An integrated economic model of multiple types and uses of water

Abstract

Water scarcity is an increasing problem in many parts of the world and the management of water has become an important issue on the political economy agenda in many countries. As water is used in most economic activities and the allocation of water is often a complex problem involving different economic agents and sectors, Computable General Equilibrium (CGE) models have been proven useful to analyze water allocation problems, although their adaptation to include water is still relatively undeveloped. This paper provides a description of an integrated water-focused CGE model (STAGE_W) that includes multiple types and uses of water, and for the first time, the reclamation of wastewater as well as the provision of brackish groundwater as separate, independent activities with specific cost structures. The insights provided by the model are illustrated with an application to the Israeli water sector assuming that freshwater resources available to the economy are cut by 50%. We analyze how the Israeli economy copes with this shock if it reduces potable water supply compared with further investments in the desalination sector. The results demonstrate that the effects on the economy are slightly negative under both scenarios. Counter intuitively, the provision of additional potable water to the economy through desalination does not substantively reduce the negative outcomes. This is mainly due to the high costs of desalination, which are currently subsidized, with the distribution of the negative welfare effect over household groups dependent on how these subsidies are financed.

Perceptions and Acceptance of Desalinated Seawater for Irrigation: A Case Study in the Níjar District (Southeast Spain)

“…Around 70% of available world resources are estimated to be used for irrigation. In some countries and regions, this share can be even higher and may exceed 90% [2]. In order to address such increasing scarcity, alternative sources of water for irrigation need to be developed, particularly in arid and semi-arid regions.…”

Changing Perspectives on the Economics of Water

“…While the farm scale is a typical case for agriculture, attention to agricultural systems is also important, and the basin scale has become a key scale of analysis in order to account for inter-sector connections, whilst maintaining a clear relationship with a meaningful hydrological unit. However, over time, the interconnections among economic activities and the emergence of global phenomena such as climate change have led to an increasing number of modelling exercises using even regional, national or global scales (see e.g., [15][16][17]). Different scales may yield completely different pictures due to interconnections among sectors, but also highlight the urgency for compensation and displacement effects.…”

Discharge Fee Policy Analysis: A Computable General Equilibrium (CGE) Model of Water Resources and Water Environments

“…Luckmann et al described an integrated water-focused CGE model (STAGE_W) that included multiple types and uses of water. Their model included reclamation of wastewater and brackish groundwater as separate and independent activities with specific cost structures for the first time in the literature [21].…”