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Is dilution the solution for water pollution? An economic analysis

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  • Paragahawewa, Upananda H.
  • Doole, Graeme J.
  • Bower, Bob

Abstract

High nitrate concentrations have been reported within Canterbury aquifers due to agricultural intensification. Reducing nutrient loadings to groundwater by a reasonable degree is difficult for industry because of the anticipated cost of effective mitigation technologies. A novel alternative is to decrease nitrate concentration through increasing the amount of water present in the aquifer through the use of Managed Aquifer Recharge (MAR) in combination with some minor farm-level mitigation practices. However, this poses a difficult economic problem that involves balancing the benefit of lowering nitrate concentrations in groundwater, improving reliability of groundwater availability for future irrigation, the capital cost of MAR infrastructure, and the cost of source surface water to use in the dilution. This study presents a dynamic economic analysis that weights these alternative sources of value. Overall, it is shown that a MAR scheme is of positive value to both the environment and economy, with an average benefit: cost ratio of four, and around $76m of income and 170FTE of employment gain per annum at regional level.

Suggested Citation

  • Paragahawewa, Upananda H. & Doole, Graeme J. & Bower, Bob, 2015. "Is dilution the solution for water pollution? An economic analysis," 2015 Conference (59th), February 10-13, 2015, Rotorua, New Zealand 202984, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare15:202984
    DOI: 10.22004/ag.econ.202984
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    References listed on IDEAS

    as
    1. Sarker, Ashutosh & Ross, Helen & Shrestha, Krishna K., 2008. "A common-pool resource approach for water quality management: An Australian case study," Ecological Economics, Elsevier, vol. 68(1-2), pages 461-471, December.
    2. Woodward, Richard T., 2000. "Market-Based Solutions To Environmental Problems: Discussion," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(2), pages 1-8, August.
    3. Doole, Graeme J., 2012. "Cost-effective policies for improving water quality by reducing nitrate emissions from diverse dairy farms: An abatement–cost perspective," Agricultural Water Management, Elsevier, vol. 104(C), pages 10-20.
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