IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/5494.html
   My bibliography  Save this paper

The full economic cost of groundwater extraction

Author

Listed:
  • Strand, Jon

Abstract

When a groundwater basin is exploited by a large number of farmers, acting independently, each farmer has little incentive to practice conservation that would primarily benefit other farmers. This can lead to excessive groundwater extraction. When farmers pay less than the full cost of electricity used for groundwater pumping, this problem can be worsened; while the problem can be somewhat relieved by rationing the electricity supply. The research in this paper constructs an analytical framework for describing the characteristics of economically efficient groundwater management plans, identifying how individual water use decisions by farmers collectively depart from efficient resource use, and examining how policies related to both water and electricity can improve on the efficiency of the status quo. It is shown that an optimal scheme for pricing electricity used for pumping groundwater includes two main elements: 1) the full (marginal) economic cost of electricity must be covered; and 2) there must be an extra charge, reflected in the electricity price, corresponding to the externality cost of groundwater pumping. The analysis includes a methodology for calculating the latter externality cost, based on just a few parameters, and a discussion of how electricity pricing could be modified to improve efficiency in both power and water use.

Suggested Citation

  • Strand, Jon, 2010. "The full economic cost of groundwater extraction," Policy Research Working Paper Series 5494, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5494
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2010/12/06/000158349_20101206131004/Rendered/PDF/WPS5494.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Santiago Rubio & BegoƱa Casino, 2003. "Strategic Behavior and Efficiency in the Common Property Extraction of Groundwater," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(1), pages 73-87, September.
    2. Birner, Regina & Gupta, Surupa & Sharma, Neeru, 2011. "The political economy of agricultural policy reform in India: Fertilizers and electricity for irrigation," Research reports reginabirner, International Food Policy Research Institute (IFPRI).
    3. Stergios Athanassoglou & Glenn Sheriff & Tobias Siegfried & Woonghee Tim Huh, 2009. "Simple Mechanisms for Managing Complex Aquifers," NCEE Working Paper Series 200905, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Oct 2009.
    4. Provencher Bill & Burt Oscar, 1993. "The Externalities Associated with the Common Property Exploitation of Groundwater," Journal of Environmental Economics and Management, Elsevier, vol. 24(2), pages 139-158, March.
    5. Tsur, Yacov & Graham-Tomasi, Theodore, 1991. "The buffer value of groundwater with stochastic surface water supplies," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 201-224, November.
    6. Tsur Yacov & Zemel Amos, 1995. "Uncertainty and Irreversibility in Groundwater Resource Management," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 149-161, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Strand, Jon, 2012. "Allocative inefficiencies resulting from subsidies to agricultural electricity use : an illustrative model," Policy Research Working Paper Series 5955, The World Bank.
    2. Zekri, Slim & Madani, Kaveh & Bazargan-Lari, Mohammad Reza & Kotagama, Hemesiri & Kalbus, Edda, 2017. "Feasibility of adopting smart water meters in aquifer management: An integrated hydro-economic analysis," Agricultural Water Management, Elsevier, vol. 181(C), pages 85-93.

    More about this item

    Keywords

    Water and Industry; Water Supply and Systems; Water Conservation; Water Use; Wastewater Treatment;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:5494. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.