Volumetric Water Pricing, Social Surplus and Supply Augmentation

Quentin Grafton*, Long Chu, Tom Kompas, Michael Ward

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

3 Citations (Scopus)

Abstract

We evaluate the welfare losses of undertaking water supply augmentation in Sydney, Australia with a fixed, regulated water price given weather variability. Stochastic dynamic programming is used to determine dynamically efficient water prices and to estimate the losses in social surplus from premature water supply augmentation. Results show that premature water supply augmentation under the base case reduces the net present value (NPV) of the welfare of households by more than $A 3 billion, or some $A 1,900 NPV per household. While the findings are specific to Sydney, our modeling is of general interest because it could be employed to avoid costly and premature supply augmentation elsewhere.

Original languageEnglish
Title of host publicationGlobal Issues in Water Policy
PublisherSpringer
Pages401-419
Number of pages19
DOIs
Publication statusPublished - 2015

Publication series

NameGlobal Issues in Water Policy
Volume15
ISSN (Print)2211-0631
ISSN (Electronic)2211-0658

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