Table Of ContentTHE ECONOMICS OF WATER RESOURCES
A Comprehensive Approach
Populationgrowthandrisinglivingstandards,ontheonehand,and
changingclimate,ontheotherhand,haveexacerbatedwaterscarcity
worldwide. To address this problem, policymakers need to take a
wide view of the water economy – a complex structure involving
environmental, social, economic, legal, and institutional aspects.
Acoherent water policymustlook atthe water economyas awhole
andapplyacomprehensiveapproachtopolicyinterventions.Written
bytwooftheworld’sleadingscholarsoneconomicsofwater,thisis
the first graduate-level textbook on the topic. The book discusses
waterresourcemanagementwithinacomprehensiveframeworkthat
integrates the different, yet highly entwined, elements of a water
economy. It follows the steps needed to develop a well-designed set
ofpoliciesbasedondetailedanalysesofinterventionmeasures,using
multi-sectoral and economy-wide examples from a variety of loca-
tions and situationsaroundthe world.
is Distinguished Professor of Environmental
Economics and Policy at the School of Public Policy, University of
California, Riverside. He served as lead economist on water and
climate change for the World Bank. He is the editor-in-chief of the
journalWaterEconomicsandPolicy.HeisanInternationalFellowof
the Center for Agricultural Economic Research of the Hebrew
University of Jerusalem, a Fulbright Senior Specialist, and a
FellowoftheAgriculturalandAppliedEconomicsAssociation.
is the Ruth Ochberg Professor of Agriculture at the
Department of Environmental Economics and Management at the
Hebrew University of Jerusalem. He publishes widely in economic
outlets,servedasco-editorofWaterResourcesResearchandofResource
and Energy Economics and has been actively involved in advising
Israel’s Water Authority and the World Bank on various issues
concerning water resource managementand regulation.
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THE ECONOMICS OF WATER
RESOURCES
A Comprehensive Approach
ARIEL DINAR
UniversityofCalifornia,Riverside
YACOV TSUR
HebrewUniversityofJerusalem
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Contents
List of Figures page vi
List of Tables ix
Acknowledgments x
Introduction and Outlook
The State of Water Resources and the Need for a
Comprehensive Perspective
The Water Economy
Supply Costs, Demands and Benefits
Optimal Water Policy
Water Regulation
Accounting for Uncertain Water Supplies: Conjunctive
Water Management
Case Studies of Regulatory Interventions
Economy-Wide Considerations of Water Management
Management of Transboundary Waters
Index
v
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Figures
. Estimates and forecasts of global water withdrawals
between and (km/year) page
. Freshwater resources per capita by continent () and by
representative water-scarce regions () (–)
. Freshwater resources per capita for a sample of water-scarce
() and water-abundant () countries (–)
. Major world cities with populations exceeding million
inhabitants in
. Major world cities with populations exceeding million
inhabitants in
. Global drought events between and
. Global flood events between and
. Future changes in six main hydrological parameters predicted
for –
. Annual precipitation in California, and
. Annual precipitation in the Jordan Basin States,
and
. Trends in groundwater levels in major aquifers
. Water reservoirs around the world ()
. Ratio of treated wastewater to produced sewage in selected
countries (in )
. Number and location of desalination plants in (top)
and (bottom)
. Global capacity of desalination plants in (top)
and (bottom)
. Global number of domestic water laws enacted by year,
–
. Total cumulative number of transboundary river basin
water laws and agreements, –
vi
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List of Figures vii
. Total cumulative number of transboundary groundwater
laws and agreements, –
. Water transfers between water districts in California,
–
. Volume of water allocation and entitlement trade in the
South Murray–Darling Basin, –
. Number of registered transactions in water rights in Chile
between and
. A schematic water economy
. Institutional structure of Israel’s water economy following the
water reform
. Natural water sources west of the Jordan River
. Domestic water allocation (MCM/y) during the period
–
. Per capita domestic water consumption (annual cubic meters
per capita) and domestic water prices during the period
–
. Agricultural water allocations (MCM/y) during the period
–
. Desalination costs ($/m) at the plant’s gate of Israel’s five
large-scale, seawater desalination plants
. A water economy with the variable and capital supply costs
. The annual benefits generated by the water allocation q(t)
and the natural water stock Q
. Sectoral demand curve (panel a) and unit cost of water
allocations from a given source to a given sector (panel b)
. Natural water supply (rainfall) fluctuates around a mean μ
. Adding a stock source (groundwater) at a price p to
nA
the (costless) uncertain rainfall Z
. Optimal groundwater infrastructure under linear demand
. Optimal groundwater infrastructure under a strictly convex
water demand
. Groundwater extractions (a) and water table depth under
common property extraction behavior (b)
. Groundwater extraction (a) and water table depth under
optimal extraction behavior (b)
. Annual net benefits (a) and water table depth (b) under
decoupling and elimination of subsidy
. Total present value of net benefits
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viii List of Figures
. Farmers gross margin, social welfare, and water table level
under different scenarios
. A general exposition of an economy-wide system that
addresses the interactions of water and the various
economic sectors
. The macro–micro linkage effects of removing subsidies to
processing of sugar, oil, and wheat
. The macro–micro linkage effects of reallocation of water
from rural to urban uses
. The macro–micro linkage effects of drought resulting in
reduction of surface water available for irrigation
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Tables
. Available renewable natural continental and world
water resources page
. Number of drought and flood events between
and divided into three periods
. Global number of wastewater facilities and capacity
(billion cubic meters per year)
. Treated wastewater reuse for various purposes in
California, , ,
. Status of water rights, allocation and trade in water-scarce
countries
. Main methods for pricing irrigation water consumption
. Main methods for pricing residential water consumption
. Israel’s current desalination capacity
. Prevalent water regulation schemes
. Costs, payments, and proceeds
. Parameters and functions
. Unit supply costs
. Demand parameters
. Water allocations and prices
. Water allocations and prices without desalination
. Summaryoftheperformanceofthedifferentpolicyinstruments
.A Parameters used in simulations for Leon, Guanajuato, Mexico
.A Aquifer parameters in western la Mancha, Spain
. Selected policy and policy linkages used in the analysis
of Morocco
. Net benefits accrued by various coalitions in the Blue
Nile Basin under various coalitional arrangements,
water trade/no trade, abatement of soil erosion,
and allocation scenarios (billion US$ in prices)
ix
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