Abstract
Agricultural economics Water Programming Models (WPM) has found that irrigators in water scarce areas have a rather inelastic response to water prices, making water pricing cost-ineffective towards water saving. We hypothesize that the predicted water saving performance of pricing is significantly underestimated by issues of model structure, due to the exclusion of deficit irrigation from the set of decision variables available to agents in conventional WPM. To test our hypothesis, we develop a model that integrates a continuous crop-water production function into a positive multi-attribute WPM, which allows us to assess agents’ adaptive responses to pricing through deficit irrigation. The model is illustrated with an application to the El Salobral-Los Llanos irrigated area in Spain. Our results show that incorporating deficit irrigation as an adaptation option makes the water demand curve significantly more elastic as compared to an alternative model setting where deficit irrigation is precluded. We conclude that ignoring deficit irrigation can lead to a significant underestimation of the cost-effectiveness of water pricing towards water saving.
Highlights
Reconciling growing freshwater demand with finite supply is one of the great policy challenges of our time (WEF, 2020c)
This paper integrates a continuous crop-water production function into a Positive Multi-Attribute Utility Pro gramming (PMAUP) model to assess the influence of intensive margin ad justments on the expected water saving and economic performance of water pricing
The model is calibrated for an agricultural area in a water scarce agricultural area in southeastern Spain (El Salobral-Los Llanos in the Júcar River Basin), so to factor in climatic, soil and other local fac tors conditioning the crop yield-water input relationship
Summary
Reconciling growing freshwater demand with finite supply is one of the great policy challenges of our time (WEF, 2020c). Given that agri culture represents 70% of global water withdrawals, which contribute to 6.4% of the world’s Gross Domestic Product (FAO, 2021a; World Bank, 2020d), governments are increasingly constrained to adopt agricultural water saving policies to reallocate irrigation water towards higher value-added economic uses, households and the environment. One such policy are water charges, often referred to as pricing, which are defined as an administrative levy imposed on irrigators to recover the costs of water use.. On top of agricultural water demand, water bodies within the SLD supply water to a population of circa 5000 inhabitants (about 10% of the total demand) (Pena-Haro et al, 2014)
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