Optimal Management of a Renewable and Replaceable Resource: The Case of Coastal Groundwater

Abstract

The nonrenewable-with-backstop model of resource management is extended to cover renewables and applied to the case of coastal groundwater. In the optimal management trajectory, efficiency price exceeds extraction cost by the sum of scarcity rent and “drawdown” cost, the latter remaining large even after the backstop price is reached. In the case of rising demand, optimal management may call for a stage of conservation followed by a stage of drawdown. Copyright 1997, Oxford University Press.

Islands of sustainability in time and space

“…At each point in time, water is extracted until the incremental benefits of the last unit extracted equal the full incremental costs. In the face of growing demand, a single aquifer should be accumulated, then depleted, and finally stabilized at the optimal sustainable-yield (Krulce et al 1997).…”

Pareto‐Improving Water Management over Space and Time: The Honolulu Case

“…Some models include both temporal optimization and multi-sector demands that can be adapted for spatial differentiation of users, but they do not allow for a variable recharge (see, e.g., Kim, Moore, and Hanchar 1989;Koundouri and Christou 2000). A model that is close to our required features is that of Krulce, Roumasset, and Wilson (1997), which examines temporally optimal groundwater use with variable aquifer recharge and a backstop source. Their model, however, does not consider spatial efficiency for geographically distributed users.…”

“…7 In order to make welfare 6 Krulce, Roumasset, and Wilson (1997) consider spatially uniform pricing, and do not have salinity-related restrictions on extraction. They apply the model to Pearl Harbor aquifer whereas the present study examines Honolulu aquifer, a smaller but more intensively used aquifer.…”

“…7 Other well-known models are then special cases of our model. Krulce, Roumasset, and Wilson (1997) model is obtained, of course, by suppressing the spatial component (i.e., assuming a uniform distribution cost). Koundouri and Christou (2000) 9 The rate of change of head level is given by: backstop cost, we obtain Gisser and Sanchez (1980) model.…”

“…The total cost of extracting water from the aquifer at 10 It may also be a function of the water volume extracted, but we assume constant returns to scale following Krulce, Roumasset, and Wilson (1997 We first model water allocation under status quo management and then under efficient management. The differences in welfare distribution under the two regimes are then examined and used to derive a mechanism to compensate those who lose welfare when the efficient allocation is implemented.…”