Sustaining water availability at current prices in the face of growing demand and declining resources is not possible, and scarcity is further exacerbated by falling recharge levels due to climate change, urbanization, and watershed depreciation. We discuss an integrated approach to water-resource development based on principles of sustainability science. In addition to demand management such as pricing, we consider supply-side substitutes such as desalination and wastewater recycling. The importance of integrating demand- and supply-side approaches is especially evident in the case of watershed conservation as climate adaptation. Watershed conservation reduces scarcity by improving groundwater recharge. Yet, incorrect pricing can waste those potential gains. We discuss a joint management strategy, wherein block prices for groundwater consumption and co-determined prices for watershed conservation incentivize and finance efficient profiles of both.
Published version: Roumasset, J., Wada, C.A., 2015. Integrating Demand-Management with Development of Supply-Side Substitutes. In: Burnett, K., Howitt, R., Roumasset, J.A., Wada, C.A. (Eds.), Routledge Handbook of Water Economics and Institutions, pp. 50-60, Oxford and New York: Routledge.