Combining flexible regulatory and economic instruments for agriculture water demand control under climate change in Beauce

Abstract

Abstract Agricultural water management is becoming a critical issue in many parts of the world and cost-effective water policies are required to control water use. We examine the case study of irrigated agriculture in Beauce, France (9750 km2, Europe's largest cereal producing region). We explore the mechanisms for water abstraction control involving a combination of regulatory and economic instruments. The analysis is conducted with a hydro-economic model that includes a calibrated economic model and a semi-distributed calibrated hydrogeological model. First, we analyse the system currently used to manage groundwater abstraction. It includes a flexible quota system, revised annually as a function of the state of the groundwater, combined with a tax. This dual system performs better than a single instrument because of regional hydrogeological and economic specificities, as well as the fact that it limits costs for farming. We then investigate the impact of alternative combinations of instruments. Our findings show that the most cost-effective and robust way to improve the groundwater state is to increase the economic component (a flexible tax) in association with a flexible quota system.