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The Welfare Impact of Self-supplied Water Pricing in Canada: A Computable General Equilibrium Assessment

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  • Nicholas Rivers
  • Steven Groves

Abstract

This paper uses a computable general equilibrium model to assess the welfare cost of changing the method of water allocation in Canada towards one that uses prices to ration demand. We model the introduction of a price on both water that is abstracted as well as water that is consumed (that is abstracted, and not returned to the source). We estimate that reducing water consumption by 25 % would require imposition of a price on water consumption of around $$\$0.21/\text{ m }^{3}$$ . Similarly, introduction of a water abstraction charge of about $$\$0.013/\text{ m }^{3}$$ would be sufficient to reduce water abstraction by 25 %. We find that if revenues from water pricing are returned in lump sum to households, the introduction of water pricing would result in a modest welfare loss. When revenues from water pricing are used to offset existing taxes, we find a gain in welfare corresponding to a ‘strong double dividend.’ Copyright Springer Science+Business Media Dordrecht 2013

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  • Nicholas Rivers & Steven Groves, 2013. "The Welfare Impact of Self-supplied Water Pricing in Canada: A Computable General Equilibrium Assessment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(3), pages 419-445, July.
    • Handle: RePEc:kap:enreec:v:55:y:2013:i:3:p:419-445
    DOI: 10.1007/s10640-013-9633-3
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    2. Luckmann, Jonas & Grethe, Harald & McDonald, Scott & Orlov, Anton & Siddig, Khalid, 2013. "A general equilibrium approach to modelling multiple types and uses of water," Conference papers 332401, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Luckmann, Jonas & Ihle, Rico & Kleinwechter, Ulrich & Grethe, Harald, 2015. "The Effects of Vietnamese Export Policies on the World Market Integration of Domestic Rice Markets," 2015 Conference, August 9-14, 2015, Milan, Italy 212159, International Association of Agricultural Economists.
    4. Zhang, Lirong & Li, Yakun & Jia, Zhijie, 2018. "Impact of carbon allowance allocation on power industry in China’s carbon trading market: Computable general equilibrium based analysis," Applied Energy, Elsevier, vol. 229(C), pages 814-827.
    5. Luckmann, Jonas & Grethe, Harald & McDonald, Scott, 2015. "When Water Saving Limits Recycling: Modeling Economy-wide Linkages of Wastewater Use," 2015 Conference, August 9-14, 2015, Milan, Italy 212161, International Association of Agricultural Economists.
    6. Luckmann, Jonas & Grethe, Harald & McDonald, Scott, 2015. "When Water Saving Limits Recycling: Modeling Cascading Water Use in a Computable General Equilibrium Framework," Conference papers 332622, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Teotónio, Carla & Rodríguez, Miguel & Roebeling, Peter & Fortes, Patrícia, 2020. "Water competition through the ‘water-energy’ nexus: Assessing the economic impacts of climate change in a Mediterranean context," Energy Economics, Elsevier, vol. 85(C).

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