Erfani, T;
Harou, JJ;
Binions, O;
(2014)
Simulating water markets with transaction costs.
Water Resources Research
, 50
(6)
pp. 4726-4745.
10.1002/2013WR014493.
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Abstract
This paper presents an optimization model to simulate short-term pair-wise spot-market trading of surface water abstraction licenses (water rights). The approach uses a node-arc multicommodity formulation that tracks individual supplier-receiver transactions in a water resource network. This enables accounting for transaction costs between individual buyer-seller pairs and abstractor-specific rules and behaviors using constraints. Trades are driven by economic demand curves that represent each abstractor's time-varying water demand. The purpose of the proposed model is to assess potential hydrologic and economic outcomes of water markets and aid policy makers in designing water market regulations. The model is applied to the Great Ouse River basin in Eastern England. The model assesses the potential weekly water trades and abstractions that could occur in a normal and a dry year. Four sectors (public water supply, energy, agriculture, and industrial) are included in the 94 active licensed water diversions. Each license's unique environmental restrictions are represented and weekly economic water demand curves are estimated. Rules encoded as constraints represent current water management realities and plausible stakeholder-informed water market behaviors. Results show buyers favor sellers who can supply large volumes to minimize transactions. The energy plant cooling and agricultural licenses, often restricted from obtaining water at times when it generates benefits, benefit most from trades. Assumptions and model limitations are discussed. © 2014 The Authors.
| Type: | Article |
|---|---|
| Title: | Simulating water markets with transaction costs |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1002/2013WR014493 |
| Publisher version: | http://dx.doi.org/10.1002/2013WR014493 |
| Additional information: | © 2014. The Authors. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made. |
| Keywords: | water trading; hydro-economic model; optimization modeling; basin modeling; |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Civil, Environ and Geomatic Eng |
| URI: | https://discovery.ucl.ac.uk/id/eprint/1429845 |
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