Xueqin Zhu

Economic Modelling for Water Quantity and Quality Management: A Welfare Program Approach

This paper presents an integrated economic model which is able to explicitly address both water quantity and quality. We use a welfare program to maximize social welfare subject to the economic and ecological constraints, where interactions, emissions and environmental impacts are incorporated. Such a welfare program can provide the marginal values of commodities and therefore can price water by means of shadow pricing. The optimal solution to a specified program provides the optimal response strategies, i.e. the efficient allocation of resources in the economy including water use and the efficient level of water quality. We illustrate the mechanism in a numerical example and show, as an example, how we can achieve efficiency by reserving water in the high season for times of high demand in the low season and by introducing price differentiation between the two seasons.

A model-based assessment of adaptation options for Chianti wine production in Tuscany (Italy) under climate change

Abstract This paper covers a comprehensive economic analysis of climate change adaptation options for a specific wine producing region, namely Tuscany. As temperature increases under climate change, rainfall patterns will be different, and Chianti wine production in Tuscany therefore needs to adapt in the near future. We address the adaptation challenges and identify grape yield and quality loss as the main impact of climate change on wine production. Relocation of vineyards uphill and introducing drought-resistant varieties are considered as adaptation measures. We appraise these adaptation measures using an optimization framework, where regional wine producers maximize income subject to economic constraints including the climate change impacts on wine productivity and quality. Our simulation shows quantitatively to what extent a higher degree of climate change impact demands a higher degree of adaptation. We find that a combination of the two measures provides a better strategy because it leads to higher economic efficiency. However, uncertainty regarding the efficiency of the new variety discourages the use of this new drought-resistant variety, whereas a higher efficiency would make this choice more favourable. Sensitivity analysis for time horizon and discount rate confirms the theory of investment under uncertainty, showing a shorter time horizon (or more frequent investment) provides the possibility to postpone the decision to implement adaptation measures due to the value of flexibility, while a higher discount rate leads to a later adaptation decision, because uncertainty creates a value of waiting for new information.

Estimation of river flood damages in Jakarta, Indonesia

Flooding is a serious problem in Jakarta, and detailed estimation of flood damage is necessary to design optimal flood management strategies. This study aims to estimate flood damage in a densely populated area in Jakarta by means of a survey, to develop the relationship between flood characteristics and flood damage, and to compare the damage estimates from the survey with the damage estimates obtained by a flood damage model for Jakarta, i.e. the damage scanner model. We collected data on economic losses of the January 2013 flood in a survey of flood-affected households and business units in Pesanggrahan River. The actual flood damage in the survey area is US

Water Markets: Insights from an Applied General Equilibrium Model for Extremadura, Spain

0.5 million for the residential sector and US

Nash bargaining solutions for international climate agreements under different sets of bargaining weights

0.7 million for the business sector. The flood damage for a similar event in the same area based on the damage scanner model is estimated to be US

A holistic sustainability assessment tool for bioenergy using the Global Bioenergy Partnership (GBEP) sustainability indicators.

1.3 million for the residential sector and US

Energy and greenhouse gas balances of cassava-based ethanol.

9.2 million for the business sector. The flood damage estimates obtained by the survey approach are lower compared to the damage scanner approach due to different ways in obtaining flood damage data and in defining the maximum flood damage per object, the different spatial levels of analysis, and uncertainties in constructing the flood damage curves that were applied in the damage scanner model.

The enlargement of the European Union: Effects on trade and emissions of greenhouse gases

In Extremadura, a southwest region of Spain, water has been traditionally been seen as an abundant resource, but growing irrigation demands under a low price of about 0.01€/m3 are outstripping the supply of raw water and competing with its other consumptive and non-consumptive uses. To deal with the water scarcity in the region, a water market can be established to achieve the highest value of water use, which may allocate irrigation water to the most efficient users. Hence, a Social Accounting Matrix and Water Accounts (SAMWA) for 2005 is used as a central core to calibrate an Applied General Equilibrium (AGE) model. This model is formulated in the Negishi format which, as a welfare program, can price raw water by its marginal value. The main purpose of this paper is to obtain insights into the potential economy-wide gains from establishing a water market such that this resource is allocated efficiently. The impact of a water market policy is investigated under three scenarios. First, we simulate a decrease in the availability of raw water in Extremadura due to climate change. Second, an investment in a more efficient irrigation technology is considered. Finally, we extend our AGE model by including the amenity services of water and investigate how the willingness to pay of consumers would affect the efficient water allocation. We thus offer policy makers insights into how regional policies could be designed under different circumstances for a better management of raw water in Extremadura.

Comparing the Social Costs of Biofuels and Fossil Fuels: A Case Study of Vietnam

Bargaining is a tool to share collaborative gains and to facilitate reaching agreement. To improve incentives to join an international climate agreement (ICA), the Nash bargaining solution can be used to distribute cooperative gains across signatories. In this paper, we examine how the formation of ICAs and their mitigation efficiency are impacted by the use of the Nash bargaining solution. In a Nash bargaining game with heterogeneous players, bargaining powers are unequal and may be driven by different characteristics of the players. We employ different sets of asymmetric bargaining weights in order to examine the effectiveness of climate coalitions that emerge as stable agreements. Using the Nash bargaining solution, we obtain results from the stability of coalition model (STACO). We find that the Nash bargaining solution can improve the participation incentives and performances of ICAs as compared to agreements that do not redistribute gains from cooperation, but its capacity to overcome free-riding incentives is limited. However, if Nash bargaining accounts for outside options of players, we find larger stable coalitions and higher global abatement levels. In fact, Nash bargaining with outside options can stabilise the largest coalitions that can possibly be stable in our game.