Pricing model of agricultural water rights trading in water-shortage region, China.

Abstract

Water rights trading is an effective way to promote the redistribution of agricultural water saving within and among water-shortage regions. Reasonable transfer price can not only improve the income of farmers and irrigation areas, but also improve the efficiency of agricultural water use. However, the trading across industries or regions will diminish the ecosystem service value of arable land, and negatively impacts irrigation areas. This paper investigates the pricing model of agricultural water transaction, which combines water trading with ecological compensation to balance the benefits of both parties. A bi-level programming model of agricultural water trading was established for optimizing the prices and corresponding volumes of transaction across users in water markets. The context of this study is the Inner Mongolia Autonomous Region, which is a typical water-shortage region in China. Results show that adjusting price variables through the model, including transaction price and ecological compensation, led to an optimization of transaction volumes across users. The economic benefits also are optimized between the irrigation districts and industrial water users. Pricing model of water trading is also improved with ecological compensation. This study ultimately provides a useful reference for policy-makers in water-shortage regions.