WATER SUPPLY COSTS FOR SMALL PRIVATE UTILITIES1

ABSTRACT: This paper examines the cost of water supply for small and mid-sized private water utilities. An econometric approach was employed in which data on utility costs and characteristics were used to estimate a total water supply cost function from which average and marginal costs were derived. The results suggest that although average and marginal costs decline with output, the rate of decline rapidly approaches zero, and unit costs therefore appear to remain relatively constant over a wide range of output. Implications of the results for pricing policy are examined.     

Water supply policies and issues in developing countries

The significant progress made during the UN International Water Decade is reviewed, eight years after its inception in 1981. Major issues remain, especially in rural areas. The advantages of an integrated water resource planning framework (IWRP) are explained, including the use of this process to develop a flexible strategy for the water and sewerage sector to meet national policy objectives. Economic efficiency in supply implies optimal service quality and least cost planning, while efficient pricing policy requires the implementation of long-run marginal cost based tariffs. Better sector organization, management, accountability, options for decentralization and innovative financing methods are also discussed.     

DEMAND SIDE MANAGEMENT OF WATER IN ONTARIO MUNICIPALITIES: STATUS,PROGRESS, AND OPPORTUNITIES1

ABSTRACT: Demand side management is being used increasingly by Ontario municipalities as a way to improve the efficiency of water use, defer the costs associated with constructing new water treatment works, and minimize the environmental impacts associated with supplying water. A comprehensive survey of 153 Ontario municipalities was completed in mid‐1998. These ranged in size from small rural townships (with populations as low as 500 people) to the province's largest urban center, Metropolitan Toronto, with a population of approximately 2.5 million people. The questionnaire measured the use of six broad types of demand side measures, including water pricing and metering; municipal by‐laws (ordinances) that promote water conservation; operational and maintenance measures to reduce water losses and consumption; water‐saving plumbing fixtures and devices; public participation programs that encourage water conservation; and other measures, such as water audits. Additionally, the survey collected data on implementation barriers and opportunities. Since the last comprehensive Ontario survey, conducted in 1987 by Kreutzwiser and Fea‐gan (1989), there has been an increase in the use of basic tools such as metering and pricing, plumbing fixtures, and public participation programs. Additionally, new initiatives, such as water audits and computerized monitoring equipment, are being used. However, in many areas opportunities exist to make better use of demand side measures. Unfortunately, municipal capacity to do so often is constrained by (among other factors) limited finances, lack of political will, and public resistance. Demonstration of real cost savings to consumers, and the development of specific goals and objectives for demand side management programs, are two important steps needed to overcome these challenges.     

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.     

PRICING IRRIGATION WATER IN DEVELOPING COUNTRIES1

ABSTRACT Alternative combinations of water pricing and regulations are possible in allocating irrigation water. The best combination will depend on the value of water, ability to control deliveries, desire to subsidize agriculture, ownership traditions, crops grown, return flows, drainage problems, staff training, ability to collect fees, the number of farmers involved, etc. Marginal cost pricing is just one possible alternative and it is more a way of thinking about prices rather than a set system. The possibilities for achieving an equitable and efficient distribution of water are improved if some form of marginal cost pricing is included in the system of water charges.     

The effect of limited options and policy interactions on water storage policy in south Florida

Due to environmental constraints and reactive water management practices, water shortages exist across the Everglades ecosystem. A growing human population and continued wetlands damage and loss decrease the system's ability to provide water for sustained natural areas and for human uses. 'The Restudy' is an $8 billion plan to restore the Everglades while also continuing to provide water storage for urban and agricultural areas. The Restudy proposes a mix of water storage systems to provide for the predicted future growth in water demand. This mix is purported to be the most cost-efficient at providing water supplies, within the constraints of unchanged agricultural and urban land use. However, a sensitivity analysis of the Restudy's cost equation reveals that the total cost of water storage systems is influenced by real estate, land acquisition and water treatment costs. The interaction of land use and agricultural policies can affect these cost factors, and can change the relative cost-efficiency between storage systems. Real estate and land acquisition costs are affected by several 1996 Farm Bill provisions, which influence the cost of aboveground water storage systems versus Aquifer Storage and Recovery systems. The Governor's Commission for a Sustainable South Florida recommendations also influence the water storage options available to the Restudy. Due to the Restudy's initial assumptions and constraints, it may not advocate the most economically and ecologically sound remediation.     

Cost-Effectiveness of Payments for Ecosystem Services with Dual Goals of Environment and Poverty Alleviation

The goal of this article is to understand strategies by which both the environmental and poverty alleviation objectives of PES programs can be achieved cost effectively. To meet this goal, we first create a conceptual framework to understand the implications of alternative targeting when policy makers have both environmental and poverty alleviation goals. We then use the Grain for Green program in China, the largest PES program in the developing world, as a case study. We also use a data set from a survey that we designed and implemented to evaluate the program. Using the data set we first evaluate what factors determined selection of program areas for the Grain for Green program. We then demonstrate the heterogeneity of parcels and households and examine the correlations across households and their parcels in terms of their potential environmental benefits, opportunity costs of participating, and the asset levels of households as an indicator of poverty. Finally, we compare five alternative targeting criteria and simulate their performance in terms of cost effectiveness in meeting both the environmental and poverty alleviation goals when given a fixed budget. Based on our simulations, we find that there is a substantial gain in the cost effectiveness of the program by targeting parcels based on the “gold standard,” i.e., targeting parcels with low opportunity cost and high environmental benefit managed by poorer households.     

EFFECTIVE WATER PRICING1

ABSTRACT: When the goal of water pricing is elevated from mere cost recovery to deriving the greatest value from scarce water and associated nonwater resources, conventional rate regimes are found to be deficient. To address the challenge of creating rates that are both efficient and budget-balancing, several theoretical and practical aspects of rate-making are considered. Purposeful selection of rate parameters for a specific billing system is demonstrated to serve efficiency and cost recovery objectives. Attention to non-accounting opportunity costs is an important system element, but these costs are often not fully borne by the utility or its customers. In situations where this issue is serious, state or federal pricing policy may be necessary.     

Farm-level irrigation and the marginal cost of water use: evidence from Georgia

We create a proxy for the cost of irrigation water in Georgia from a sample of Georgia irrigators by investigating the marginal cost of pumping groundwater. We then combine this proxy with agronomic and climatic variables to estimate the response of agricultural water use to differences in the marginal cost of irrigation. The results show that pumping costs are a significant determinant of water use, and imply that agricultural water use would be moderately affected by institutional changes that would explicitly price water.     

A MODEL FOR ACHIEVING CONSISTENCY FOR COST SHARING IN WATER RESOURCE PROGRAMS1

ABSTRACT: Three basic principles of responsibility have influenced the Federal/non-Federal cost sharing rates for water resources programs (1) full payment by beneficiaries (2) exclusive Federal assumption of costs and (3) joint Federal/non-Federal sharing. The efforts to determine appropriate cost sharing rates have resulted in several hundred complex arrangements involving contributions, user charges and direct sales based on many variations of payment terms. This basic present value model was developed to determine the non-Federal cost shares which are expected to be paid for 32 different functional purposes emanating from Federal water resources programs and projects for both implementation and OMR stages. The model introduces the concept of a composite (implementation plus OMR) cost share as a focus developing appropriate cost sharing rates for the private, public and mixed outputs produced through public water resources investments. The model can be used as a focus for policy decisions on cost sharing which seek to achieve consistent and equitable cost shares for purposes provided while maintaining an efficient allocation of resources within water programs.     

Determining the socially optimal recycling rate

What municipal recycling rate is socially optimal? One credible answer would consider the recycling rate that minimizes the overall social costs of managing municipal waste. Such social costs are comprised of all budgetary costs and revenues associated with operating municipal waste and recycling programs, all costs to recycling households associated with preparing and storing recyclable materials for collection, all external disposal costs associated with waste disposed at landfills or incinerators, and all external benefits associated with the provision of recycled materials that foster environmentally efficient production processes. This paper discusses how to estimate these four components of social cost to then estimate the optimal recycling rate.     

AN OPTIMIZATION MODEL FOR EFFICIENT MANAGEMENT OF URBAN WATER RESOURCES1

ABSTRACT: A mathematical programming model is proposed to determine economically efficient urban water resource allocation and pricing policy by maximizing the sum of the consumer and producer surplus. The optimization of this nonlinear problem is accomplished by the use of linear programming algorithm. The feasibility of using recycled water for municipal purposes is examined in a planning context. The impact of higher water quality discharge standards on pricing and allocation of water is analyzed and the attractiveness of water reuse option is demonstrated.     

Environmental cost accounting: The bottom line for environmental quality management

Recent years have seen the environment emerge as one of the most pressing issues facing American business. Eventually, environmental costs will affect the bottom line of every American company. A recent study in the National Law Journal estimates that cleanup of the nation's known hazardous wastes sites will cost $752 billion over thirty years under current environmental policies. Environmental legislation and regulations impose annual compliance costs estimated by the Environmental Protection Agency at more than $30 billion. In the near future, environmental expenses for cleanup, regulatory compliance, and management are anticipated to grow to between 2.5 and 3 percent of GNP. Corporations that wish to be competitive must successfully manage these costs while maintaining or improving their role as responsible corporate citizens. Implementing a comprehensive system for identifying and managing environmental costs requires a multidisciplinary team effort. Environmental costs impact product selection, design and pricing, capital budgeting, and future strategic direction. In order to make informed and meaningful managerial decisions on environmental programs, real cost data are vital. An environmental management systems (EMS) requires information to set goals and then monitor progress towards those goals over time. This article will discuss the current cost accounting systems (CASs) available to support the myriad goals of environmental management systems. In addition, the article will outline a framework for plotting the location of your current EMS on a matrix of regulatory and information requirements and evaluating whether your corporation's CAS is adequate to support the goals and objectives set by your environmental management program. By anticipating future regulatory and information requirements, flexible systems can be developed to adapt to new and more stringent regulations and more complex information requirements.     

居民生活用电碳排放交易机制研究

个人排放交易被认为可以促进居民参与碳减排,但是因其减排收益难以覆盖高昂的建立和运行成本,降低了公众接受度。本文提出除了考虑碳减排的收益外,更需要关注个人排放交易机制的教育价值、形成正确的激励以及鼓励创新的价值,并提出可以基于当前国内多地实行的阶梯电价制度,利用电力系统现有的用户网络和账户系统,建立居民生活用电碳排放交易机制,以降低成本并实现上述价值。在此基础上,就居民生活用电碳排放交易机制的配额设定与分配、配额交易以及清缴问题做了细致的分析,并提出绿色电力作为补充电力可以免费获得碳配额以促进绿色消费。同时,比较分析了在居民生活用电交易机制和阶梯电价制度下,不同居民家庭以及电力公司的用电成本(收益),指出了其在形成正确的激励方面的作用。最后指出在条件成熟的情况下,居民生活用电碳排放交易机制可以扩展到居民的其他能源消费领域,以实现更为全面的个人排放交易。     

Irrigation water management policies: Allocation and pricing principles and implementation experience

Food security and sustainable development require efficient use of water resources, especially in irrigation. Economic pricing can be an effective tool to achieve more efficient water use, provided it is supported by other policies in implementation. Applying various water pricing and cost recovery arrangements is suggested for efficient allocation. Any adverse impact on farmers’ incomes must be addressed and more reliable service must accompany higher prices. Experience from several countries suggests a variety of implementation issues. Essential complements to water pricing are water distribution rules and technological choices at critical nodes in the delivery system that allow farmers flexibility in conserving water in response to higher prices. Among supporting institutions, water users associations seem a higher priority than water markets.     

EFFICIENCY IN THE USE OF WATER FOR IRRIGATION: THE ROLE OF PRICES AND REGULATIONS

Efficiency in the use of water for irrigation is normally defined in a physical sense - engineering and agronomic; and it is often assumed that higher efficiency is desirable. However, in an economic sense, there is an optimum range in the level of physical efficiency. Normally it can be said that as water prices increase, it becomes more rational to increase physical efficiency by selecting and adopting improved methods of controlling, measuring and applying water, and to design systems of pricing and regulations that will promote optimal allocation and efficient use. However, the value of water is often extremely low, in which case there may be little economic incentive to improve physical efficiency unless forced by physical factors that affect production and productivity such as soil characteristics, waterlogging or nutrient leaching.
The combination of regulations and prices that are used to allocate irrigation water reflect the conflicting goals of redistribution of income in favor of agriculture and needs to encourage efficient use of water. Regulations and pricing systems also depend on the value of water, the dependability of supplies, systems of delivery and the extent to which flows can be regulated.
Using examples and case studies, this paper discusses physical and economic efficiencies and their interrelationships. It emphasizes the role of pricing and regulations and provides general guidelines.     

Efficient management of marine resources in conflict: An empirical study of marine sand mining, Korea

This article develops a dynamic model of efficient use of exhaustible marine sand resources in the context of marine mining externalities. The classical Hotelling extraction model is applied to sand mining in Ongjin, Korea and extended to include the estimated marginal external costs that mining imposes on marine fisheries. The socially efficient sand extraction plan is compared with the extraction paths suggested by scientific research. If marginal environmental costs are correctly estimated, the developed efficient extraction plan considering the resource rent may increase the social welfare and reduce the conflicts among the marine sand resource users. The empirical results are interpreted with an emphasis on guidelines for coastal resource management policy.     

The UK Landfill Tax: an analysis of its contribution to sustainable waste management

The UK Government in October 1996 introduced a Landfill Tax to ensure that landfill waste disposal is properly priced so as to reflect its environmental cost and to help promote a more sustainable approach to waste management in which less waste is produced, reused or recycled. The UK Customs and Excise have recently reviewed the tax and the report indicates that there has been a modest reduction in waste going to landfill by industry but not households. It is submitted that for there to be a significant move towards a more sustainable approach to waste management to meet the targets set in the National Strategy the tax should be higher and the money raised by the tax should be invested to make alternatives to landfill cheaper and more readily available. It is also submitted that the Tax Credit Scheme, introduced as a means of enabling some of the tax to be invested to promote better waste management, is inadequately funded and the money is inappropriately focused. Following an examination of the projects and contributions made under the Scheme it is found that most of the contributions are not made towards projects which will fulfil the UK Government's perceived purposes. It is further submitted that there needs to be a more rational approach to waste management and legislation in Philadelphia forms a good case study of such an approach     

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.     

EXTERNALITIES,WATER PRICES,AND WATER TRANSFERS1

Discussing, estimating or analyzing the value of water is a difficult task. In addressing the value of water as reflected in its price — either as charged by a water utility, as the price of a water transfer, or a water sale in some market — this paper will examine three propositions regarding water pricing. The paper will consider the marginal scarcity rent of water, estimates of externalities, the full cost pricing of water and the consequences of these considerations on water prices, transfers and the efficiency of water use.