The impact of water conservation regulations on mining firms : a stochastic control approach
Large water demands by the mining industry are of increasing concern around the world. The cost of a specific water management regulation is studied for an oil sands mining operation in Canada, where restrictions on water withdrawals vary with fluctuations in the river. A stochastic optimal control problem is formulated for a firm choosing production, water use, and the timing to build a water storage facility, under conditions of uncertain oil prices and uncertain water withdrawal limits. As no closed form solution is available, a stochastic dynamic programming approach is implemented to determine the difference in value and optimal controls for the oil-producing asset, with and without water restrictions. The cost of the restrictions is estimated to be quite small given historical river flow conditions, while cost is shown to increase under drier conditions. A long run marginal cost curve is developed showing the cost of increasing restrictions given expectations about future river conditions and oil prices
In: Yichun Huang and Margaret Insley. “The impact of water conservation regulations on mining firms: A stochastic control approach”, Water Resources and Economics, August 2021, Accepted paper, https://doi.org/10.1016/j.wre.2021.100185
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 30, 2021 erstellt
Other identifiers:
10.2139/ssrn.3643430 [DOI]
Classification:
Q30 - Nonrenewable Resources and Conservation. General ; Q40 - Energy. General ; C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; C63 - Computational Techniques