OPTIMAL INVESTMENT IN RESEARCH AND DEVELOPMENT REGARDING A BACKSTOP TECHNOLOGY

We examine the role of investment opportunities on the marginal cost of a backstop technology and the resulting implications for optimal depletion of a non-renewable resource. We consider the case in which two economic agents (individuals, cities, or nations) compete for a non-renewable resource, and investments in research and development will reduce the marginal cost of a backstop technology. We examine the problem in both social optimization and game theory frameworks. We consider three scenarios: 1) The social planner's problem in which the sum of net benefits earned by the two agents (players) is maximized, 2) A scenario in which two players compete for the limited resource, while making investments jointly, and 3) A scenario in which the players compete for the resource and they choose investment levels independently. We examine, in particular, the case of groundwater withdrawals from an aquifer with a very small rate of natural recharge. The backstop technology is desalination. Results describe the optimal paths of investments in knowledge, as the original stock of groundwater is depleted. Groundwater is extracted over a longer interval, and the sum of investments in knowledge is smallest, in the social planner's scenario.Research and Development/Tech Change/Emerging Technologies, Resource /Energy Economics and Policy,

EXAMINING CHANGES IN LAND USE AFTER THE SALE OF DEVELOPMENT RIGHTS ON FARMS IN RHODE ISLAND

Purchasable development rights (PDR) programs are generally considered to provide permanent protection of farmland because development rights are separated from the land in perpetuity. However, the programs do not require that farming activities be maintained in the future. Farming may be discontinued on PDR parcels due to changes in economic conditions or if the parcels are converted to non-farm, rural estates. Such changes may reduce the flow of public goods that citizens seek to obtain by implementing PDR programs. We examine changes in land use on PDR parcels to determine if current activities are consistent with program goals. While changes have occurred in the crops and livestock produced on Rhode Island farms, over time, all of the farms on which development rights were purchased during 1985 through 1999 are currently being farmed by the original owners or by new operators who have either purchased or leased the land.Land Economics/Use,

Irrigation and drainage in the new millennium

Presented at the 2000 USCID international conference, Challenges facing irrigation and drainage in the new millennium on June 20-24 in Fort Collins, Colorado.Includes bibliographical references.Waterlogging and salinization arise in arid areas largely because two essential resources, irrigation water and the assimilative capacity of unconfined aquifers. are not priced or allocated correctly to reflect scarcity values and opportunity costs. Farm-level decisions regarding irrigation methods and water volumes will not be socially optimal when such values are not communicated to farmers in the prices they pay for irrigation and drainage resources, or in allocations that define their water supply or drainage capacity. Modifying farm-level prices and allocations may be helpful in reducing the rate of increase in waterlogged and saline areas in many regions. This paper describes why farm-level irrigation and drainage strategies often differ from those that would be considered socially optimal. In the absence of appropriate economic incentives, farmers are not encouraged to consider the off-farm and long-term impacts of their decisions regarding irrigation and drainage inputs. Policies that can be implemented to provide such encouragement include volumetric water pricing, water markets, tradable water allotments, adjustments in area-based cost recovery programs, and incentives for farmers to use irrigation methods that reduce deep percolation

REPLY: ENERGY ACCOUNTING: THE CASE OF FARM MACHINERY IN MARYLAND

Resource /Energy Economics and Policy,

Environmental costs and benefits

Presented at Contemporary challenges for irrigation and drainage: proceedings from the USCID 14th technical conference on irrigation, drainage and flood control held on June 3-6, 1998 in Phoenix, Arizona.Includes bibliographical references.A conceptual framework that depicts soma of the private and public costs and benefits of irrigated agriculture is presented for use in identifying situations in which public policies might be implemented to generate a socially optimal use of resources in a competitive equilibrium. The framework is useful in describing the potential social gains or losses due to policies that motivate farmers to internalize the external costs or benefits of their activities. The model is demonstrated using the example of water quality issues pertaining to irrigation and drainage in California's San Joaquin Valley. The potential social costs of public policies designed to reduce the volume of subsurface drain water and selenium loads discharged into the San Joaquin River are examined using the conceptual framework

ENERGY ACCOUNTING: THE CASE OF FARM MACHINERY IN MARYLAND

Resource /Energy Economics and Policy,

GAME THEORY ANALYSIS OF COMPETITION FOR GROUNDWATER INVOLVING EL PASO, TEXAS AND CIUDAD JUAREZ, MEXICO

We examine the potential gains from cooperation in the withdrawal of water from the Hueco Bolson aquifer that provides municipal water supply for El Paso, Texas and Ciudad Juarez, Mexico. The aquifer lies beneath the international border, and both cities operate independently regarding pumping rates and withdrawals. We estimate the gains by comparing four scenarios in a dynamic setting: 1) a status quo scenario in which both cities continue extracting groundwater as they are at present, 2) a Nash non-cooperative game scenario, 3) a Nash bargaining scenario, and 4) a scenario that involves maximizing the sum of net benefits in both cities. All scenarios, including the non-cooperative game, provide a longer useful life of the Hueco Bolson aquifer than does the status quo. In the Nash bargaining scenario, both cities gain from cooperation and the sum of net benefits approaches the maximum that can be obtained by maximizing that value explicitly.Resource /Energy Economics and Policy,

Responding to Water Quality Problems Through Improved Management of Agricultural Water

10 pages. Contains references

Responding to Water Quality Problems Through Improved Management of Agricultural Water

10 pages. Contains references

ESTIMATING POTENTIAL GAINS TO COOPERATION FOR LIMITED WATER RESOURCES ALONG THE RIO GRANDE

We examine the potential gains from cooperation in the withdrawal of water from the Hueco Bolson aquifer that provides a substantial portion of municipal water supplies in El Paso, Texas and Ciudad Juarez, Mexico. The aquifer lies beneath the international border, and both cities operate independently regarding pumping rates and annual withdrawals. The natural the rate of recharge has been less than the sum of annual withdrawals since the early 1900s, and the resource likely will be depleted if current pumping rates are maintained. Optimal pumping rates and depths are described using a model that maximizes the sum of net benefits obtained from municipal water supplies in both cities. Those results are compared with pumping rates and depths obtained using a dynamic game-theory model of strategic behavior involving the two cities.Resource /Energy Economics and Policy,