Economics of Water Use, Regulation and Markets

The course will examine the incentives that lead to overexploitation of water recourses and how altering these incentives can promote socially optimal use patterns. The course will also provide the students with a set of analytical tools that can be used to work on water issues or natural resource issues more broadly. Those topics are: 1. Introduction and Economics Basics 2. Agricultural Water Use (water rights, agricultural water use efficiency and productivity, land allocation, technology choice, environmental quality) 3. Residential Water Use 4. Water, Land Use and Environmental Aspects of Biofuel Production 5. Other Approaches to Value Water (hedonic modelling, experimental economics, nonmarket valuation approach) 6. Intertemporal and Interregional Aspects of Water 7. Water Markets Around the World (Europe, China, USA)

This course is designed to introduce students to the subject of water economics. Upon successful completion of the module, students will be able to: • understand the basic concepts and economic models used to study the economics of water resources issues. • select and apply the appropriate economic model to solve water policy problems as for example producer’s profit or consumer’s utility maximization. • provide economic intuition for mathematical answers to water management problems. • apply models to address a wide range of water resource problems and assess the economic effects of decision making process at different levels based either on the water demand or the water supply side of the economy. • critique journal articles pertaining to economics of water resources.

In a written examination at the end of the semester of 120 mins (in class), students will demonstrate the ability to understand and analyze concepts and methodological approaches related to water resource management using economic terminology, and the ability to apply mathematical tools to solve specific calculus problems. A written exam is necessary to assess the students' holistic understanding and analytical competencies. In addition, there is the option of taking a voluntary mid-term assignment as coursework in accordance with APSO §6, 5. For this, an in-class presentation (~15 min) of a short research project related to water resource economics that they will choose from a list of references provided by the instructor has to be given. Students who are interested in participating in the research project activity will have to express their interest and choose a topic by the third week of the course. The module grade can be improved by 0.3 by passing the course work if this better characterizes the student's performance level on the basis of the overall impression and the deviation has no influence on passing the examination. No repeat date is offered for the mid-term performance. When retaking a failed module examination at the next possible examination date, successfully passed mid-term assignments will be taken into account.

Students taking this course should be familiar with the basics of microeconomics as well as mathematical economics (derivatives, basic function integrals and graphs). However, all necessary concepts will be introduced before application.

Theoretical concepts and example exercises will be given by the lecturer on the blackboard and by PowerPoint presentations to build the required knowledge base in water resource economics. Q&A sessions at the beginning of each lecture will be provided to recapitulate the previous lecture. In addition, under the supervision and help of the lecturer, in-class application exercises will be used to create real-world water management problems for which students in randomly assigned groups will create and solve problems. Discussion of relevant scholarly articles and literature will be used to aid understanding of the topic covered.