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The regulation of a spatially heterogeneous externality: Tradable groundwater permits to protect streams

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  • Kuwayama, Yusuke
  • Brozović, Nicholas

Abstract

Groundwater pumping can reduce the flow of surface water in nearby streams. In the United States, recent awareness of this externality has led to intra- and inter-state conflict and rapidly-changing water management policies and institutions. Although the marginal damage of groundwater use on stream flows depends crucially on the location of pumping relative to streams, current regulations are generally uniform over space. We use a population data set of irrigation wells in the Nebraska portion of the Republican River Basin to analyze whether adopting spatially differentiated groundwater pumping regulations leads to significant reductions in farmer abatement costs and costs from damage to streams. We find that regulators can generate most of the potential savings in total social costs without accounting for spatial heterogeneity. However, if regulators need to increase the protection of streams significantly from current levels, spatially differentiated policies will yield sizable cost savings.

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  • Kuwayama, Yusuke & Brozović, Nicholas, 2013. "The regulation of a spatially heterogeneous externality: Tradable groundwater permits to protect streams," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 364-382.
  • Handle: RePEc:eee:jeeman:v:66:y:2013:i:2:p:364-382
    DOI: 10.1016/j.jeem.2013.02.004
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    References listed on IDEAS

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    Cited by:

    1. Andrew B. Ayres & Eric C. Edwards & Gary D. Libecap, 2017. "How Transaction Costs Obstruct Collective Action: Evidence from California’s Groundwater," NBER Working Papers 23382, National Bureau of Economic Research, Inc.
    2. Cameron Speir & Jae Han & Nicholas Brozović, 2016. "Spatial Dynamic Optimization of Groundwater Use with Ecological Standards for Instream Flow," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(03), pages 1-23, September.
    3. Cobourn, Kelly M. & Amacher, Gregory S. & Elbakidze, Levan, 2015. "Bargaining for recharge: an analysis of cooperating and conjunctive surface water-groundwater management," 2016 Allied Social Sciences Association (ASSA) Annual Meeting, January 3-5, 2016, San Francisco, California 212843, Agricultural and Applied Economics Association.
    4. Lichtenberg, Erik & Majsztrik, John & Saavoss, Monica, 2014. "Willingness to Pay for Sensor-Controlled Irrigation," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 168211, Agricultural and Applied Economics Association.
    5. repec:kap:enreec:v:68:y:2017:i:3:d:10.1007_s10640-016-0026-2 is not listed on IDEAS
    6. Eric C. Edwards, 2016. "Book Review: “Chasing Water — A Guide for Moving from Scarcity to Sustainability”," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(02), pages 1-4, June.
    7. Shaneyfelt, Calvin R. & Schoengold, Dr. Karina, 2014. "Irrigation Demand in a Changing Climate: Using disaggregate data to predict future groundwater use," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170586, Agricultural and Applied Economics Association.

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