Allocating limited water: linking ecology and economics

Abstract

Available water is limited in quantity with many potentially competing uses, including irrigation, environmental amenity and domestic supply. A question is how to allocate a limited water quantity to different uses for society. Economically we allocate water to equate marginal social benefits across different uses. For environmental amenity this framework relies on ecological response functions and prices. The economic framework uses prices to represent social welfare - representing social willingness to pay for extra ecological amenity. Valuation (pricing) of ecological improvements involves non-market valuation; estimates are available for ecological amenity improvements. An economic decis..