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water

water. a renewable resource: the hydrological cycle. the potential for water scarcity. surface water (rivers lakes reservoirs) ground water (aquifers) 90% fresh water only 2.5% available on a renewable basis the rest is finite / depletable

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water

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  1. water

  2. a renewable resource: the hydrological cycle

  3. the potential for water scarcity • surface water (rivers lakes reservoirs) • ground water (aquifers) • 90% fresh water • only 2.5% available on a renewable basis • the rest is finite / depletable • accumulated through geologic time, once used cannot recharge

  4. other water issues • quality further limits supply potable water • land subsidence • settling / sinking of earth surface due to excessive withdrawals of gw

  5. efficient allocations:surface vs. groundwater • surface water • how to allocate a renewable supply among competing uses • intergenerational effects less important (future supplies depend on natural phenomenon, e.g. rain, rather than current allocation) • groundwater • withdrawing now affects future supply

  6. efficient allocation: surface water • balance btw users • marginal net benefit equal across users • handle variability • above-average and below-average flows must be accommodated

  7. efficient allocation: groundwater • if withdrawal > recharge, eventual exhaust resource • MEC rises over time as water table falls • pumping would stop: • no water left • MC pumping > benefit of water or MC of backstop resource (desalination) • price rises over time until choke price or switch point

  8. the current allocation system • riparian doctrine • early settlers • adjacent owner got right • as demand grew, less appropriate • diversion necessary • prior-appropriation doctrine • gold rush / mining • first to arrive got right • usufruct • state ownership; right to use • federal govt took over; building dams, diverting water

  9. are these efficient allocation systems? • restrictions on transfers • hard to equalize marginal net benefits • federal reclamation projects • regional vs. national benefits • water pricing • both price and rate structure • should account for storage, treatment, distribution, and value of water (this often left out) • common property problems • low incentives to conserve

  10. efficient pricing • MC, not AC • customer should be charged mc of supplying last unit • usually charged cost of running operation (historical costs) • no scarcity rent • water inefficiently cheap; excessive demand for water

  11. potential remedies • reduce restrictions on transfers • get rid of “use it or lose it” ethic • water markets/ water banks to transfer water • getting the prices right!

  12. agricultural pricing schemes

  13. agricultural pricing schemes • 2 part: volume pricing + fixed fee • output pricing: linked to output not water use • input pricing: assessed taxes on water-related input (not on water itself) • block rate / tiered pricing: seasonal peaked demand • area pricing: how much area, not how much water (mc using extra water is zero!)

  14. utilities pricing: uniform & declining block rates(inefficient)

  15. utilities pricing: inverted block & seasonal rates(potentially efficient)

  16. US pricing structures

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