Economic policies for sustainable water use in Thailand

Abstract

This paper has been prepared as part of the ongoing CREED project, Macro Economic Policies and the Environment in Thailand. The objective of the paper is to illustrate how the Social Accounting Matrix of Thailand may be extended to incorporate water resources and give examples of what the supply and demand functions for water would look like. The framework is based upon an integrated approach to demand and supply management of water resources and its implications for water pricing policies. The discussion concentrates on modifications and extensions of the social accounting matrix and on demand and supply equations for water that reflect the true scarcity of water for different uses and from different sources. There is an attempt, at the conceptual level, to introduce the user cost of water in the accounting matrix, thereby enabling a link between Computable General Equilibrium (CGE) models and user costs. Incorporation of the modified social accounting matrix and demand and supply equations for different water resources into the general equilibrium model would be a follow up of this exercise, to be undertaken at a later stage.