Dynamic marginal cost curves to support water resources management

Abstract

Marginal cost curves (MCCs) are popular decision-support tools for assessing and ranking the cost-effectiveness of different options in environmental policy and management. However, conventional MCC approaches have been criticized for lack of transparency and disregard for complexity; not accounting for interaction effects between measures; ignoring ancillary benefits and costs; and not considering intertemporal dynamics. In this paper, we present an approach to address these challenges using a system dynamics (SD)-based model for producing dynamic MCCs. We describe the approach by applying it to evaluate efforts to address water scarcity in a hypothetical, but representative, Swedish city. Our results show that the approach effectively addresses all four documented limitations of conventional MCC methods. They also show that combining MCCs with behaviorover-time graphs and causal-loop diagrams can lead to new policy insights and support a more inclusive decisionmaking process.

Keywords

Marginal cost curve; Water; System dynamics; Simulation; Cost-effectiveness

Published in

Journal of Environmental Management
2024, Volume: 368, article number: 122004

SLU Authors

• Nicolaidis, Andreas

  • Department of Biosystems and Technology, Swedish University of Agricultural Sciences
    
  • RISE Research Institutes of Sweden
  • Stockholm University

• Tufvesson, Linda

  • Department of Biosystems and Technology, Swedish University of Agricultural Sciences
    

• Prade, Thomas

  • Department of Biosystems and Technology, Swedish University of Agricultural Sciences
    

UKÄ Subject classification

Environmental Management


Publication identifier

DOI: https://doi.org/10.1016/j.jenvman.2024.122004

Permanent link to this page (URI)

https://res.slu.se/id/publ/131388