Narrow Results

We examine the effects of irrigation technology subsidies using a model of inter-temporal common pool groundwater use with substitutable technology and declining yields from groundwater stocks, where pumping cost and stock externalities arise from the common property problem. We develop and simulate an optimal control analytical model parameterized for Sheridan County, Kansas, overlying the Ogallala aquifer. We contrast competitive and optimal allocations and account for endogenous and time-varying irrigation capital on water use and groundwater stock. In our analysis, we account for the labor-savings from improved irrigation technologies. We find that in the absence of policy intervention, the competitive solution yields an early period with underinvestment in efficiency-improving irrigation technology relative to the socially efficient solution, followed by a period of overinvestment. This suggests a potential role for irrigation capital subsidies to improve welfare over certain ranges of the state variables. In contrast to previous work, we find evidence that significant returns may be achieved from policy intervention. We simulate a policy scenario where an irrigation technology subsidy is implemented to explore whether such a program can capture significant portions of the potential welfare gain.

We combine a theoretical model and a quantitative modeling chain based on a bio-economic model and a hydrological model in order to assess the marginal damage related to the nitrate concentration in an aquifer. The fundamental concept is to take the steady state level resulting from a social planner’s optimization program as the target level of nitrate concentration. The interest of doing this is three-fold: (i) we characterize the social value of damage related to the targeted nitrate concentration; which (ii) leads us to design the optimal path consistent with the target; and (iii) we can in turn assess welfare losses arising when the tax path deviates from the optimal one.

Managing outdoor water use while maintaining urban tree cover is a key challenge for water managers in arid climates. Urban trees generate flows of ecosystem services in arid areas, but also require significant amounts of irrigation. In this paper, a bioeconomic-health model of trees and water use is developed to investigate management of an urban forest canopy when irrigation is costly, water has economic value, and trees provide ecosystem services. The optimal tree irrigation decision is illustrated for Albuquerque, New Mexico, an arid Southwest US city. Using a range of monetary values for water, we find that the tree irrigation decision is sensitive to the value selected. Urban deforestation is optimal when the value of water is sufficiently high, or alternatively starts low, but grows to cross a specific threshold. If, however, the value of water is sufficiently low or if the value of tree cover rises over time, then deforestation is not optimal. The threshold value of water where the switch is made between zero and partial deforestation is well within previously identified ranges on actual water values. This model can be applied generally to study the tradeoffs between urban trees and water use in arid environments.

Groundwater use is likely to be inefficient in the absence of regulation and there is therefore substantial interest in optimal groundwater withdrawals over time. Under an optimal withdrawal regime, agriculture above the aquifer and profits converge to steady-state levels. We combine, in one endogenous system, the economic and environmental aspects of optimal aquifer management with not only surface water, groundwater and wastewater for irrigation, but also desalinated groundwater. Empirical estimates of a steady-state solution in which the quantity and quality of the groundwater are fixed at optimal levels and the aggregate net present value of the farmer’s profits is maximized are reported for an agricultural area in Israel with heavy reliance on groundwater supply. Our analysis enables the calculation of a Pigovian tax levied on the farmers to internalize the planner’s solution.