The Neglected Water Rebound Effect of Income and Employment Growth

Water Resources Management - The water footprint assessment, particularly for the agricultural sector, is often a valuable input to water policy formation globally. Efforts on reducing it focus on...     

Using Real Options Theory to Irrigation Dam Investment Analysis: An Application of Binomial Option Pricing Model

This paper demonstrates the utility of the real options approach to irrigation dam investment analysis. The main objective is to show how to calculate the option values of selected options that may be available to managers of irrigation dam investments. The paper provides an empirical application, which compares an irrigation dam investment using the static Net Present Value (NPV) model and the real options approach and shows how it can be adopted to model uncertainty and managerial flexibility in dam management. Four management options are used for the real options approach: an option to delay the investment, an option to enlarge the dam, an option to abandon the dam, and multiple options that evaluated all three options together. All options were evaluated using the binomial option pricing model, where water values are assumed to follow a multiplicative binomial process. The analysis show that although the traditional NPV approach accepted the investment as profitable the option approach provided better results showing that all three options were highly valuable if exercised. When real options are considered, the traditional NPV model for assessing the profitability of a dam investment may fail to provide an adequate decision-making framework because it does not properly value management’s ability to adjust to shocks in the economy, as well as risks and uncertainty.     

A Socioeconomic Valuation of an Irrigation System Project Based on Real Option Analysis Approach

Traditional net present value methods used to evaluate potential projects make no allowance for flexibility and assume a static environment. The concept of real options has extended into irrigation systems to model design flexibility in the realistically uncertain environment. In particular, this article extends the evaluation techniques of an irrigation dam by combining the real options approach along with the traditional on (Discount Cash Flow). However, whereas financial options are well-defined traded contracts, real options in irrigation systems are a priori undefined, complex and interdependent. Moreover, irrigation systems involve many more options than designers could consider. Therefore designers need to identify the real options most likely to offer good flexibility and the most value. This paper demonstrates the ease that irrigation systems economic analysis with risk analysis and real options can be valued by simulation software that is readily available to owners of personal computers. Sequentially, Discount Cash Flow analysis accompanied with real options approach facilitates decision making and encourages more sophisticated and realistic economic analysis of irrigation systems.     

Arbitrary Pole Placement by Constant Output Feedback for Linear Time Invariant Systems

In this paper, the pole placement problem by constant output feedback for linear time invariant systems is investigated. In particular, is proven that, for the class of linear time invariant systems with m inputs, p outputs, and McMillan degree n, the condition (m + p) > n is necessary for the solution of the arbitrary pole placement problem by constant output feedback.     

Reducing health impacts of biomass burning for cooking—the need for cookstove performance testing

Biomass is a renewable energy source that is routinely used for cooking in the developing world, especially in rural areas. The World Health Organization estimates that about 2.5 billion people globally rely on biomass, such as wood, agricultural waste and animal dung to meet their energy needs for cooking utilising traditional low-efficiency cookstoves. However, certain human health risks are associated with the inhalation of off-gases resulting from the indoor use of biomass for cooking, especially for women and children who spend more of their time at home. On the other hand, use of energy-efficient cookstoves is considered to reduce those risks. Thus, qualitative and quantitative measurements of cookstove performance are necessary in order to make different stoves and different cooking processes comparable. The aim of this paper is the presentation of the current situation regarding biomass use for cooking with emphasis placed on the developing world, the brief of the adverse health impacts of biomass burning based on the review of literature, the presentation of the merits of improved efficiency cookstoves and to highlight the need for stove performance tests. The demand of different types of biomass is not likely to change in the near future in the developing world since biomass is readily available and cheap. Thus, the efforts to improve household air quality must concentrate on improving cookstoves efficiency and ventilation of the flue gases outdoors. Programmes for the improvement of the cookstoves efficiency in the developing world should be part of the development agenda.