Economic and Environmental Policy Analysis of the Flumen‐Monegros Irrigation System in Huesca, Spain

Abstract

This article describes a behavioral model of the Flumen‐Monegros irrigation area (Spain) and presents the results from the model simulation under various policy scenarios. The model combines agronomic, economic and policy information in a framework built using linear programming and crop growth simulation techniques. An important feature of the model is the classification of crop acreage in various types of soils which have different productive potential. The objective function maximizes net margins of crops and includes direct payments of the Common Agricultural Policy (CAP). The crop activities covered in the model are the main crops cultivated in the area (fallow, wheat, barley, corn, sunflower, alfalfa, rice, other crops, and CAP set‐aside). To validate the model, the results on cropland utilization obtained from the model have been compared with actual cropland utilization, concluding that the model closely approximates the actual data. The model is used to characterize the behavior of the irrigation area under three scenarios which reflect likely changes in agricultural and environmental policies: removal of direct payments, increase in water prices, and reduction of fertilizer use. The results show the large impact of these three scenarios on farmers' production decisions: the elimination of direct payment reduces net margin almost by half; prices corresponding to full recovery of water costs reduce significantly the cultivated acreage; and the reduction in fertilizer use causes a fall of 23 percent in net margins.