TY - JOUR
T1 - Dynamic water pricing and the risk adjusted user cost (RAUC)
AU - Chu, Long
AU - Grafton, Quentin
PY - 2021
Y1 - 2021
N2 - We formalise a dynamic water pricing model as a tool for increasing social surplus in short-term
water allocations and long-term water supply planning and investments. We calculate, in monetary terms, the intertemporal risk that current water uses impose on future water availability,
termed as the Risk-Adjusted User Cost (RAUC), given multi-period droughts. Our model is calibrated to the water supply system in the Australian Capital Territory. Results show that the RAUC
may be a substantial proportion of the cost of supplying water, and incorporating it in the water
price can result in long-term welfare gains.
AB - We formalise a dynamic water pricing model as a tool for increasing social surplus in short-term
water allocations and long-term water supply planning and investments. We calculate, in monetary terms, the intertemporal risk that current water uses impose on future water availability,
termed as the Risk-Adjusted User Cost (RAUC), given multi-period droughts. Our model is calibrated to the water supply system in the Australian Capital Territory. Results show that the RAUC
may be a substantial proportion of the cost of supplying water, and incorporating it in the water
price can result in long-term welfare gains.
U2 - 10.1016/j.wre.2021.100181
DO - 10.1016/j.wre.2021.100181
M3 - Article
SN - 2212-4284
VL - 35
SP - 100181
JO - Water Resources and Economics
JF - Water Resources and Economics
ER -