Improving Allocative Efficiency of Scarce Water in Southern Alberta

Abstract

Using a positive mathematical programming (PMP) model with improved ‘wide-scope’ calibration, this study demonstrates how allocative efficiency of scarce water could be improved in the Bow- and Oldman River Sub Basins (BRSB and ORSB) of Southern Alberta, where 12 irrigation districts, two cities and three major industrial/commercial users withdraw bulk of the surface water for irrigation, municipal, industrial and commercial needs. Earlier studies ironically neglected the larger ORSB even though it is subject to the same water licensing and regulation policies as the BRSB. The inclusion of nine irrigation districts and non-irrigation users of ORSB enables this model to estimate allocative efficiency gains in a more comprehensive manner than before. Results indicate that ORSB has a relatively less elastic water demand curve primarily due to its more reliance on irrigation and less water saving/supply options. It is also less responsive to allocations with alternative policies as reflected in net returns, land use and cropping pattern changes due to its less elastic water demand.