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Ordering Renewable Resources: Groundwater, Recycling, and Desalination

  • Roumasset James

    ()

    (University of Hawaii at Manoa)

  • Wada Christopher A

    ()

    (University of Hawaii at Manoa)

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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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 11 (2011)
Issue (Month): 1 (May)
Pages: 1-29

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Handle: RePEc:bpj:bejeap:v:11:y:2011:i:1:n:28
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  1. CHAKRAVORTY Ujjayant & MOREAUX Michel & TIDBALL Mabel, 2006. "Ordering the Extraction of Polluting Nonrenewable Resources," LERNA Working Papers 06.19.212, LERNA, University of Toulouse.
  2. 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.
  3. 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).
  4. 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.
  5. 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.
  6. Chakravorty, Ujjayant & Krulce, Darrell L, 1994. "Heterogeneous Demand and Order of Resource Extraction," Econometrica, Econometric Society, vol. 62(6), pages 1445-52, November.
  7. 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.
  8. 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.
  9. 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).
  10. 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.
  11. 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.
  12. Huhtala, Anni, 1999. "Optimizing production technology choices: conventional production vs. recycling," Resource and Energy Economics, Elsevier, vol. 21(1), pages 1-18, January.
  13. 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.
  14. 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.
  15. Richard Horan & James Shortle, 1999. "Optimal Management of Multiple Renewable Resource Stocks: An Application to Minke Whales," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(4), pages 435-458, June.
  16. 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.
  17. 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.
  18. 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.
  19. 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.
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