Paper2 - Introduction: The value of water in the desert...

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Unformatted text preview: Introduction: The value of water in the desert southwest should be determined by its relative scarcity. Current water rates in the city of Albuquerque are approximately 2/100ths of a cent per gallon. This implies that residents are paying $1.50 per unit of water consumed. 1 The current per capita water use in the city is around 142 gallons per day. Recent estimates suggest that the Santa Fe group aquifer is being pumped at an unsustainable rate. In order to reduce pressure on the aquifer, the city plans on using surface-water to supplement groundwater supplies; with the objective of maintaining a drought reserve in the aquifer. To aid in reaching this goal the city has adopted a long-run water conservation policy designed to reduce the amount of water used by residents. The efficacy of such a policy will be dependent upon accurately estimating the demand for water in Albuquerque. An intrinsic component of this process will involve controlling for seasonal impacts. A large and diverse literature has developed regarding issues of seasonality. The Box-Jenkins approach to modeling seasonal data is by and far the most popular method employed by economists. 2 In many cases, the identification of seasonal impacts is made more difficult because they often interact with non-seasonal processes. The use of model based seasonal adjustment is appropriate when dealing with such an interaction (Moosa and Lenten 2000). Regardless of the method used, identifying the nature of, and controlling for, seasonality is important if accurate water demand estimates are to be made. This paper employs the Box-Jenkins strategy for appropriate model selection. However, a variation on this approach was be used in order to control for seasonality in 1 1 unit of water is 748 gallons. 2 Box, G. and Jenkins, G. Time Series Analysis, Forecasting, and Control . Holden Day, San Francisco 1976. 1 commercial water consumption data. Preliminary results suggest that a seasonally adjusted ARIMA (1, 0, 1) model provide adequate estimates of commercial water usage. Section I: The Data Using the City of Albuquerque Water Utility Divisions Waterwise database, 84 monthly observations of commercial water usage were obtained for the period January 1994 to December 2000. Average monthly temperature data were obtained from the NOAA website. Although the model developed in this paper is univariate, the temperature data was obtained in order to highlight the seasonal nature of commercial water consumption. Figure 1 illustrates commercial water consumption over the observed time period. It becomes readily apparent that the variations in commercial water usage display a seasonal trend. Because of this variability, the water usage data were logged....
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Paper2 - Introduction: The value of water in the desert...

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