Incorporating Uncertainty in the Economic Evaluation of Capital Investments for Water Use Efficiency Improvements

Adamson, David and Loch, Adam (2021) Incorporating Uncertainty in the Economic Evaluation of Capital Investments for Water Use Efficiency Improvements. Land Economics, 97 (3). pp. 655-671. ISSN 1543-8325

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Official URL: https://doi.org/10.3368%2Fwple.97.3.100119-0143r

Abstract

Long-run investments in wateruse efficiency (WUE) are risky, particularly where water is required as a secure input. State-of-nature representations of supply outcomes provide an increased understanding of the vulnerability of capital and water users to adverse events. Using Californian data, we couple cost-benefit analysis to a state-contingent analysis approach to explore the riskiness of WUE investment payoffs and cash-flow outcomes when frequencies of states of nature change over the investment course. Critically, this allows us to represent decision-maker adaptation in the face of risk and uncertainty and the role of subsidy policy in those decisions. (JEL D61, D81)

Item Type:	Article
Keywords:	D81, Q25, Q54
Depositing User:	Dr David Adamson
Date Deposited:	24 Oct 2024 18:28
Last Modified:	08 Nov 2024 09:33
URI:	https://rau.repository.guildhe.ac.uk/id/eprint/16793

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