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We investigate the economic relation between two common approaches to tacklingwater scarcity and adapting to climate change, namely expanding water-storagecapacities and improving water-use efficiency. We build, analyze, and extend a simplemodel for capacity choices of dams, incorporating stochastically dynamic control ofwater inventories and efficiency in water use. We show that expanding water-storagecapacities could encourage water users to improve water-use efficiency andimproving water-use efficiency could increase optimal dam sizes even if water-useefficiency improvement decreases the water demand. The possibility ofcomplementarity is numerically illustrated by an empirical example of the CaliforniaState Water Project. Our analysis implies that, if complementarity holds, resourcesshould be distributed in a balanced way between water-storage expansions andwater-use efficiency improvement instead of being concentrated on one side with theother side being ignored.

Subject(s): Environmental Economics and Policy

Land Economics/Use

Issue Date: 2015

Publication Type: Conference Paper/ Presentation

PURL Identifier: http://purl.umn.edu/211894

Total Pages: 54

Record appears in: International Association of Agricultural Economists (IAAE) > 2015 Conference, August 9-14, 2015, Milan, Italy

Autor: Xie, Yang ; Zilberman, David

Fuente: http://ageconsearch.umn.edu/record/211894?ln=en

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