Withdrawing Water from an Aquifer: The Economics

Water is a renewable natural resource. Driven by solar energy and gravity, the global water cycle indefinitely circulates water through the atmosphere, over continents, and across oceans. On a more local level, however, water sometimes has more of a nonrenewable character because it can be depleted, at least to some degree. Withdrawing too much water from an aquifer that has only limited recharge, for example, diminishes stored water. This note discusses groundwater withdrawal, how it is optimally done, and how it depends on the particular institutional setting. Excerpt UVA-GEM-0119 Feb. 25, 2014 Withdrawing Water from AN Aquifer: THE ECONOMICS Water is a renewable natural resource. Driven by solar energy and gravity, the global water cycle indefinitely circulates water through the atmosphere, over continents, and across oceans. On a more local level, however, water sometimes has more of a nonrenewable character because it can be depleted, at least to some degree. Withdrawing too much water from an aquifer that has only limited recharge, for example, diminishes stored water. This note discusses groundwater withdrawal, how it is optimally done, and how it depends on the particular institutional setting. Unlike surface water, which is measured as a flow over a period of time, groundwater is a stored stock and is measured at a particular moment in time. Withdrawing groundwater now, therefore, will require explicit consideration of future water use: Indeed, using more scarce groundwater today means having less stored for the future. Consequently, water users will want to use available groundwater optimally over time (i.e., they will want to use water in such a way that it achieves the maximum possible benefit over cost, explicitly comparing the benefits and costs of water use at each moment in time). Figure 1. Demand for water and the cost of pumping. . . .