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2012 | Buch

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Economic Modeling of Water

The Australian CGE Experience

herausgegeben von: Glyn Wittwer

Verlag: Springer Netherlands

Buchreihe : Global Issues in Water Policy

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

The book details the innovative TERM (The Enormous Regional Model) approach to regional and national economic modeling, and explains the conversion from a comparative-static to a dynamic model. It moves on to an adaptation of TERM to water policy, including the additional theoretical and database requirements of the dynamic TERM-H2O model. In particular, it examines the contrasting economic impacts of water buyback policy and recurring droughts in the Murray-Darling Basin. South-east Queensland, where climate uncertainty has been borne out by record-breaking drought and the worst floods in living memory, provides a chapter-length case study. The exploration of the policy background and implications of TERM’s dynamic modeling will provide food for thought in policy making circles worldwide, where there is a pressing need for solutions to similarly intractable problems in water management.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Practical Policy Analysis Using TERM

Abstract

TERM entails a more detailed representation of regional economies than any previous multi-regional national CGE model. This has broadened the array of policy topics covered using a CGE model. In this book, we concentrate on applications of TERM to rural and urban water issues.

Glyn Wittwer

The TERM Approach

Frontmatter

Chapter 2. The TERM Model and Its Database

Abstract

TERM (The Enormous Regional Model) provides a strategy for creating a ‘bottom-up’ multi-regional CGE model which treats each region of a single country as a separate economy. This makes it a useful tool for examining the regional impacts of shocks that may be region specific. TERM is designed to allow quick simulations with many regions, so allowing for models of large countries with 30–50 provinces, such as USA or China. TERM also offers a standard procedure for preparing a database which requires, in addition to a national input-output or use-supply table, a minimal amount of regional data. More regional data can be used if available.

Mark Horridge

Chapter 3. Introducing Dynamics to TERM

Abstract

The massive master database of TERM needs to be aggregated before it can be used for any simulation. There is demand for moving to dynamic TERM simulations and rewards from doing so due to additional insights that arise from the influence that a dynamic baseline may have on a policy simulation. This chapter covers a number of issues concerning dynamic modeling with TERM. We start by outlining the motivations for moving from comparative static to dynamic regional modeling. Following that, we provide an overview of how we go about making a version of TERM dynamic. This includes details of how to vary the time intervals within a dynamic model. Next is an explanation of using the master database of TERM to prepare variable aggregation versions of dynamic TERM. The chapter also outlines how recursive dynamic models are run. RunDynam (specialist software) is a very useful tool for the dynamic CGE practitioner.

Glyn Wittwer, George Verikios

Water Modeling

Frontmatter

Chapter 4. Water Resources Modeling: A Review

Abstract

Australian economists were modeling irrigation water scenarios many years before substantial reforms started taking effect. Early modelers recommended that the water authorities raise the price of irrigation water. A recurring theme of later modeling is that water trading plays an important role in improving allocative efficiency. The eventual COAG reforms included the separation of land and water titles. With this separation, water trading became easier. With such trading, the market rather than authorities determine the price of water. Modeling has shown that other institutional aspects of water management have also hindered optimal water allocations in the past.

Marnie Griffith

Chapter 5. The Theory of TERM-H2O

Abstract

TERM-H2O is a dynamic variant of TERM with agricultural detail adapted to include regional water accounts. This chapter describes: (a) the technology assumptions in TERM-H2O for farm industries, (b) the creation of an input-output database for farm industries including inputs of water, (c) the derivation of input demand functions for farm industries and their calibration using farm sector input-output data, and (d) assumptions concerning mobility of capital, land, owner-operator labour and hired labour between farm industries. A key assumption is that irrigable land in TERM-H2O can be used either as an input of irrigated land or an input of dryland, with the division determined endogenously via water availability.

Peter B. Dixon, Maureen T. Rimmer, Glyn Wittwer

Chapter 6. Buybacks to Restore the Southern Murray-Darling Basin

Abstract

We use TERM-H2O in analysing the effects of the Australian Government buying back water from irrigators in the Southern Murray-Darling Basin (SMDB) and thereby increasing river flows. Results are explained using data from the model and simplified theory. We refer to this as the ‘back-of-the-envelope’ approach. Back-of-the-envelope calculations and regressions allow us to explain key features of the results including differences in regional outcomes. Controversially, our results suggest that buyback would increase economic activity in SMDB. Although a scheme of environmentally useful size would sharply increase the price of irrigation water, there would be little effect on aggregate SMDB farm output. Instead, farm resources would be reallocated between activities. Because farmers are owners of water rights, they would benefit from the price increase induced by buyback. Community anxiety in the basin over buybacks may have arisen because the buyback process started during a period of drought-induced stress.

Peter B. Dixon, Maureen T. Rimmer, Glyn Wittwer

Chapter 7. The Economic Consequences of a Prolonged Drought in the Southern Murray-Darling Basin

Abstract

The Australian government’s water buyback program started in earnest during a prolonged drought. TERM-H2O modeling indicates that in the short term, drought-induced job losses amount to around 6,000 jobs. Despite a recovery to average seasons, depressed investment during drought lowers levels of farm capital in the long run. In turn, long-run employment in the region will remain around 1,500 jobs below forecast. In both the short and long terms, job losses arising from drought appear to be manyfold those arising from water buybacks.

Glyn Wittwer, Marnie Griffith

Chapter 8. Urban Water Supply: A Case Study of South-East Queensland

Abstract

South-east Queensland suffered a record drought for several years after 2005 while accounting for almost one quarter of Australia’s entire population growth. This resulted in an urban water supply crisis. The state government’s response was to plan new dams, construct pipelines to create a water grid, and build a massive recycling plant and a desalination plant. Policy makers are in an invidious position, in so far as they will be accused of not preparing for the future should they underinvest in water infrastructure. Were a drought to continue indefinitely, it would be possible to justify much of the new infrastructure. Yet with a return of average rains, analysts may regard some of the new infrastructure as an excessively expensive means of maintaining a secure water supply.

Glyn Wittwer

Chapter 9. Applying TERM-H2O to Other Countries

Abstract

Dynamic CGE modeling has been useful in analyzing water policy issues within Australia. This chapter explores the possibility of applying a version of TERM-H2O to other countries.

Glyn Wittwer

Backmatter

Titel: Economic Modeling of Water
herausgegeben von: Glyn Wittwer
Verlag: Springer Netherlands
Electronic ISBN: 978-94-007-2876-9
Print ISBN: 978-94-007-2875-2
DOI: https://doi.org/10.1007/978-94-007-2876-9