Analyse hydro-économique

1. Introduction

2. Économie des ressources en eau


Offre

Demande

Valeur de l'eau

Allocation

3. Modélisation hydro-économique
 La méthode de Lagrange

La programmation dynamique

La programmation linéaire

La programmation dynamique stochastique
Introduction

Topics
1. What is an economic value?

2. Is it a relevant concept for water?

3. Is there a single value to water?

4. What are the different components to the economic value of water?

5. How can we use this concept to allocate water among competing uses?

6. What is the difference between value, cost and price of water?

7. How can economics complement hydrology?

Introduction

Topics
1. What is an economic value?

2. Is it a relevant concept for water?

3. Is there a single value to water?

4. What are the different components to the economic value of water?

5. How can we use this concept to allocate water among competing uses?

6. What is the difference between value, cost and price of water?

7. How can economics complement hydrology?

Introduction

Water's characteristics
 Water is a fugitive resource

High exclusion cost resource

Water management = Unidirectional externality
problems

Asymetrical relationship between upstream and
downstream uses
Introduction

Water's characteristics
 Can be both a private good and a public good

Private good = rival use + exclusive use

Public good = non-rival use + non-exclusive use

Examples?

Water is characterized by high exclusion costs

free rider problem : a user takes advantages of the public good nature of water without
paying for it

Examples ?
Introduction

Water's characteristics

Instream versus offstream uses

Examples?

Consumptive versus nonconsumptive uses

Examples?

Water is low value commodity. In irrigated agriculture, the value of water is about 5
$/1000 m3. Tap water has a value of +/- 50$/1000 m3

Water is often used free of charge by power companies, farmers, etc …

What is the value of bottled water?
Introduction

Water's characteristics

Water demands vary in space and time

Transaction cost are high = Cost required to manage the resource (ex. development,
pollution control, allocation, etc.)

Water is a common pool resource. it costly, but not impossible, to exclude potential
beneficiaries from obtaining benefits from its use

/ High / Low

/ High Private good

/ Low Collective or common good Public good

Table des matières

Introduction

Water supply

Water demand

Water allocation
Water supply

How do water users get “their” water?

Some users can supply their own water

In general, single organization supplies finished, processed or retail water to all
individuals in a given area = water utility (public/private, profit/non-profit)

Who are the customers?

Households

Irrigators

Industries
 etc

What type of water ? Treated or bulk water
Water supply

What does water supply involve for the
supplier? Cost $
Total cost

Fixed costs: Irreversible investment
(storage, pumping stations, treatment
c(w)
plants, conveyance, etc)

Variable costs: operation and
maintenance (energy, chemicals, vc
management, etc.)

Total cost = fixed cost + variable cost
fc

What does water supply involve for the
0
society? w


Positive/negative externalities

The function c(w) will vary from place to
place and from year to year
Water supply

The total cost function
Cost $

The total cost increases with w Total cost

Initially, as water deliveries rise from a
zero level, costs rise more rapidly than c(w)
they do for intermediate levels where the
supplier fully employs its capital
vc

Then, at some point, total cost start rising
more rapidly again : the supplier has
reached the limit of its resources (capital
fc
and managerial)
0
w
Water supply

Marginal cost function
∂C Cost $
MC = Marginal cost function
∂w
= slope of the total cost function MC(w)


Average cost function
AC(w)
C
AC=
W
0
w
Water supply

Marginal cost function
∂C Cost $
MC = Marginal cost function
∂w
= slope of the total cost function MC(w)

AVC(w)

Average cost function
C
AC= =AFC +AVC AFC(w)
W
0
w