptive water usage within the basin. With respect to spatial scale, models that aggregate behaviour over entire river basins may prove useful for examining inter-sectoral allocations of water, but are unlikely to provide useful information about how these water allocations influence-and are influenced by-choices of crops or of technologies in irrigation, for example. With respect to temporal scale, very short-run models can illustrate options for water management within an irrigation season should unforeseen water surpluses or deficits arise. Conversely, long-run models can allow adjustment time for investments in machinery, infrastructure and changes in land uses and cropping patterns. The basin management alternatives and choices generated by models on each scale are likely to vary considerably. The paper provides specific illustrative examples from recent models of Alberta's Bow River Basin.

Financial Development and Intersectoral Allocation: A New Approach

ABSTRACTThis paper uses a new methodology based on industry comovement to examine the role of financial market development in intersectoral allocation. Based on the assumption that there exist common global shocks to growth opportunities, we hypothesize that country pairs should have correlated patterns of sectoral growth if they are able to respond to these shocks. Consistent with financial markets promoting responsiveness to shocks, countries have more highly correlated growth rates across sectors when both countries have well‐developed financial markets. This effect is stronger between country pairs at similar levels of economic development, which are more likely to experience similar growth shocks.

Long-term trends in intersectoral water allocation and crop water productivity in Zhanghe and Kaifeng, China

This paper examines the trends in water allocation among sectors, water use by source, cropped area, crop production and water productivity. The study was undertaken at two sites in China: the Zhanghe Irrigation District in the Yangtze River Basin approximately 200 km west of Wuhan and Kaifeng City Prefecture located just south of the Yellow River in Henan Province. In both areas, water demand for purposes other than irrigation has grown. In the Zhanghe Irrigation District this resulted in a sharp reduction of water availability for irrigation. The decline of water availability for irrigation resulted in adoption of water saving practices and policies that led to a significant gain in water productivity per unit of irrigation water. In the Kaifeng City Prefecture the increased demand from other uses was met by an increase in groundwater extraction without the dramatic cuts in supplies for agriculture as in the Zhanghe Irrigation District. Gains in water productivity were due almost exclusively to higher crop yields. There will be continuing pressure to further reduce diversions to agriculture from the Zhanghe main reservoir in the Zhanghe Irrigation District and from the Yellow River in Kaifeng. Research continues on testing practices that have the potential for further increasing water productivity, some of the results of which are reported in other papers in this volume.