Understanding the Economics of Water in Israel: the Multi-Year Water Allocation System Model

The objective of this project is to develop a tool, called MYWAS (Multi-Year Water Allocation System), as an analytical instrument for assessing the economic efficiency of the Israeli water sector, to quantify the effects of various policies and changes in external factors, and to formulate recommendations with respect to future water management and policy. MYWAS incorporates detailed supply and demand information for the various users and regions of Israel, a constrained optimization model and an interface module that facilities simulations (using the Water Evaluation and Planning (WEAP) software). The natural water sources within each region in Israel are specified along with the cost of extraction and the sustainable yield. The model incorporates regional demand functions of different types of water use, including households, agriculture, and industry, as well as information on water infrastructure and its operational and capital costs (wastewater treatment plants, desalination plants, storage facilities, and conveyance infrastructure). MYWAS enables the user to impose constraints that reflect her views of social values for water, including the specification of amounts of water to be set-aside for environmental purposes. Water management policies, such as the prices at which water is to be sold to farmers, can also be set if desired; MYWAS takes these inputs and calculates the water flows that maximize the system-wide net benefits received from the available water. These consist of the gross benefits (measured by the areas under the different demand curves) less the costs. We present two applications of the model: (1) a short-run static analysis of water pricing schemes, which was conducted in response to a request by the Israeli Ministry of Agriculture and Rural Development (IMARD); (2) long-run dynamic runs, conducted to compare an optimal water management path to the results of keeping the current (2014) water prices. Under both scenarios MYWAS suggests a much slower desalination-capacity development than the schedule proposed in the Master Plan of the Israeli Water Authority (IWA, 2011). We also report dissemination activities and discuss the potential of the model to become an analytical tool in decision making processes in the Israeli water and agricultural economies.