Optimality Conditions of the Water Infrastructure Model

Abstract

The optimality conditions are formulated as non-profit conditions. They are expressed as actual and inter-temporal marginal costs for human labour and energy inputs for the production sector and for the water and wastewater sectors. These marginal costs depend on the development path of the consumption goods, which are accompanied by structural changes that are caused by innovation effects within the different sectors. The reduction of water losses from the water distribution system, for example, leads to a decrease in the required water quantities. The reduction of wastewater leakages, on the other hand, results in an increase in the quantities of wastewater to be treated. These changes in the actual and inter-temporal marginal costs for wastewater treatment can be interpreted as beneficial increases of reduced wastewater leakages, which generate social costs in the form of health risks and damages to the water infrastructure. As a result, the actual and inter-temporal marginal costs for using non-renewable resources for production are combined with those costs for water and its infrastructure.