VALUATION OF IMPROVED IRRIGATION EFFICIENCY FROM AN EXHAUSTIBLE GROUNDWATER SOURCE1

This paper presents estimates made via a recursive linear programming model of the net benefits of improving irrigation application efficiency from an exhaustible groundwater source. Net benefits were derived for different application efficiency levels under furrow, sprinkler, and LEPA irrigation systems. In addition, net benefit estimates were obtained for the transition across irrigation systems. Solutions from the model indicate that low crop prices have a differential impact on net benefits across irrigation application efficiencies and irrigation systems. Also, the more limited groundwater situations consistently reduce the economic incentive to adopt improved irrigation application techniques across all irrigation systems.     

THE ECONOMIC VALUE OF GROUND WATER RECHARGE FOR IRRIGATION USE1

ABSTRACT: Artificial recharge as a means of augmenting water sup plies for irrigation is a management alternative which policy makers in ground water decline areas are beginning to consider seriously. A conceptual model is developed to evaluate the economic benefits from ground water recharge under conditions where the major water use is irrigation. The methodology presented separates recharge benefits into two components: pumping cost savings and aquifer extension benefits. This model is then applied to a Nebraska case to approximate the value of recharge benefits as a function of aquifer response. discount rate, and commodity prices. It was found that recharge benefits vary from less than $2 to over $6 an acre foot recharged.     

Investor demand and spot commodity prices

The on-going debate over the influence of investor demand on spot commodity prices largely attempts to assess this influence by measuring the growth in investor demand in recent years. Given the serious data problems that plague such analyses, this article pursues another approach in the hope of providing useful insights into the impact of investor demand on spot commodity prices. It focuses on the mechanisms by which investor demand affects spot prices, and in particular on two questions. First, how does an increase in investor demand on the futures markets affect the spot market and spot price? Second, when investor demand is increasing and pushing a commodity's price up, do physical stocks of the commodity also have to be rising, as economists and others widely assume?On the first question, the article concludes that a surge in investor demand raising prices on the futures markets will have a direct and comparable effect on the spot market prices when these markets are in strong contango. However, when markets are in weak contango or backwardation, price movements in the futures markets have a much looser effect on spot prices. As a result, changes in investor demand on the futures markets may have little or no influence on spot prices in the absence of a strong contango. Instead, changes in fundamentals (that is, producer supply and consumer demand) and possibly changes in investor demand taking place directly on the spot market largely determine the spot price at such times.On the second question, the article shows that investor demand can be pushing up a commodity's price even when investor stocks are falling, despite the widespread presumption to the contrary.     

Water transfers,agriculture, and groundwater management: a dynamic economic analysis

Water transfers from agricultural to urban and environmental uses will likely become increasingly common worldwide. Many agricultural areas rely heavily on underlying groundwater aquifers. Out-of-basin surface water transfers will increase aquifer withdrawals while reducing recharge, thereby altering the evolution of the agricultural production/groundwater aquifer system over time. An empirical analysis is conducted for a representative region in California. Transfers via involuntary surface water cutbacks tilt the extraction schedule and lower water table levels and net benefits over time. The effects are large for the water table but more modest for the other variables. Break-even prices are calculated for voluntary quantity contract transfers at the district level. These prices differ considerably from what might be calculated under a static analysis which ignores water table dynamics. Canal-lining implies that districts may gain in the short-run but lose over time if all the reduction in conveyance losses is transferred outside the district. Water markets imply an evolving quantity of exported flows over time and a reduction in basin net benefits under common property usage. Most aquifers underlying major agricultural regions are currently unregulated. Out-of-basin surface water transfers increase stress on the aquifer and management benefits can increase substantially in percentage terms but overall continue to remain small. Conversely, we find that economically efficient management can mitigate some of the adverse consequences of transfers, but not in many circumstances or by much. Management significantly reduced the water table impacts of cutbacks but not annual net benefit impacts. Neither the break-even prices nor the canal-lining impacts were altered by much. The most significant difference is that regional water users gain from water markets under efficient management.     

Application of game theory for a groundwater conflict in Mexico

Exploitation of scarce water resources, particularly in areas of high demand, inevitably produces conflict among disparate stakeholders, each of whom may have their own set of priorities. In order to arrive at a socially acceptable compromise, the decision-makers should seek an optimal trade-off between conflicting objectives that reflect the priorities of the various stakeholders. In this study, game theory was applied to a multiobjective conflict problem for the Alto Rio Lerma Irrigation District, located in the state of Guanajuato in Mexico, where economic benefits from agricultural production should be balanced with associated negative environmental impacts. The short period of rainfall in this area, combined with high groundwater withdrawals from irrigation wells, has produced severe aquifer overdraft. In addition, current agricultural practices of applying high loads of fertilizers and pesticides have contaminated regions of the aquifer. The net economic benefit to this agricultural region in the short-term lies with increasing crop yields, which requires large pumping extractions for irrigation as well as high chemical loading. In the longer term, this can produce economic loss due to higher pumping costs (i.e., higher lift requirements), or even loss of the aquifer as a viable source of water. Negative environmental impacts include continued diminishment of groundwater quality, and declining groundwater levels in the basin, which can damage surface water systems that support environmental habitats. The two primary stakeholders or players, the farmers in the irrigation district and the community at large, must find an optimal balance between positive economic benefits and negative environmental impacts. In this paper, game theory was applied to find the optimal solution between the two conflicting objectives among 12 alternative groundwater extraction scenarios. Different attributes were used to quantify the benefits and costs of the two objectives, and, following generation of the Pareto frontier or trade-off curve, four conflict resolution methods were then applied.     

Tradeoffs between soil, water, and carbon -- a national scale analysis from New Zealand

The tradeoffs between the regulation of soil erosion, provision of fresh water, and climate regulation associated with new Pinus radiata forests in New Zealand are explored using national models. These three ecosystem services for which there is strong demand are monetised as commodities (avoided soil erosion is NZ $1 per tonne; water is NZ $1 per cubic metre; and sequestered carbon is assumed to be NZ?$73 per tonne). This permits their summation on a spatial basis to produce a national map of the net benefit of these ecosystem services. Net benefit is spatially variable depending primarily on the relative mix of forest growth rates and demand for irrigation water. New P.?radiata forests (once mature) generally reduce mass-movement erosion by an order of magnitude. This provides significant benefits for erosion control where there are high natural rates of erosion. Benefits are especially large in catchments where high sedimentation is increasing flood risk and degrading aquatic ecosystems. The generally high growth rates of P.?radiata in New Zealand (8.5 tonnesCha(-1)yr(-1) on average for existing forest) add significant environmental benefits of carbon sinks to climate regulation. However, the reduction of water yield associated with new forests (between 30% and 50%) can neutralise these benefits in catchments where there is demand for irrigation water, such as the eastern foothills of the Southern Alps and the tussock grasslands in the South Island.     

AN ANALYSIS OF RISING IRRIGATION COSTS IN THE GREAT PLAINS1

ABSTRACT: Irrigation costs are rising rapidly on the 32 million acres irrigated with ground water. Ground water levels are declining under about 15 million of those acres adding to increased costs. However, from 1975 to 1982, 75 to 80 percent of increased ground water irrigation costs were due to higher nominal energy prices and interest rates. In real dollars, adjusted for inflation, these costs have risen faster than other irrigation costs and the real rise in commodity prices has been very small. A continuation of rapidly rising costs and slowly rising prices will shorten the economic life of those aquifers experiencing declining water levels. That same condition of prices and costs place all ground water irrigators in a disadvantaged position compared to nonirrigators and could cause a decline in ground water irrigation.     

THE ECONOMIC FEASIBILITY OF DUAL PURPOSE NUCLEAR DESALINATION OF GROUND WATER1

ABSTRACT: The economic feasibility of a large scale dual purpose (desalting water and power production) facility were evaluated. Although a site in the Tularosa basin of southern New Mexico was chosen as a case study for this analysis, it is believed that the approach and consequential results would be applicable to alternative sites in the Southwest. The basic project evaluated included: a) a ground water well field; b) a dual purpose, nuclear, desalination plant; c) a mineral recovery plant; and d) a reservoir for recreation and irrigation storage. Principle project outputs included electrical power, minerals, recreation, and water for either irrigated agricultural production or export to an adjoining river basin. Two alternative project designs were developed for detailed analysis. The first alternative encompassed all major project components. The results, in discounted net values used to assess the feasibility of the project, were essentially negative; that is, values were less than zero for full scale development. The net benefits ranged from $-986.57 million at a 5 percent discount rate, to $-1,137.528 million at a discount rate of 10 percent. In the second alternative, exportation of the desalted water from the Tularosa basin to two adjacent rivers was analyzed with somewhat better net benefits, ranging from $-382,527 million to $-478,612 million at the 5 and 10 percent discount rates.     

ECONOMIC ANALYSIS OF WETLAND RESTORATION ALONG THE ILLINOIS RIVER1

Creating and restoring wetland and riparian ecosystems between farms and adjacent streams and rivers in the Upper Mississippi River Basin would reduce nitrogen loads and hypoxia in the Gulf of Mexico and increase local environmental benefits. Economic efficiency and economic impacts of the Hennepin and Hopper Lakes Restoration Project in Illinois were evaluated. The project converted 999 ha of cropland to bottomland forest, backwater lakes, and flood‐plain wetland habitat. Project benefits were estimated by summing the economic values of wetlands estimated in other studies. Project costs were estimated by the loss in the gross value of agricultural production from the conversion of corn and soybean acreage to wetlands. Estimated annual net benefit of wetland restoration in the project area amounted to US$1,827 per ha of restored wetland or US$1.83 million for the project area, indicating that the project is economically efficient. Impacts of the project on the regional economy were estimated (using IMPLAN) in terms of changes in total output, household income, and employment. The project is estimated to increase total output by US$2,028,576, household income by US$1,379,676, and employment by 56 persons, indicating that it has positive net economic impacts on the regional economy.     

FARM-LEVEL MANAGEMENT OF DEEP PERCOLATION EMISSIONS IN IRRIGATED AGRICULTURE1

ABSTRACT: Source control costs for deep percolation emissions from irrigated agriculture are analyzed using a farm-level model. Crop area, irrigation system and applied water are chosen to maximize the net benefits of agricultural production while accounting for the environmental damages and disposal costs of those emissions. Deep percolation is progressively reduced as environmental and disposal costs are increased. This occurs primarily through the adoption of more efficient irrigation technology and reductions in applied water for a given technology Higher surface water prices, such as through irrigation reform and constrained surface supplies, are additionally considered in light of the drainage problem, as are the effects, both short- and long-term, on ground water use.     

Water demand management in England and Wales: Constructions of the domestic water user

Measures to manage demand include implicit and explicit messages about domestic water users, which have important potential impacts on their perceptions and practices. Drawing on recent literature, this paper identifies three different ‘dimensions’ along which demand management measures' constructions of the water user may vary: these relate to whether the water user is passive or active, whether they are motivated by individual or common needs and whether they perceive water as a right or a commodity. Demand management measures currently used in England and Wales are then discussed and analysed. The paper concludes by highlighting the importance of communications associated with demand management, and in particular, notes the need to consider the cumulative impact of messages and their interactions with people's existing understandings.     

PRIMARY AND SECONDARY IMPACTS OF A WATER RESOURCE DEVELOPMENT PROJECT1

ABSTRACT: At a time in history when water resource development in the United States is being condemned as both economically inefficient and an environmental disaster, perhaps economists need to look back at previous development to see what the fruits of water development (be they sweet or sour) have been. The Boise Project of south-western Idaho is 70 years old and to some people it represents a gross error in resource use, while to others it represents a means of livelihood and well being. A recent research project at the University of Idaho attempted to measure not only the direct economic income benefits of the project (from irrigation), but also the indirect or secondary income benefits (from the food processing industry). Periodic regional input-output tables were constructed to assess the income generated from irrigation and food processing over the period from 1946 to 1970. Input-output analysis allowed researchers to evaluate the direct and indirect impacts of both the irrigation sector and the food processing sector and to compare their growth over time.     

Needs-based sewerage prioritization: alternative to conventional cost-benefit analysis

This paper presents an empirical approach to select and prioritize sewerage projects within set budgetary limitations. The methodology includes a model which quantifies benefits of a sewerage project as an index or dimensionless number. The index considers need and urgency of sewerage and other project goals. Benefit is defined as the difference in anticipated impact between the current condition (without the project) and the expected condition with the project. Anticipated benefits primarily include reduction in environmental pollution, reduction of human diseases and morbidity, and other tangible and intangible improvement. This approach is a powerful decision tool for sewerage prioritization and an effective alternative to conventional cost-benefit analysis. Unlike conventional analysis, this approach makes no attempt to convert project benefits and other impacts into a monetary measure. This work recognizes that the decision to provide sewerage based solely on net benefits is not practical. Instead, benefit-cost ratios (B/C) are calculated utilizing cost-effectiveness approach. Using these ratios, 16 unserviced areas of Ensenada, Mexico are ranked. The prioritization rankings produced by this method must be further scrutinized and carefully reviewed for logic, accuracy of input data, and practicality of implementation. A similar framework may also be useful for prioritizing other public works projects.     

A STOCHASTIC MODEL TO EVALUATE RIPARIAN IRRIGATION EXPANSION IN THE EASTERN UNITED STATES1

ABSTRACT: Irrigation has expanded in parts of the eastern United States. In some areas, the adjoining surface (riparian) water is the most economical source of irrigation water. Expanded demand for riparian water may lead to conflict among irrigators and other streamflow users. Accurate information on the potential for and impacts of riparian irrigation expansion is needed to decide if control of such expansion is necessary. In this study, a stochastic economic model to evaluate the impacts of potential irrigation expansion is presented. The model considers the soil, location, and land use characteristics of individual sites, as well as weather and streamflow patterns. The application of the model to an eastern Virginia watershed indicates that, with maximum potential expansion, water availability becomes limited and yields will be reduced in some years. As a result, the expected net returns from irrigation and the probability of breaking even on the investment are reduced substantially. The results suggest the need to consider regulation of surface water allocation for irrigation development in riparian watersheds.     

Economic rationale for Canada's future uranium policy

After the dramatic increase in prices for uranium over the 1972–1975 period, prices have declined in real terms. This article examines the future supply, demand and price trends for uranium, and predicts that a situation of excess supply will result in the 1980s, bringing a continuing decline in real prices, unless Canada and other net exporters, most importantly Australia, agree to restrict supplies in order to maintain the price of uranium at its present level in real terms. Such a policy would have substantial benefits for Canada and other net exporters of uranium.     

Commodity currencies and currency commodities

There is a large literature on the influence of commodity prices on the currencies of countries with a large commodity-based export sector, such as Australia, New Zealand, and Canada (“commodity currencies”). There is also the idea that because of pricing power, the value of currencies of certain commodity-producing countries affects commodity prices, such as metals, energy, and agricultural-based products (“currency commodities”). This paper merges these two strands of the literature to analyze the simultaneous workings of commodity and currency markets. We implement the approach by using the Kalman filter to estimate jointly the determinants of the prices of these currencies and commodities. Included in the specification is an allowance for spillovers between the two asset types. The methodology is able to determine the extent that currencies are indeed driven by commodities, or that commodities are driven by currencies, over the period 1975–2005.     

Wildfire effects on hiking and biking demand in New Mexico: a travel cost study

We use a travel cost model to test the effects of wild and prescribed fire on visitation by hikers and mountain bikers in New Mexico. Our results indicate that net benefits for mountain bikers is $150 per trip and that they take an average of 6.2 trips per year. Hikers take 2.8 trips per year with individual net benefits per trip of $130. Both hikers' and mountain bikers' demand functions react adversely to prescribed burning. Net benefits for both groups fall as areas recover from prescribed burns. Because both visitation and annual recreation benefits decrease to these two types of visitors, this gives rise to multiple use costs associated with prescribed burning. With respect to wildfire, hikers and mountain bikers both exhibit decreased visitation as areas recover from wildfires, however, only hikers indicate an increase in per trip net benefits. Bikers' demand effectively drops to zero. These results differ from previous findings in the literature and have implications for efficient implementation of the National Fire Plan and whether prescribed burning is a cost effective tool for multiple use management of National Forests. Specifically, that fire and recreation managers cannot expect recreation users to react similarly to fire across recreation activities, or different geographic regions. What is cost effective in one region may not be so in another.     

Estimating the volatility of mining projects considering price and operating cost uncertainties

In the real option pricing model of valuation and decision making, the estimation of future volatility is a key input parameter. For traded commodities or financial assets, past volatility is used as a proxy for predictions. But, for projects, this approach is not feasible because, in most cases, historical data of traded projects are not available. As an alternate solution, it is usually assumed that project volatility is equal to that of commodity price. In order to investigate this assumption, we estimate the project volatility considering that both commodity price and operating cost evolve as a geometric Brownian motion (GBM). Results of a hypothetical gold mining project indicate that project volatility is higher than that of commodity price and it only drops to price volatility under very unrealistic industry conditions, such as very high prices or very low production costs. In addition, we find that project volatility is independent of production capacity and taxation, but depends on increments in price and cost, as well as strongly on their degree of correlation.     

PROJECTED EFFECTS OF ENERGY POLICIES ON AGRICULTURAL WATER USE AND IRRIGATION1

ABSTRACT: A national and interregional programming model was used in projecting the impacts of alternative energy policies and prices on agricultural production, land use, and irrigation. The alternatives analyzed include (a) natural gas deregulation, (b) natural gas curtailment, (c) doubled energy prices, and (d) tripled energy prices. These alternatives are compared with a base alternative where prices and conditions are at normal levels. Restraints in the model control availability of water, land, nitrogen fertilizers, and energy. Water production functions were used to adjust water use to conform with projected energy prices and policies. Natural gas curtailment would have the largest effect on nitrogen use on irrigated land. Values or shadow prices for lands that remains in irrigation would increase under all of the alternatives because of reduced supply. Increased energy prices generally would increase use of surface water for irrigation and reduce use of ground water due to higher pumping costs. Reductions of 50 percent or more in ground water use would occur in the South Central and Western regions of the United States. Water supply prices increase under all of the alternatives; with the amount varying by regions and the policy or price situation.     

Wetland protection as land-use planning: The impact of section 404 in Wisconsin,USA

The ability of Section 404 of the Clean Water Act to act as an effective, efficient, and equitable land-use planning tool was assessed through a survey of Section 404 permits in Wisconsin. In a six-month period of permitting, the 404 program reduced wetland losses in the state by 15%. Several factors were examined that may affect permit decisions; these factors are water dependency, alternatives, project type, wetland type, and public or agency comments. Only the water dependency of the project had a statistically significant effect on permit decisions, although development projects that were perceived to provide public good were more likely to be permitted. Environmental impacts of a proposed fill project were not adequately assessed in any of the permit decisions. Because of the way Section 404 is interpreted and administered by the US Army Corps of Engineers, increasing net benefits and achieving an equitable distribution of those benefits is difficult. The corps does not perform any functional evaluations of wetlands nor do they attempt to measure economic value and environmental impacts. In addition, the 404 review process is, in effect, inaccessible to the public. The de facto interpretations of the Section 404 regulations and a lack of program funding and trained personnel all contribute to the program's ineffectiveness.