Economic Impacts of Water Scarcity Under Diverse Water Salinities
. Water Economics and Policy 2016
, 1550013. Publisher's VersionAbstract
Exploitation of alternative water sources is expected to grow in the decades to come in water-stressed countries with fast population growth, especially in regions where a further decline of natural freshwater availability is expected due to climate change. Increasing utilization of non-freshwater usually leads to salinity build-up in fields and water sources as well as accumulation of various pollutants — both having a considerable impact on the suitability of non-freshwater for irrigation due to constraints associated with crop salinity tolerance and food safety regulations. We developed a linked Computable General Equilibrium (CGE) — farm-level model of a water economy with representation for multiple water types characterized by different qualities. We employ the model to assess the impact of water shortage on the Israeli economy, where steadily growing water scarcity leads to an increasing utilization of alternative water sources. We simulate water shortage scenarios based on the Long Term National Master Plan for The Water Economy developed by the Israeli Water Authority (IWA). The linked CGE — farm-level model provides a mechanism for estimating the Constant Elasticity of Substitution (CES) rates between different irrigation water types used in agriculture. This mechanism accounts for the effects of salinity on yields and takes into consideration food safety regulations for irrigating crops with treated wastewater. We demonstrate that, in contrast to previous studies, CES rates between different water types are not identical. The CES rates obtained in our study have relatively low values, which can be attributed to the constraints associated with crop salinity tolerance and food safety regulations. Our results reveal that water shortage can lead to a significant decline of Israel’s GDP, where a considerable part of the decline is attributed to the decrease in agricultural outputs. The magnitude of the impact depends on the underlying assumptions regarding future desalination capacity. To further study the effect of desalination, we run simulations under various desalination levels and examine its impact on the GDP. We also examine the extent to which the impact of water shortage is sensitive to CES rates between different irrigation water types.
The Cost of Covering Costs: A Nationwide Model for Water Pricing
. Water Economics and Policy 2016
, 1650024. Publisher's VersionAbstract
This study offers a high-resolution model of nationwide water supply. The model is sufficiently detailed to represent all main water sources in an economy, the principal segments of the conveyance system, urban, industrial and agricultural demand regions, and various water types, including fresh, saline and recycled. Calibrated for Israeli 2010 data, we find that the optimal extraction of fresh water is only 2% larger than the total observed supply from those sources. However, for some specific sources, the deviation between optimal and observed quantities is significant. Assuming average constant recharge, the optimal aggregated desalination is 57% of the 2010 desalination capacity and only 33% of the present desalination capacity. Even with an assumed 40% decline in recharge (for example, due to climate change), the model uses only 50% of the present desalination capacity. This may suggest that the construction of desalination facilities in Israel, which began in 2005, could have been delayed. The model establishes a comprehensive system of pumping levies and user fees that support the optimal allocation. However, due to considerable scale economies, the average cost is almost 50% larger than the marginal cost. The implications are that the welfare cost of the recent Israeli Balanced Budget Water Economy legislation is more than 100 million USD per year, about 10% of the water economy share of the GDP.