Desalinate or divert? Coastal non-market values as a decision tool for an integrated water management policy: The case of the Jordan River basin Nir Becker a, * , Doron Lavee a , Tchai Tavor b a Department of Economics and Management, Tel-Hai College, Upper Galilee, 12210 Israel b Department of Economics and Management, Yezreel Valley College, 19300 Israel article info Article history: Available online 20 April 2012 JEL classification: Q25 Q28 Q51 abstract This paper deals with a cost effective analysis of two options to increase the water supply in Israel. The first policy is to divert 300 Million Cubic Meters (MCM) of water from the Sea of Galilee (SOG) to the central part of Israel. This policy is the existing one. The second policy is to replace this diversion with desalinated water plants that will be built on the Mediterranean Coast (MC). These two options carry both market and non-market consequences. The first policy has a negative effect on the SOG itself due to the lower lake level. It also carries some negative consequences on the Jordan River (JR) and the Dead Sea (DS) which are located downstream. The second policy involves water production at a higher cost and has negative external effects of scarce coastal land usage and high energy consumption. A Payment Card (PC) Contingent Valuation (CV) survey was performed at the four sites (the SOG, the DS, the JR and the MS). We show that when one takes these non-use values into account, the preferred solution will shift from the usage of the SOG to the desalination policy. Ó 2012 Elsevier Ltd. All rights reserved. 1. Introduction Water resources are essential for household, farming and industrial uses. Projected demand, especially in the household sector, will worsen the existing water problems worldwide (Afgan et al., 1998). Therefore, water use should be planned in a rational way in order to account for all uses and allocate water where the marginal contribution is the highest. This should be done by taking into account both market as well as non-market values of the water resources (Mitchell and Carson, 1989; Loomis, 2005). After counting out approximately 99% of the available water on earth (too saline or stored in icebergs), even the remaining 1% is not equally distributed. Therefore, while observing high rainfall areas, we also observe semi-arid as well as arid regions. Desalination is one of the proposed solutions to alleviate the increasing demand vs. supply gap in such semi-arid and arid regions. The Water sector in Israel is no exception and suffers from an increasing gap of fresh water. The climate in Israel varies according to location but it is generally defined as a semi-arid region. Approxi- mately 70% of the rainfall evaporates, another 25% will infiltrate into the aquifers and the remaining 5% will flow into the rivers. Israel’s water resources have been relying on the two major underground aquifers as well as the transfer of water from the SOG. This is accomplished through the Water Carrier which transfers an average of 300 MCM annually. Since the SOG is the only fresh water lake in Israel, it has several values ranging from recreational to cultural and sentimental values. Decreased water table due to water transfer to the central part of Israel has long been claimed a major concern from a touristic and heritage point of view. In addition, water transfer is actually achieved by damming the water outflow from the SOG through the JR into the DS. It has been claimed that the major reason for the reduction of size of the DS is due to the damming of the JR (Becker and Katz, 2006). In contrast to using the water of the SOG, we can desalinate 300 MCM from the Mediterranean Sea. Desalination has two drawbacks. The first is that, it is more expensive than using fresh water (either from underground aquifers or from the SOG) by approximately 100%. The second drawback is that it carries along with it negative external effects, one of which is capturing limited coastal areas as well as the usage of energy. In order to decide on the better alternative we are going to use an integrated approach which measures the cost of one unit of water saved or produced (including both market and non-market values). We can summarize the pros and cons of both alternatives in Table 1 below. As can be seen in Table 1 , the first parameter is a market value parameter, while the other parameters are non-market values. Analyzing the two alternatives will capture the economic values of the Mediterranean Coast, the SOG and the JR combined together. * Corresponding author. E-mail address: nbecker@telhai.ac.il (N. Becker). Contents lists available at SciVerse ScienceDirect Ocean & Coastal Management journal homepage: www.elsevier.com/locate/ocecoaman 0964-5691/$ e see front matter Ó 2012 Elsevier Ltd. All rights reserved. doi:10.1016/j.ocecoaman.2012.04.008 Ocean & Coastal Management 64 (2012) 27e36