Laserfiche WebLink
<br />DRAFT <br /> <br />VI. ECONOMIC ANALYSIS OF AREA-OF-ORIGIN COMPENSATION <br />(PROTECTION) SCHEMES <br /> <br />In this section we provide an economic analysis of the issue <br /> <br />of area of origin compensation. We begin with a consideration of <br /> <br />the rationales for compensation. Next we present and discuss two <br /> <br />conditions which must be met for a transbasin diversion to be <br /> <br />economically desirable: <br /> <br />(I) that it be the least-cost source of <br /> <br />water and (2) that its benefits exceed all related costs. We <br /> <br />then consider appropriate forms of compensation. <br /> <br />Finally we <br /> <br />present some general guidelines for designing compensation <br /> <br />schemes. . <br /> <br />A. Why Compensate Areas of Origin? <br /> <br />Why should the export of water be treated differently from <br /> <br />the export of any natural resource? <br /> <br />In forested areas, we make <br /> <br />no pretense of maintaining local lumber or firewood prices as the <br /> <br />area is logged. We don't compensate local areas for the removal <br /> <br />of coal or ores beyond the royalties paid directly to resource <br /> <br />owners, and we certainly don't guarantee that the local price of <br /> <br />coal will never rise above what it would have been in the absence <br /> <br />.of exports. Why is water viewed differently? <br /> <br />Two reasons stand out from a popular viewpoint: <br /> <br />(I) water <br /> <br />exports usually .come from unappropriated water, acquisition of <br /> <br />which does not require payment to residents of the basin, and (2) <br /> <br />water exports generally do not prov ide a continuing base for <br /> <br />employment and local taxation as do mineral or forestry exports. <br /> <br />Regarding (1), the thing that concerns that population is that no <br /> <br />39 <br />