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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.

Suggested Citation

  • James Roumasset & Christopher Wada, 2011. "Ordering Renewables: Groundwater, Recycling, and Desalination," Working Papers 201105, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:201105
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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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    References listed on IDEAS

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    1. 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, pages 227-245.
    2. 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).
    3. 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.
    4. Huhtala, Anni, 1999. "Optimizing production technology choices: conventional production vs. recycling," Resource and Energy Economics, Elsevier, vol. 21(1), pages 1-18, January.
    5. Naomi Zeitouni & Ariel Dinar, 1997. "Mitigating negative water quality and quality externalities by joint mangement of adjacent aquifers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 1-20.
    6. Ujjayant Chakravorty & Michel Moreaux & Mabel Tidball, 2008. "Ordering the Extraction of Polluting Nonrenewable Resources," American Economic Review, American Economic Association, vol. 98(3), pages 1128-1144, June.
    7. Vernon L. Smith, 1972. "Dynamics of Waste Accumulation: Disposal versus Recycling," The Quarterly Journal of Economics, Oxford University Press, vol. 86(4), pages 600-616.
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    10. Thomas Kaeo Duarte & Sittidaj Pongkijvorasi & James Roumasset & Daniel Amato & Kimberly Burnett, 2010. "Optimal Management of a Hawaiian Coastal Aquifer with Near-Shore Marine Ecological Interactions," Working Papers 201021, University of Hawaii at Manoa, Department of Economics.
    11. 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.
    12. 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.
    13. 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.
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    16. 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.
    17. Chakravorty, Ujjayant & Krulce, Darrell L, 1994. "Heterogeneous Demand and Order of Resource Extraction," Econometrica, Econometric Society, vol. 62(6), pages 1445-1452, November.
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    19. Richard Horan & James Shortle, 1999. "Optimal Management of Multiple Renewable Resource Stocks: An Application to Minke Whales," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 435-458.
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    Cited by:

    1. Shawn Arita & Sumner La Croix & James Mak, 2012. "How Big? The Impact of Approved Destination Status on Mainland Chinese Travel Abroad," Working Papers 2012-3, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    2. repec:eee:resene:v:49:y:2017:i:c:p:186-200 is not listed on IDEAS
    3. James Roumasset & Christopher Wada, 2014. "Groundwater Economics without Equations," Working Papers 2014-8, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    4. James Roumasset & Christopher Wada, 2012. "The Economics of Groundwater," Working Papers 201211, University of Hawaii at Manoa, Department of Economics.
    5. 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.
    6. James Roumasset & Christopher Wada, 2014. "Integrated Groundwater Resource Management," Working Papers 201414, University of Hawaii at Manoa, Department of Economics.
    7. James Roumasset & Christopher A. Wada, 2014. "Energy, Backstop Endogeneity, and the Optimal Use of Groundwater," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, pages 1363-1371.

    More about this item

    Keywords

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

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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