Planning & Management

Oral

394701 - How to live with no regrets: Informing policy decisions through marginal economic analysis of water supply and demand management actions under uncertainty

Tuesday, June 5
10:30 AM - 12:00 PM
Location: Greenway GH
Co-Authors: Ellen Hanak, San Francisco – Public Policy Institute of California; Josue Medellin-Azuara, Merced – University of California, Merced; Jay Lund, Davis, California – University of California, Davis

Almost half of California’s San Joaquin Valley water supplies are imported from other regions or extracted unsustainably from the aquifer. Whereas environmental concerns are likely to affect imports, the Sustainable Groundwater Management Act of 2014 requires to bring groundwater basins into balance by 2040. Given that agriculture is a leading economic driver in the Valley, many projects looking for supply augmentation and demand management are under scrutiny to avoid major economic disruptions.
To inform policy decisions, we study all major supply and demand management proposals using a marginal economic analysis. Every proposal is evaluated assessing the potential “new water” or “savings” that would provide on an annual basis, and the equivalent annual costs. To account for uncertainty, we include the likely ranges of water provided/saved and the costs of the projects. For any uncertain future realization, and using a Monte Carlo approach, we obtain the optimal set of actions by obtaining a supply and demand curve representing marginal costs and benefits for each supply and demand management action. Using this methodology, those actions that are selected in most of the realizations are considered “no-regret policy decisions”, and actions are ordered to inform decision makers on the best economic pathways.

Alvar Escriva-Bou

Research Fellow
Public Policy Institute of California

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394701 - How to live with no regrets: Informing policy decisions through marginal economic analysis of water supply and demand management actions under uncertainty



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