A COST‐BENEFIT ANALYSIS OF WATER QUALITY PROTECTION IN THE CATAWBA BASIN1

ABSTRACT: The primary objective of this study was to perform a cost‐benefit analysis of maintaining the current level of water quality in the Catawba River basin. Economic benefits were estimated using a stated preference survey method designed to value respondents' willingness to pay for a management plan to protect water quality in the Catawba basin over time. From the surveys conducted with 1,085 area residents, we calculated an annual mean willingness to pay of $139 for the management plan, or more than $75.4 million for all taxpayers in the area. Over the five‐year time horizon in which respondents were asked to pay for the management plan, this resulted in a total economic benefit of $340.1 million. The Watershed Analysis Risk Management Framework model was used to estimate the amount of management activities needed to protect the current level of water quality in the basin over time. Based on the model results, the total cost of the management plan was calculated to be $244.8 million over a ten‐year period. The resulting cost‐benefit analysis indicated that the potential benefits of this management plan would outweigh the costs by more than $95 million.     

THE IMPORTANCE OF INSTITUTIONAL STRUCTURE IN CONTROLLING AGRICULTURAL RUNOFF1

Abstract: Agricultural runoff, such as dissolved mineral salts and selenium, creates pronounced downstream impacts to agricultural producers and to wildlife. The ability to manage these problems efficiently depends critically on the institutional pricing structure of irrigation water delivery agencies. An important characteristic of irrigation water delivery is whether irrigators pay per unit of water received or make one payment regardless of the quantity of water received. In this study we compare the effectiveness of agricultural runoff reduction policies in two regions that employ these different water pricing structures. We find that reduction policy is more effective and can be achieved at a lower cost when water is priced on a per unit basis and that growers have greater incentive to act on their own to reduce runoff problems. Operating under a per unit pricing system encourages water conservation and runoff reduction, which creates public benefits that are not achieved under the single-payment, fixed allotment method of irrigation water delivery.     

Congestion at Recreation Areas: Empirical Evidence on Perceptions, Mitigating Behaviour and Management Preferences

Economists have tried to estimate the demand for recreation under conditions of congestion, struggling especially with a model that uses observed rather than stated behaviour to obtain results. This paper reports statistical analyses of data on perceptions, mitigating behaviour and management preferences in order to highlight the difficulties related to empirical analysis of congestion. We offer evidence that may be of assistance to those wishing to construct measures of congestion for use in an observed behaviour model. The results may also be useful to recreation area managers who can implement a quota or permit system or change site entry or access fees to control access to the site they manage.     

The economics of tire remanufacturing

The world market for tires is described to identify the current material flow from raw materials to tires and the used tire disposal problem. Then, I describe the value-adding operations in the tire production process and in the tire retreading process. Once retreading is identified as the only recovery alternative that maximizes tire utilization, I explain why heat generation is the only recovery alternative, when retreading is not technically feasible. The economic values of heat generation in electric plants and in cement kilns are discussed. The paper culminates with the case of retreading, the tire remanufacturing process and the recommendation of a simple decision rule for selecting the number of times a tire should be retreaded to maximize its utilization.     

MUNICIPAL WATER USE AND WATER RATES DRIVEN BY SEVERE DROUGHT: A CASE STUDY1

ABSTRACT: This paper synthesizes and interprets data pertaining to the evolution of average water revenue, water use, and the average cost of water supply in the City of Santa Barbara, California, from 1986 to 1996, a period which included one of the most devastating droughts in California this century. The 1987–1992 drought hit the study area particularly hard. The City of Santa Barbara was dependent exclusively on local sources for its water supply. That made it vulnerable as the regional climate is prone to extreme variability and recurrent droughts. The 1986–1992 drought provided a rare opportunity to assess the sensitivity of municipal water use to pricing, conservation, and other water management measures under extreme drought conditions. Our analysis indicates that the average cost of water rose more than three-fold in real terms from 1986 to 1996, while the gap between the average cost of supply and the average revenue per unit of water (= 100 cubic feet) rose in real terms from $0.14 in 1986 to $ 0.75 in 1996. The rise of $3.08 in the average cost of supplying one unit of water between 1986 and 1996 measures the cost of hedging drought risk in the study area. Water use dropped 46 percent at the height of the drought relative to pro-drought water use, and remains at 61 percent of the pre-drought level. The data derived from the 1987–1992 California drought are unique and valuable insofar as shedding light on drought/water demand adaptive interactions. The experience garnered on drought management during that unique period points to the possibilities available for future water management in the Arid West where dwindling water supplies and burgeoning populations are facts that we must deal with.     

FARMERS' ATTITUDES TOWARD NONPOINT POLLUTION CONTROL AND PARTICIPATION IN COST-SHARE PROGRAMS1

The success of government programs to control nonpoint source pollution depends upon attitudes toward those programs and the availability of technical and financial assistance. Applicants for the Rural Clean Water Program cost-share funding in Virginia possess different personal and operational characteristics than do nonapplicants. Factors associated with participation in the Rural Clean Water Program differed from those associated with the more traditional soil conservation programs. Discriminant analysis was used to differentiate between other farmers who may become applicants and nonapplicants. Farmers' attitudes toward various policy options for inducing implementation of nonpoint source management practices varied greatly. Farmers were most favorable to cost sharing, low-interest loans and tax credits, and least favorable to a soil loss tax. They were either very favorably or very unfavorably inclined toward cross-compliance between pollution control and other agricultural programs.     

COST SHARING IN TRANSITION: THE CASE OF PLAN 6, CENTRAL ARIZONA PROJECT1

ABSTRACT: In the past, development of Federal water resource projects depended heavily or exclusively on Federal financing of construction costs. However, pressures on the Federal budget, environmental issues, and the notion that there are economic efficiency gains when beneficiaries of Federal water resource projects increase their cost share are causing changes. The case of the Central Arizona Project Plan 6 is a noteworthy example of the transition to more non-Federal participation in water resource development. This is because the non-Federal financing is to be provided for a project already under construction. The negotiation and terms of the Plan 6 financing agreement between the Department of the Interior and multiple interests in Arizona are used as an example of how Federal water project cost sharing is in a state of transition. The negotiation process is described, a financial analysis is provided, and the terms of the agreement and policy issues that were deliberated in the Executive Branch of the Federal Government are discussed.     

ANALYZING THE IMPACT OF LAND USE ON SEWER SERVICE AREA PLANNING1

ABSTRACT: The density and distribution of land uses has important consequences for the planning of sewerage systems and for the costs of these systems. This paper examines these consequences using a simplified service area model. The model determines the area to be served by a central waste treatment plant, where alternative on-lot disposal systems are also available. The model is applied to various urban area configurations, which are summarized by their total populations and by their population density distributions. Both minimum regional cost and minimum local cost service area configurations are determined. In addition, the sensitivity of the model to the parameters of the cost and population density functions is assessed. It is found that the model is most sensitive to the parameters of the collection cost function.     

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.     

Biodiversity and industry ecosystem management

The term biodiversity describes the array of interacting, genetically distinct populations and species in a region, the communities they comprise, and the variety of ecosystems of which they are functioning parts. Ecosystem health, a closely related concept, is described in terms of a process identifying biological indicators, end points, and values. The decline of populations or species, an accelerating trend worldwide, can lead to simplification of ecosystem processes, thus threatening the stability and sustainability of ecosystem services directly relevant to human welfare in the chain of economic and ecological relationships. The challenge of addressing issues of such enormous scope and complexity has highlighted the limitations of ecology-as-science. Additionally, biosphere-scale conflicts seem to lie beyond the scope of conventional economics, leading to differences of opinion about the commodity value of biodiversity and of the services that intact ecosystems provide. In the face of these uncertainties, many scientists and economists have adopted principles that clearly assign burdens of proof to those who would promote the loss of biodiversity and that also establish near-trump (preeminent) status for ecological integrity. Electric utility facilities and operations impact biodiversity whenever construction, operation, or maintenance of generation, delivery, and support facilities alters landscapes and habitats and thereby impacts species. Although industry is accustomed to dealing with broad environmental concerns (such as global warming or acid rain), the biodiversity issue invokes hemisphere-wide, regional, local, and site-specific concerns all at the same time. Industry can proactively address these issues of scope and scale in two main ways: first, by aligning strategically with the broad research agenda put forth by informed scientists and institutions; and second, by supporting focused management processes whose results will contribute incrementally to the broader agenda of rebuilding or maintaining biodiversity.