Sinking peatlands: Optimal control of subsidence

Land subsidence threatens the living conditions of about 1.2 billion people worldwide in deltaic regions characterized by soft top soil. Economic activity in these areas requires lowering groundwater levels to keep the land sufficiently dry, which leaves future generations worse off by accelerating subsidence and increasing future costs. This paper provides a model that recognizes this trade‐off and yields analytical expressions for the groundwater level paths that optimally manage the dynamics of subsidence in agricultural lands. Applying our model to the paradigm case of Dutch peatlands, we find that accounting for dynamic efficiency increases welfare by more than 2.5% compared to a myopic benchmark, and these gains can be about 10% within reasonable parameter ranges. Our results support current proposals to reduce subsidence, even without considering additional social benefits from avoided carbon dioxide emissions.