Research on economic instruments for water allocation in a river

2006 Fiscal Year Final Research Report Summary

• Project/Area Number: 16530161
• Research Category: Grant-in-Aid for Scientific Research (C)
• Allocation Type: Single-year Grants
• Section: 一般
• Research Field: Applied economics
• Research Institution: Keio University
• Principal Investigator: ONUMA Ayumi KEIO University, Department of Economics, Professor, 経済学部, 教授 (60203874)
• Project Period (FY): 2004 – 2006
• Keywords: international river / cooperation / non-cooperation / ecological system / non-point source pollution / second-best / input tax / polluting permit

Research Abstract

Three researches were achieved. First of all, "An Ecological Implication of a Cooperative Water Resources Allocation in a River Basin" deals with the problem of water allocation in an international river, which sometimes makes an tension among the countries located in the river. In order to mitigate the tension, cooperation among countries is proposed. In our research, it is shown that cooperation can reduce total water use throughout the river. The condition is the property of "response function", which is the decision function of a country's water use against the level of water use in upstream countries. If the function satisfies some properties, then it always holds that cooperation leads to declining the total water use, which will give a good effect on fresh water ecosystem in the river.
The other two researches are ones concerning "non-point pollution". To begin with, "Non-point Source Pollution and the Second Best Taxation on Pesticide" studies the second-best taxation on pesticide in agriculture, since it is generally impossible to monitor the level of care by a farmer, which mitigates the pollution from pesticide. Our analysis shows that the second-best is achieved by the taxation on pesticide, whose rate can be positive, zero or negative, depending on the runoff, production and cost functions.
In "On the trading rate of polluting permits between point and non-point sources" studies the first-best trading ratio of polluting permits between point and non-point sources. The interesting characteristics are that the rate is not one to one. In some programs carried out, one permit from the point source is traded with two or three permits from the non-point source. Our study shows that such rate is not the first-best. The first-best is conversely that one permit from the point source is traded with less than one permit from the non-point source.