Optimal and sustainable groundwater management: multiple aquifers, watershed conservation, and water recycling

While renewable resource economics is typically confined to one source and one demand, resource managers must often decide how to manage multiple sources simultaneously. The second chapter in this dissertation develops a dynamic optimization model to determine the efficient extraction of groundwater from two coastal aquifers. I find that Herfindahl's least-cost-first result for non-renewable resources does not necessarily apply to renewable resources, even with a single demand. Instead, the endogenously determined marginal opportunity cost of each resource dictates the optimum order and rates of extraction.;The third chapter addresses the relationship between groundwater extraction and watershed conservation in an integrated framework. Payments for ecosystem services should be informed by how both the providing-resource and the downstream resource are managed. I develop a model that jointly optimizes conservation investment in a watershed that recharges a downstream aquifer and groundwater extraction from the aquifer. Although volumetric user-fees to finance watershed investment induce inefficient water use, a lump-sum conservation surcharge can preserve efficient incentives and fully finance conservation investment.;The fourth chapter integrates water recycling into a groundwater management program. With multiple demand sectors, high quality sources (e.g., groundwater, desalinated water) can serve all sectors; whereas, lower quality sources (e.g., recycled water) are restricted to non-potable uses. The results of a multi-sector optimization model indicate that when unit recycling cost is constant, recycled water eventually supplies the non-potable sector as a sector-specific backstop, while desalination supplements groundwater in the potable sector steady state. When the unit cost is instead increasing, recycled water serves as an intermediate backstop in transition to the desalination steady state. In both cases, recycling water increases welfare by shifting demand away from the aquifer, thus delaying implementation of costly desalination.;This dissertation extends the basic renewable resource economics model to examine various issues that affect water scarcity, and hence, the efficient management of a groundwater resource. At the end of each chapter, I provide a numerical example, using data from O'ahu (Hawai'i) to illustrate the practical applicability of the developed theoretical methodologies.