Urban freshwater needs and spatial cost externalities for coastal aquifers: a theoretical approach

Saltwater intrusion in coastal aquifers is one of the main causes of groundwater quality degradation. These intrusions are often due to excessive withdrawals in sensitive parts of coastal aquifers. The scope of this paper is to identify specific problems set by optimal management of such a resource. To this end, we develop a simple spatial model describing a coastal aquifer under seawater intrusion. We show that water mining creates a specific cost externality between population spread over the aquifer. We then characterize the system of taxes that must be used to implement the optimum in a decentralized economy.