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Ordering Renewables: Groundwater, Recycling, and Desalination

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  • James Roumasset

    ()
    (Department of Economics, University of Hawaii at Manoa and University of Hawai‘i Economic Research Organization)

  • Christopher Wada

    ()
    (University of Hawai‘i Economic Research Organization)

Abstract

Optimal recycling of minerals can be thought of as an integral part of the theory of the mine. In this paper, we consider the role that wastewater recycling plays in the optimal extraction of groundwater, a renewable resource. We develop a two-sector dynamic optimization model to solve for the optimal trajectories of groundwater extraction and water recycling. For the case of spatially increasing recycling costs, recycled water serves as a supplemental resource in transition to the steady state. For constant unit recycling cost, recycled wastewater is eventually used as a sector-specific backstop for agricultural users, while desalination supplements household groundwater in the steady state. In both cases, recycling water increases welfare by shifting demand away from the aquifer, thus delaying implementation of costly desalination. The model provides guidance on when and how much to develop resource alternatives.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_11-5R.pdf
File Function: First revision, 2011
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Bibliographic Info

Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 201105.

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Length: 28 pages
Date of creation: 06 May 2011
Date of revision:
Handle: RePEc:hai:wpaper:201105

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Keywords: Renewable resources; dynamic optimization; groundwater allocation; wastewater reuse; recycling; reclamation; water quality;

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References

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  1. Klaus Conrad, 1999. "Resource and Waste Taxation in the Theory of the Firm with Recycling Activities," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 14(2), pages 217-242, September.
  2. Chakravorty, Ujjayant & Krulce, Darrell & Roumasset, James, 2005. "Specialization and non-renewable resources: Ricardo meets Ricardo," Journal of Economic Dynamics and Control, Elsevier, vol. 29(9), pages 1517-1545, September.
  3. Basharat A. Pitafi & James A. Roumasset, 2009. "Pareto-Improving Water Management over Space and Time: The Honolulu Case," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 138-153.
  4. Naomi Zeitouni & Ariel Dinar, 1997. "Mitigating negative water quality and quality externalities by joint mangement of adjacent aquifers," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(1), pages 1-20, January.
  5. Brozovic, Nicholas & Sunding, David L. & Zilberman, David, 2006. "On the spatial nature of the groundwater pumping externality," 2006 Annual meeting, July 23-26, Long Beach, CA 21035, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Chakravorty, Ujjayant & Moreaux, Michel & Tidball, Mabel, 2006. "Ordering the Extraction of Polluting Nonrenewable Resources," IDEI Working Papers 415, Institut d'Économie Industrielle (IDEI), Toulouse.
  7. Gerard Gaudet & Michel Moreaux & Stephen W. Salant, 2001. "Intertemporal Depletion of Resource Sites by Spatially Distributed Users," American Economic Review, American Economic Association, vol. 91(4), pages 1149-1159, September.
  8. Chakravorty, Ujjayant & Roumasset, James & Tse, Kinping, 1997. "Endogenous Substitution among Energy Resources and Global Warming," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1201-34, December.
  9. Majah-Leah Ravago & James Roumasset, 2009. "Economic Policy for Sustainable Growth and Development vs. Greedy Growth and Preservationism," Working Papers 200909, University of Hawaii at Manoa, Department of Economics.
  10. Chakravorty, Ujjayant & Krulce, Darrell L, 1994. "Heterogeneous Demand and Order of Resource Extraction," Econometrica, Econometric Society, vol. 62(6), pages 1445-52, November.
  11. Darrell Krulce & James A. Roumasset & Tom Wilson, 1997. "Optimal Management of a Renewable and Replaceable Resource: The Case of Coastal Groundwater," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1218-1228.
  12. Stavins, Robert & Wagner, Alexander & Wagner, Gernot, 2002. "Interpreting Sustainability in Economic Terms: Dynamic Efficiency Plus Intergenerational Equity," Discussion Papers dp-02-29, Resources For the Future.
  13. Koundouri, Phoebe & Christou, Christina, 2006. "Dynamic adaptation to resource scarcity and backstop availability: theory and application to groundwater," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(2), June.
  14. Huhtala, Anni, 1999. "Optimizing production technology choices: conventional production vs. recycling," Resource and Energy Economics, Elsevier, vol. 21(1), pages 1-18, January.
  15. Pitafi, Basharat A.K. & Roumasset, James A., 2004. "Pareto-Improving Water Management Over Space And Time," 2004 Annual meeting, August 1-4, Denver, CO 20022, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  16. Chakravorty, Ujjayant & Umetsu, Chieko, 2003. "Basinwide water management: a spatial model," Journal of Environmental Economics and Management, Elsevier, vol. 45(1), pages 1-23, January.
  17. Thomas Kaeo Duarte & Sittidaj Pongkijvorasin & James Roumasset & Daniel Amato & Kimberly Burnett, 2010. "Optimal Management of a Hawaiian Coastal Aquifer with Near-Shore Marine Ecological Interactions," Working Papers 2010-08, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
  18. Costello, Christopher & Polasky, Stephen, 2008. "Optimal harvesting of stochastic spatial resources," Journal of Environmental Economics and Management, Elsevier, vol. 56(1), pages 1-18, July.
  19. Phoebe Koundouri & Christina Christou, 2006. "Dynamic adaptation to resource scarcity and backstop availability: theory and application to groundwater ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(2), pages 227-245, 06.
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Citations

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Cited by:
  1. James Roumasset & Christopher Wada, 2012. "The Economics of Groundwater," Working Papers 2012-4, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
  2. James Roumasset & Christopher Wada, 2013. "Integrating Demand-Management with Development of Supply-Side Substitutes," Working Papers 2013-13, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.

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