Recent changes in international commodity agreements

The contents of international commodity agreements have changed from those in which open-ended intervention mechanisms regulated the market defending a normative price to those limiting intervention so as not to obscure market forces and consequently the market price. Underlying this change is the principle to which the developed countries accorded the highest priority, namely that the interests of producing and consuming countries must balance to avoid an indiscriminate transfer of resources. On the other hand, the principles which guided agreements that set a normative price were based on the grounds that the market price determined by unequal partners was unfair and that internationally agreed developmental goals implied untied and unconditional resource transfers by means of normative, higher than market, prices. These two sets of principles were incompatible. As a result negotiations were not only difficult but inconclusive. Another reason for this outcome was that the question of the cost effectiveness of market duplicating agreements based on the principle of balanced interests was unresolved. These reasons explain why commodity agreements do not figure currently in substantive discussions on North-South cooperation and why only three commodity agreements have a functional role and even of these three, one is not in force definitively.     

Managing Congestion: Economics of Price and Lottery Rationing

It is not uncommon for the carrying capacity for congestible facilities to be estimated before the allocation method is known. This paper shows how efficient capacity differs between two competing resource allocation mechanisms, one which is efficient (price) and one which is fair (lottery). The welfare theoretic implications of adopting lottery allocation rather than price allocation are illustrated from the perspectives of economic efficiency and the benefits obtained by resource users and suppliers. It is found that risk-neutral resource users will always prefer lottery allocation to price allocation. While price allocation is efficient, it is never in risk-neutral resource users» interests to have price allocation imposed. Conclusions are tested using a linear constant crowding demand function, in which case it is found that the efficient capacity for lottery rationing exceeds the efficient capacity where price is to be used to allocate a congestible resource. Objectives may be better met by joint use of allocation mechanisms, the implications of which are investigated using the linear demand model.     

A Transactions Cost Approach to the Theoretical Foundations of Water Markets1

Abstract: Water marketing is often cited as a means of alleviating the stresses attached to allocation of water use. Frequently, marketing is suggested in a context that implies substitution of competitive markets for the allocation based on the prior appropriation doctrine. This study examines water marketing from the perspective of a transactions cost approach to the private and broad social agreements (contracts) that support water allocation. It examines the major behavioral challenges faced by any contract, and the alternative approaches to those challenges, with respect to water allocation. It also examines the impact of market design on the existence of externalities, costs imposed by transactions on society and individuals not party to the transaction. It finds that the most robust water market designs will be found in systems with sufficient property rights protection to support investment, sufficient hydrologic information to provide accurate analysis of third party effects, conjunctive management of surface and groundwater, and a governance structure capable of administering the rules while not determining outcomes.     

FROM FLOW TO FISH TO DOLLARS: AN INTEGRATED APPROACH TO WATER ALLOCATION1

This paper details a case study of economic and natural system responses to alternative water management policies in the Cache La Poudre River basin, Colorado, 1980–1994. The case study is presented to highlight the value and application of a conceptual integration of economic, salmonid population, physical habitat, and water allocation models. Five alternative regimes, all intended to increase low winter flows, were investigated. Habitat enhancements created by alternative regimes were translated to population responses and economic benefits. Analysis concluded that instream flows cannot compete on the northern Colorado water rental market; cooperative agreements offer an economically feasible way to enhance instream flows; and establishing an instream flow program on the Cache La Poudre River mainstem is a potentially profitable opportunity. The alliance of models is a dynamic multidisciplinary tool for use in professional settings and offers valuable insight for decision-making processes involved in water management.     

CONSERVATIONAL WATER PRICING FOR INCREASED WATER SUPPLY BENEFITS1

ABSTRACT: A study was undertaken to see if benefits from water supply could be increased by utilizing price-usage information in reservoir design studies. Three pricing policies were examined. The first policy assumed no price-use relationship, and quantity demanded was based on existing community usage with a low water rate. The price of water was set to recover system costs. A price-use relationship was assumed in the second policy and the water rate was constant. The price of water was determined from the associated system which provided maximum expected net benefits. The third policy assumed the price-use relationship and the price charged for water during each billing period was a non-linear function of storage which increased as the amount of water in storage at the beginning of the period decreased. It was found that the use of the conservation pricing policies substantially reduced storage requirements while providing demonstrable net benefits to the community and a large average supply. The conservation pricing policies substantially lowered the average price paid for water. The effect of uncertainty in consumer response to changes in price was studied by using a probabilistic price-use relationship. This uncertainty did not significantly reduce the effectiveness of the conservation policy. It was concluded that demand management by the use of a proper pricing policy could significantly increase net water supply benefits to a community.     

Legal aspects of natural resource projects in the CIS

Foreign companies interested in natural resources ventures in republics of the Commonwealth of Independent States must contend with a legal, regulatory and tax environment that is particularly fluid. The approval process for joint ventures, production sharing and export agreements (particularly for natural resources) is complex. Legislation in most CIS countries falls short of adequately addressing investors' concerns or lacks clear guidance on many key issues, such as conditions under which a state enterprise can enter into new business arrangements under current privatization laws. Among other conditions that act as a constraint to investment projects are lack of a sufficiently convertible currency in each CIS country and complex regimes of currency regulation; the absence of financing techniques that are common in market economies (ie secured lending); the need to scrutinize the validity and enforceability of any locally available guarantees and a reluctance by financial institutions to participate in projects in CIS countries (often because they have considerable difficulty assessing the viability of projects). These problems demand an extraordinary commitment in terms of effort and perseverance from potential investors, as compared to projects in other areas of the world. This paper cites the key negotiating issues and transactions that need to be structured with care by a prudent investor.     

The hotelling valuation of natural resources: some further results

This paper tests the Hotelling Valuation Principle (HVP) for natural resources using data from oil and gas ‘pure plays’ such as royalty trusts and master limited partnerships. The results support the HVP which specifies that the value of any mineral reserve may be predicted by the market price of the resource, net of extraction costs. Regression results also indicate that a Box-Cox transformation of variables provide a better means of estimating the functional relationship between the value of an exhaustible natural resource and its market price.     

The pricing of water services in developing countries

This paper focuses on improving efficiency in the water and sewerage sectors through long-run marginal cost pricing, adjusted for financial needs, externalities, second best considerations, lifeline tariffs and cross subsidization within an integrated water resource planning (IWRP) framework. Supply efficiency suggests that for a given price structure, an optimal long-run investment plan and a corresponding level of supply quality should be determined which maximizes net social benefits. Supply efficiency also requires efficient operation of the water system, including optimization of losses.     

Joint institutional arrangements for addressing transboundary water resources issues—lessons for the GEF

The lofty goals of the 1992 Earth Summit regarding sustainable development will not be achieved without major improvements in the management of transboundary water resources. This paper describes the serious nature of water-related conflicts and environmental damage associated with degradation of marine ecosystems, coastal zones, and shared surface/groundwater systems. Traditional approaches such as international conventions, watercourse agreements with basin organizations, and arbitration have generally fallen short of their objectives. This article suggests that a middle ground centered on multicountry institutional arrangements for joint fact finding, evaluation, and problem resolution may be a more productive approach over the short term to achieve sustainable development. The experience of the International Joint Commission (Canada and U.S.) is described as a way of providing a neutral ground for building trust among nations, for 'leveling the playing field' among small and large countries, and for providing mechanisms for countries to work jointly toward sustainable development of their shared resources without relinquishing their sovereignty. The Global Environment Facility (GEF) is playing a catalytic role in assisting countries to address transboundary water resources issues. The paper describes GEF's Operational Strategy and discusses the implications of joint institutional arrangements for the international waters focal area. Given that the environmental security of many nations rests on improved transboundary cooperation, the GEF provides a pragmatic opportunity for countries to cooperatively address these pressing problems.     

POTENTIAL ECONOMIC IMPACTS OF CHANGES IN WATER AVAILABILITY ON AGRICULTURE IN THE TRUCKEE AND CARSON RIVER BASINS,NEVADA, USA1

ABSTRACT: Effects of climate change are likely to be detected in nearly all sectors and regions of the economy, with both winners and losers. One of the consequences of climatic changes could be altered regional water supplies. This paper presents an investigation of regional agricultural implications of changes in water availability. Specifically, using a profit maximization approach, the economic consequences of altered water availability in the Great Basin of Nevada are analyzed in terms of the effects on net returns of agricultural producers. Under the scenarios analyzed in this paper, it is found that with adequate water systems, increase in streamflow and consequent increase in water availability could significantly benefit agricultural producers of this region. Net returns to irrigators could increase by 8 to 13 percent, not taking into account the possibility of changes in crop yields and prices. It is also shown that the benefits from increased water availability are sensitive to likely crop yield and price changes. The potential for adverse effects of climatic changes on water supply is also considered by analyzing the effects of decreased water availability. Under decreased water availability scenarios, farmer net returns decrease substantially.     

碳排放权配额管理体系的比较和借鉴

在地方性试点的基础上,我国已在电力行业启动全国性碳排放权交易市场建设。配额管理不仅直接影响参与者的经济利益,还决定着碳排放权交易机制能否成功建立和持续运行。从配额总量设定、地区和企业层面的配额分配、配额的调控和灵活管理机制等角度总结比较了各国碳排放权配额管理制度设计的经验教训,并从五个方面提出了对我国全国性碳交易市场建设的启示。     

SIMULATION AND DECISIONMAKING: THE PLATTE RIVER BASIN IN NEBRASKA1

Substantial conflict exists over water management and allocation in the Platte River Basin of Nebraska. An interdisciplinary computer simulation model, representing the water quantity, water quality, environmental, and economic dimensions of the conflict, was developed in order to analyze the tradeoffs among allocation scenarios. Most importantly, decisionmakers and interest groups were involved in model development. Simulation results for a base case and two scenarios are presented. One scenario favors protection of instream flow for wildlife; the other favors water diversions for agriculture. Impacts of the instream flow scenario, as measured by the amount of land irrigated, groundwater levels, the amount of wildlife habitat for cranes and catfish, and net agricultural benefits did not differ greatly from those of the base case. However, impacts of the diversion scenario were substantial. On the negative side, instream flows and wildlife habitat declined an average of 39 percent; while, on the positive side, groundwater levels and net agricultural benefits each increased 6 percent. The modeling process was successful insofar as it promoted an understanding among the highly diverse interest groups of the systems nature of the Basin. One agreement on a water diversion schedule among three of the parties has been reached, partly as a result of this process. More comprehensive compromises have not yet been forged. Our experience, however, indicates that modeling success at the policymaking level depends more on the extent to which the policymakers understand the model than it does on model sophistication.     

Market structure and bargaining power: A study of three international mineral markets

This paper considers how differences in the structure and arrangements between the international markets for bauxite, iron ore and copper affect the bargaining strength and division of benefits between buyers and sellers. After describing the characteristic features of each market, and noting the absence of appropriate economic theory to disentangle the issue at hand, an attempt is made to clarify the problem by considering the difference between the markets in terms of five factors - degree of concentration, ability of the parties to inflict losses on each other, varying shares of the raw material in final product prices, structure of the market in which the final products are sold, and the process of trade negotiation.     

Evidence Supporting Cap and Trade as a Groundwater Policy Option for Reducing Irrigation Consumptive Use1

Thompson, Christopher L., Raymond J. Supalla, Derrel L. Martin, and Brian P. McMullen, 2009. Evidence Supporting Cap and Trade as a Groundwater Policy Option for Reducing Irrigation Consumptive Use. Journal of the American Water Resources Association (JAWRA) 45(6):1508‐1518. Abstract: In the American West water is becoming an increasingly scarce resource. Obligations to bordering states, endangered species protection, and long‐term resource sustainability objectives have created a need for most western states to reduce the consumption of irrigation water. In Nebraska specifically, the Nebraska Department of Natural Resources (NDNR) and local Natural Resource Districts (NRDs) are meeting a large part of this need by using a regulatory approach, commonly called groundwater allocation. The cost of allocation, which occurs in the form of reduced economic returns to irrigation, could be greatly reduced by using an integrated cap and trade approach. Much like environmental cap and trade programs which are used to reduce the cost of limiting environmental pollution, the trading of capped groundwater allocations can reduce the cost of limiting water use. In an analysis of a typical case in the Nebraska Republican Basin, we found that the impact of a water market to trade groundwater allocations depended on the size of the allocation and on the characteristics of the land and irrigation systems involved in the trade. Potential economic benefits from trade ranged from US$0 to US$120 per 1,000 cubic meters traded, from US$25 to US$250 per 1,000 cubic meters of reduction in consumptive use, and from US$16 to US$50 per hectare of irrigated land in the region. The highest benefits occurred at relatively high allocations, which capped withdrawals at 65‐75% of the expected unrestricted pumping level. These gains from trade would be split between buyers and sellers based on the negotiated selling price.     

NEW DEVELOPMENTS IN THIRD WORLD MINING AGREEMENTS

The long-term trend toward mineral resource development agreements that reflect the desires of developing country governments as well as those of foreign investors is not always clear-cut. At times, conditions in the market for a particular mineral and general financial conditions may affect the balance of bargaining power between governments and investors. Mr Zorn's analysis of two recent copper agreements, in Panama and Papua New Guinea, shows that foreign investors have been able to achieve favorable provisions for the early return of capital and for ensuring investor control over key management decisions. At the same time, the host governments have won provisions that may increase their 'take' from the projects in the longer term.     

Fuzzy pricing for urban water resources: model construction and application

A rational water price system plays a crucial role in the optimal allocation of water resources. In this paper, a fuzzy pricing model for urban water resources is presented, which consists of a multi-criteria fuzzy evaluation model and a water resources price (WRP) computation model. Various factors affecting WRP are comprehensively evaluated with multiple levels and objectives in the multi-criteria fuzzy evaluation model, while the price vectors of water resources are constructed in the WRP computation model according to the definition of the bearing water price index, and then WRP is calculated. With the incorporation of an operator's knowledge, it considers iterative weights and subjective preference of operators for weight-assessment. The weights determined are more rational and the evaluation results are more realistic. Particularly, dual water supply is considered in the study. Different prices being fixed for water resources with different qualities conforms to the law of water resources value (WRV) itself. A high-quality groundwater price computation model is also proposed to provide optimal water allocation and to meet higher living standards. The developed model is applied in Jinan for evaluating its validity. The method presented in this paper offers some new directions in the research of WRP.     

LINEAR PROGRAMMING USE FOR EVALUATING WATER RESOURCES AND COST AND BENEFIT ALLOCATION1

ABSTRACT A linear programming model for a river basin was developed to include almost all water-related economic activity both for consumers and producers. The model was so designated that the entire basin or basin sub-division could be analyzed. The model included seven sectors, nine objective function criteria, and three river-flow levels. Economic basis for conflicts among sectors over incidence of cost allocation and level of economic activity can be traced to some chosen objective. The disposal of untreated household waste water, particularly from the rural household, directly into the river was consistent with maximizing net benefits and minimizing costs. The optimum resource allocation, water-treatment plants, farms and industry activities would change with flow level. For each of the three industries analyzed separately, paper, wool and tanning, public treatment of industrial waste water was the optimal treatment process in one or more of the solutions. Lake shoreline was the dominant feature determining lake-resource valuation. Implied capital value varied from $126 per shoreline foot to over $250 depending on discount rate. Implied prices on lake surface ranged from $42 to $147 per acre. Strong economic forces encouraged small lot sizes for vacation cottages.     

Technological Innovation and Developmental Strategies for Sustainable Management of Aquatic Resources in Developing Countries

Sustainable use and allocation of aquatic resources including water resources require implementation of ecologically appropriate technologies, efficient and relevant to local needs. Despite the numerous international agreements and provisions on transfer of technology, this has not been successfully achieved in developing countries. While reviewing some challenges to technological innovations and developments (TID), this paper analyzes five TID strategic approaches centered on grassroots technology development and provision of localized capacity for sustainable aquatic resources management. Three case studies provide examples of successful implementation of these strategies. Success requires the provision of localized capacity to manage technology through knowledge empowerment in rural communities situated within a framework of clear national priorities for technology development.     

Organic olive orchards on sloping land: More than a specialty niche production system?

Five organic Sloping and Mountainous Olive Plantation Production Systems (SMOPS) have been studied in four olive-producing areas in four European countries (Spain, Italy, Greece and Portugal). Results indicate that these SMOPS provide ecological, economic and social benefits to the regions in which they are located, although most of these benefits are not strictly limited to the organic production systems. Erosion control and organic matter balance remain significant issues in four of the SMOPS and we suggest that subsidy support should be conditional on the implementation of additional soil and water conservation measures that should be provided with specific funding. Most of the SMOPS will remain dependent on a similar level of support in order for olive production to remain economically feasible. The lower profitability compared to non-organic olive production systems suggests that there is limited scope for expansion of organic olive production, although in the study areas where there is little such production, such as Western Crete (Greece) and Basilicata-Salerno (Italy) the scope remains great. The analysis of the reasons for the beneficial effects of olive cultivation in the areas studied indicates that in most cases soil management techniques adopted in or recommended for organic production systems could provide similar benefits in other production systems as well.     

Assessing equity and sustainability of water allocation in Colombia

Based on the national database of 28,104 water rights (concessions) granted in Colombia, this paper presents an analysis of how the principles of equity and sustainability are reflected in water allocation. Concessions appear to be an exclusionary mechanism since only a minority of small water users have concessions and the distribution of water volumes among those who have them is extremely inequitable. The 2009 Gini coefficient calculated for water concessions granted for agriculture was 0.90 compared with the rural land Gini of 0.88 (both indicators grouping holdings under the same entity). More than half of the Colombian departments have a higher Gini coefficient for water than for land, suggesting that water rights are at least as unequally distributed as land, in one of the most inequitable countries in Latin America. Water allocated to domestic, agriculture and hydropower use indicates a lack of consistency of water allocation criteria across regions. The volumetric and administrative attributes of water allocation in Colombia do not account for environmental flows or the concerns of marginalised groups of society that have limited access to the mechanism. Water allocation as a technical task, with limited transparency and secluded from public scrutiny, does not contribute to the solution of increasing water-related conflicts.