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
    

Global goals (SDG)

SDG8 Decent work and economic growth
SDG9 Industry, innovation and infrastructure
SDG12 Responsible consumption and production

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