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Environmental water efficiency: Maximizing benefits and minimizing costs of environmental water use and management

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Environmental water management is a relatively new discipline, with concepts, management practice and institutional mechanisms that are still emerging. The efficient and effective use of environmental water to maximize environmental benefits, or environmental water use efficiency, is one such emerging concept. Currently, much of the focus is on allocative efficiency, where the objective is to achieve a better balance between consumptive and environmental water uses in a cost‐effective way. However, this may not provide the most efficient and effective way to manage environmental water in the long term, where managers are seeking productive (or operational) efficiency. Here, the objective is to maximize environmental outcomes relative to the cost of managing the available resource. This paper explores the concept of water use efficiency in the context of environmental water. This article is categorized under: Engineering Water > Planning Water Human Water > Value of Water
(a) Demand is the marginal social benefit of additional water allocated to the environment. Supply is the marginal social cost of reallocating water from other uses to the environment. Allocative efficiency involves an allocation to the environment at a quantity which equates demand and supply, which is where marginal benefit equals marginal cost. (b) Productive efficiency occurs as outcomes approach the production frontier, where the production frontier represents the maximum possible output given available resources and technological constraints. If current management is at position a, adopting different management strategies to achieve the same environmental benefit with less water could move onto the production frontier (point b) or achieving a greater environmental outcome with the same water (point c). A change in policy (including the allocation mechanism(s) and/or institutional arrangements), technology, or infrastructure may also shift the production frontier outward for further total environmental benefits (shown by the dotted curve)
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Allocative efficiency and productive efficiency link within the context of environmental water. Choices about how to allocate water to the environment necessarily involve selection between allocation mechanisms, which constrain the potential benefits and determine the required costs (i.e., they define the possible productive efficiency)
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Institutional requirements and management costs for environmental allocation mechanisms
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The total available water resource in a river basin is often thought of as being allocated to the environment or consumptive water users. However, there is also a portion of the water resource which provides shared benefits (i.e., consumptive water delivered to also achieve environmental outcomes, or environmental water that is harvested at a point further downstream for consumptive purposes)
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Human Water > Value of Water
Engineering Water > Planning Water

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