Economics of household preferences for water-saving technologies in urban South Africa.

Drought severity is expected to increase in South Africa in the coming years, given the deteriorating effects of climate change on rainfall patterns, global temperature, and evaporation. A common mitigation strategy adopted by households is to promote water demand management initiatives to reduce water consumption volume and complement existing water supply management approaches implemented by suppliers. This study contributes to the discussion on adaptation strategies by investigating household preference heterogeneity for water-saving technologies through empirical evidence from urban Cape Town, South Africa. Using a choice modelling framework, we collected primary survey data from 512 urban households in five of the city's major suburbs and investigated heterogeneity among the households based on their preferences for characteristics embedded in four water-saving technologies. Four preference classes were identified by accounting for taste heterogeneity. Overall, respondents had the highest marginal willingness to pay (MWTP) for the greywater technology alternative at 17,025 ZAR (US$ 1142) while rainwater technology has the least willingness to pay value at 5206 ZAR (US$ 349). In addition, the results show that respondents in classes 1 and 2 have a high interest in technologies that save a large quantity of water, whereas members of classes 3 and 4 rely on inexpensive conservation and behavioral habits as climate adaptation measures. This study has important policy implications for many water-stressed and arid cities within and outside South Africa since like Cape Town, many large cities require long-lasting measures that help reduce the pressure on their strained water systems.

Integrating ecosystem benefits for sustainable water allocation in hydroeconomic modeling.

The increasing concern about the degradation of water-dependent ecosystems calls for considering ecosystems benefits in water management decision-making. Sustainable water management requires adequate economic and biophysical information on water systems supporting both human activities and natural ecosystems. This information is essential for assessing the impact on social welfare of water allocation options. This paper evaluates various alternative water management policies by including the spatial and sectoral interrelationships between the economic and environmental uses of water. A hydroeconomic model is developed to analyze water management policies for adaptation to reduced water availability in the Ebro Basin of Spain. The originality in our contribution is the integration of environmental benefits across the basin, by using endemic biophysical information that relates stream flows and ecosystem status in the Ebro Basin. The results show the enhancement of social welfare that can be achieved by protecting environmental flows, and the tradeoffs between economic and environmental benefits under alternative adaptation strategies. The introduction of water markets is a policy that maximizes the private benefits of economic activities, but disregards environmental benefits. The results show that the current institutional policy where stakeholders cooperate inside the water authority, provides lower private benefits but higher environmental benefits compared to those obtained under water markets, especially under severe droughts. However, the water authority is not allocating enough environmental flows to optimize social welfare. This study informs strategies for protection of environmental flows in the Ebro Basin, which is a compelling decision under the imminent climate change impacts on water availability in coming decades.

We lose ground: Global assessment of land subsidence impact extent.

Depletion of groundwater aquifers along with all of the associated quality and quantity problems which affect profitability of direct agricultural and urban users and linked groundwater-ecosystems have been recognized globally. During recent years, attention has been devoted to land subsidence-the loss of land elevation that occurs in areas with certain geological characteristics associated with aquifer exploitation. Despite the large socioeconomic impacts of land subsidence most of these effects are still not well analyzed and not properly recognized and quantified globally. In this paper we developed a land subsidence impact extent (LSIE) index that is based on 10 land subsidence attributes, and applied it to 113 sites located around the world with reported land subsidence effects. We used statistical means to map physical, human, and policy variables to the regions affected by land subsidence and quantified their impact on the index. Our main findings suggest that LSIE increases between 0.1 and 6.5% by changes in natural processes, regulatory policy interventions, and groundwater usage, while holding all other variables unchanged. Effectiveness of regulatory policy interventions varies depending on the lithology of the aquifer system, in particular its stiffness. Our findings suggest also that developing countries are more prone to land subsidence due to lower performance of their existing water governance and institutions.

Economics of social trade-off: Balancing wastewater treatment cost and ecosystem damage.

We have developed a social optimization model that integrates the financial and ecological costs associated with wastewater treatment and ecosystem damage. The social optimal abatement level of water pollution is determined by finding the trade-off between the cost of pollution control and its resulting ecosystem damage. The model is applied to data from the Lake Taihu region in China to demonstrate this trade-off. A wastewater treatment cost function is estimated with a sizable sample from China, and an ecological damage cost function is estimated following an ecosystem service valuation framework. Results show that the wastewater treatment cost function has economies of scale in facility capacity, and diseconomies in pollutant removal efficiency. Results also show that a low value of the ecosystem service will lead to serious ecological damage. One important policy implication is that the assimilative capacity of the lake should be enhanced by forbidding over extraction of water from the lake. It is also suggested that more work should be done to improve the accuracy of the economic valuation.

Modeling sustainable groundwater management: packaging and sequencing of policy interventions.

Of the many studies estimating effectiveness of policy reforms most have been considering various types of policy reforms in isolation from each other. Such pattern has also been the case in water resource regulations. In the case of groundwater almost all policy interventions considered in the literature have been implemented individually, without taking into account the possible interactions and impacts among them. In this paper, we focus on two policy instruments: water quota and uniform water tax. The paper demonstrates how packaging and sequencing sets of policy interventions, with possible triggers to initiate their time of implementation, may be more effective in achieving a sustainable groundwater management than single policies when environmental externalities exist. The policy instruments are applied to the Western la Mancha aquifer in Southeast Spain, a major aquifer that is managed by a command and control approach.

The design of water markets when instream flows have value.

The main objective of this paper is to design and test a decentralized exchange mechanism that generates the location-specific pricing necessary to achieve efficient allocations in the presence of instream flow values. Although a market-oriented approach has the potential to improve upon traditional command and control regulations, questions remain about how these rights-based institutions can be implemented such that the potential gains from liberalized trade can be realized. This article uses laboratory experiments to test three different water market institutions designed to incorporate instream flow values into the allocation mechanism through active participation of an environmental trader. The smart, computer-coordinated market described herein offers the potential to significantly reduce coordination problems and transaction costs associated with finding mutually beneficial trades that satisfy environmental constraints. We find that direct environmental participation in the market can achieve highly efficient and stable outcomes, although the potential does exist for the environmental agent to influence outcomes.