ABSTRACT
This chapter demonstrates application of the dynamic and general equilibrium model to measure the shadow rental values of water in the Aral Sea. It introduces a tool for mainstreaming ecosystem service valuation that helps understand the impact of policy on natural asset wealth, and illustrates how to use the tool and interpret the results. The focus of the chapter is two regions in Kazakhstan:; South Kazakhstan and Kyzylorda. The authors analyse three policy options: the status quo, trading water use rights and improving irrigation efficiency. The chapter demonstrates how to use land and water asset (stock) values to evaluate the impact of policy. Natural resource stock values provide what appears to be a natural index to use to compare the impact of policy on natural resource (or ecosystem) wealth. The model introduced in this chapter examines and predicts: (1) current and future levels of gross domestic product (GDP) across seven Kazakh subsectors, (2) the contribution of water and land to agricultural value-added (loosely viewed as GDP) along the Syr Darya, and agricultural value-added in the rest of Kazakhstan, and (3) the stock (or wealth) value of land and water in Kazakhstan. The authors suggest that trading water use rights could increase the wealth/well-being of those controlling the use rights of land and water by 9%. Irrigation improvements, however, yield smaller gains (less than 1%). The study also illustrates how policy can affect specific natural asset values in different ways. For example, trading water use rights led to a decrease in the stock (wealth) value of water, but an increase in the stock value of land. Improving irrigation efficiency tends to increase the wealth values of both land and water.
