Research Highlights

I highlight some of my research below. For a full list of my papers and publications, see my CV.

Groundwater under open access: A structural model of the dynamic common pool extraction game

Authors: Louis Sears, C.-Y. Cynthia Lin Lawell, and M. Todd Walter

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Groundwater is a critical resource whose common pool and partially nonrenewable nature poses a challenge to sustainable management. We analyze groundwater extraction decisions under an open access regime by estimating a structural econometric model of the dynamic game among agricultural, recreational, and municipal groundwater users in the Beaumont Basin in Southern California during a period of open access. We use our parameter estimates to simulate a counterfactual scenario of continued open access and compare our open access counterfactual with the actual extraction decisions of players after the institution of quantified property rights. Results show that groundwater provides large but concentrated economic benefits to users in the Beaumont Basin. While imposing property rights on the previously open-access groundwater resource did not deliver significant economic benefits on groundwater users, the joint effect of the property rights system and the introduction of artificial recharge of imported water prevented a significant decline in the basin’s stock of groundwater. Furthermore, by preventing a shift in groundwater extraction to wells outside of Beaumont, these policies also had a positive spillover effect on the level of groundwater stocks at neighboring basins. Finally, we find that municipal water districts tend to value the interests of their customers more than water sale profits. This creates significant welfare loss, suggesting that the potential gains from sustainable management are large.

Interjurisdictional Spatial Externalities in Groundwater Management

Authors: Louis Sears, C.-Y. Cynthia Lin Lawell, David Lim, Gerald Torres, and M. Todd Walter

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When designing groundwater management policies, it is important to account for spatial externalities that result from the common pool nature of the resource. Spatial externalities may arise not only among individual groundwater users sharing the same aquifer, but also among groundwater managers whose separate jurisdictions do not each cover an entire aquifer. In this paper, we develop a model of interjurisdictional spatial externalities in groundwater management. We find that if groundwater managers each manage only a subset of the plots of land that over- lie an aquifer, and if there is spatial movement of water between patches that are managed by different groundwater managers, then groundwater will be over-extracted relative to the socially optimal coordinated solution. We apply our model to a detailed spatial data set to analyze and estimate interjurisdictional spatial externalities in groundwater management in California. Our results suggest that fragmented regulation may lead to inefficient pumping in the face of uninternalized externalities, and provide empirical evidence for the presence of interjurisdictional spatial externalities that should be accounted for in the optimal design of groundwater management in California.

Adjudicated Groundwater Property Rights: A Structural Model of the Dynamic Game Among Groundwater Users in California

Authors: Louis Sears, C.-Y. Cynthia Lin Lawell, Gerald Torres, and M. Todd Walter

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California’s farmers and cities rely on groundwater to supply water for irrigation, residential users, and recreation. During its history groundwater has operated as an open access resource with no quantified limits on extraction, which has allowed several basins in the state to become critically overdrafted. A commonly proposed solution to this problem is the institution of private property rights to groundwater, or quantified limits on extraction for extractors. In this paper we model a dynamic game in which players extract groundwater and import outside water to a group of small groundwater basins. We estimate parameters in the payoff functions by taking advantage of variation in the extraction and water import decisions across a group of municipal water companies, farmers, and other users in the Beaumont Basin in Southern California over a 10 year period following the institution of quantified property rights. We use these parameters to estimate the welfare impact of the property rights regime, and to understand the factors either amplified or diminished the impact of the program.

Spatial Groundwater Management: A Dynamic Game Framework and Application to California

Authors: Louis Sears, C.-Y. Cynthia Lin Lawell, and David Lim

Water Economics and Policy, Vol. 05, No. 01, September 2018.

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Coverage of the paper in the Cornell Chronicle

The design of policies and institutions to promote the sustainable management of groundwater resources for use in agriculture is both a long-term and short-term challenge in California and globally. When designing groundwater management policies, it is important to account for spatial externalities that may lead groundwater users to behave non-cooperatively. Spatial externalities arise because groundwater users face a common pool resource problem: because farmers are sharing the aquifer with other farmers, other farmers’ pumping affects their extraction cost and the amount of water they have available to pump. In this paper, we present a dynamic game framework for analyzing spatial groundwater management. In particular, we characterize the Markov perfect equilibrium resulting from non-cooperative behavior, and compare it with the socially optimal coordinated solution. In order to analyze the benefits from internalizing spatial externalities in California, we calibrate our dynamic game framework to California, and conduct a numerical analysis to calculate the deadweight loss arising from non-cooperative behavior. Results show that the inefficiencies arising from spatial externalities are driven by higher returns on crops, electricity input prices, whether the crop is an annual crop versus a perennial, the level of the groundwater stock, the climate of the region, and the adjustment costs of fallowing production. We find that the benefits from coordinated management in California are particularly high when crop prices are high.

How Large Are Global Fossil Fuel Subsidies?

Authors: David Coady, Ian Parry, Louis Sears, and Baoping Shang

World Development, Vol. 91, March 2017.

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Coverage of the paper in the New York Times, Nature, and by the Energy Institute at Haas.

This paper estimates fossil fuel subsidies and the economic and environmental benefits from reforming them, focusing mostly on a broad notion of subsidies arising when consumer prices are below supply costs plus environmental costs and general consumption taxes. Estimated subsidies are $4.9 trillion worldwide in 2013 and $5.3 trillion in 2015 (6.5% of global GDP in both years). Undercharging for global warming accounts for 22% of the subsidy in 2013, air pollution 46%, broader vehicle externalities 13%, supply costs 11%, and general consumer taxes 8%. China was the biggest subsidizer in 2013 ($1.8 trillion), followed by the United States ($0.6 trillion), and Russia, the European Union, and India (each with about $0.3 trillion). Eliminating subsidies would have reduced global carbon emissions in 2013 by 21% and fossil fuel air pollution deaths 55%, while raising revenue of 4%, and social welfare by 2.2%, of global GDP.