On the spatial nature of the groundwater pumping externality

• Published in: Resource and energy economics Vol. 32; no. 2; pp. 154 - 164
• Main Authors: Brozović, Nicholas, Sunding, David L., Zilberman, David
• Format: Journal Article Conference Proceeding
• Language: English
• Published: Amsterdam Elsevier B.V 01.04.2010; Elsevier; Elsevier Sequoia S.A
• Series: Resource and Energy Economics
• Subjects: Applied sciences; Approximation; Aquifers; Buildings. Public works; Calibration; Common property resource; Common property resource Groundwater Dynamic optimization; Computation methods. Tables. Charts; Dynamic optimization; Economic models; Economics; Environmental policy; Exact sciences and technology; Externalities; Externality; Groundwater; Groundwater management; Mathematical models; Pumping; Structural analysis. Stresses; Studies; Water collecting, well, pumping; Water supply. Pipings. Water treatment; D62; Groundwater; Common property resource; Q25; Dynamic optimization; C61; Economic analysis; Spatial variability; resource; Water resource management; Externality; Optimization; Common property; Pumping; Dynamic model; Ground water
• ISSN: 0928-7655; 1873-0221
• DOI: 10.1016/j.reseneeco.2009.11.010

Most existing economic analyses of optimal groundwater management use single-cell aquifer models, which assume that an aquifer responds uniformly and instantly to groundwater pumping. In this paper, we develop an economic model of groundwater management that explicitly incorporates spatial dynamic groundwater flow equations. Calibration of our model to published economic studies of specific aquifers demonstrates that existing studies generally incorrectly estimate the magnitude of the groundwater pumping externality relative to spatially explicit models. In particular, for large aquifers with surface areas of thousands of square miles, the marginal pumping externality predicted by single-cell models may be orders of magnitude less than that predicted by a spatially explicit model, even at large distances from a pumping well. Conversely, for small aquifers with areas of a few hundred square miles or less, single-cell models reasonably approximate the pumping externality. Application of single-cell models to inappropriate settings may result in misleading policy implications due to understatement of the magnitude and spatial nature of the groundwater externality.