Environmental Economics Seminar Series｜ Katrina Jessoe, UC Davis

Title: Industry Impacts of Pricing Externalities: Groundwater Pricing and Agricultural Land Use

Speaker：Katrina Jessoe, UC Davis

Time： 9: 00 – 10:30 (Beijing Time), 26 May, 2021

Mode：Online   

About the speaker

Katrina Jessoe is an associate professor in the Department of Agricultural and Resource Economics at UC Davis, where she specializes in environmental and energy economics. Much of her research centers on the design and evaluation of pricing and conservation policies in the water and electricity sectors. In her research, she often collaborates with electric and water utilities, as well as state agencies. Some recent and ongoing projects include the estimation of the price elasticity of demand for agricultural groundwater and land use, the effects of drought on drinking water in disadvantaged communities, and a RCT to understand the effects of default options in commercial energy efficiency. She received a BA from Princeton University in 2002 and a PhD in Environmental and Resource Economics from Yale University in 2009.

Abstract

Groundwater externalities pose a critical threat to the future availability of water supplies. However, perceived long-run industry costs remain an impediment to regulation. This paper analyzes the industry impacts of a volumetric pricing program that was implemented to address water quality and quantity externalities arising from groundwater irrigation. We use panel data on farm-level land and groundwater use to identify the short and long-run effects of a pollution tax on groundwater use, crop choice, land fallowing, and land conversion. We find that farmers respond to a 21% price increase through a 17-22% decrease in input use, where the reduction in water use grows by 40% between the first and fifth year of the tax. In the longer-run, farmers also respond by retiring fallowed land and to a lesser extent irrigated acreage, margins that our short-run estimates do not detect. Groundwater pricing will reduce water use and contract industry size, but may have more limited impacts on agricultural output.

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