Irreversibility and Natural Resource Allocation: Applying Krutilla - Fisher Model in Zarinehrood Basin Water Allocation

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Abstract

Development projects in natural water resources like rivers and lakes, specially transferring water to use in agriculture, domestic and industrial sector without considering environmental values, causes irrecoverable and irreversible damage to ecosystem and future options. If we consider the future generation and species rights, those damages and costs can be very much than we take in.
The above problem has shown its results in the development projects in Urmia Lake basin in north-western Iran. In our case study, water of Zarinerood is transferred to use in domestic and agriculture sector that made a lot of irrecoverable damage to the ecosystem. In this paper, we develop an optimal control model for allocating a natural water resource by considering irreversibility. The model shows that allocating of basin’s water for different uses is not an optimal policy. Indeed, it intensifies the environmental irreversibility in that ecosystem.
JEL Classification: Q25, Q27, Q57, C6

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