Abstract
The conflict between increasing water demand and limited water resources has become a serious threat to oasis regions in China. Solutions to water scarcity have to curb overall water demands, especially reducing agricultural water use. Price control and quantitative control are the two most commonly applied policy instruments for water demand management. This paper used a bio-economic model (BEM) to examine the shadow price of water resources and to investigate farmers’ response to water demand management policies in water scarce regions based on a study in the Heihe River Basin in northwest China. The results indicate that farmers are not very responsive to changes in water price, because it is currently far below the shadow price of water resources in most irrigation zones. A reduction of agricultural water demand could occur only with a large rise in the water price. In comparison, a quantitative control measure is more effective at reducing water use. Concerning the effects on farm income, a price control will cost much more than a quantitative control to save the same volume of water. Hence, a water quota is a more suitable choice for the purpose of reducing agricultural water use, while minimizing farm income loss in the region of this case study.
Highlights
The conflict between increasing water demand with population growth, economic development and limited water resources has become the most serious threat to oasis regions in China
In order to alleviate water scarcity in downstream regions, water reallocation from upstream to downstream regions has been implemented in some river basins in oasis regions, notably the Heihe River Basin and the Shiyang River Basin in northwest China
The solution to water scarcity and ecological degradation in oasis regions is to stop the growth in water demands, especially reducing agricultural water use
Summary
The conflict between increasing water demand with population growth, economic development and limited water resources has become the most serious threat to oasis regions in China. This study aims to assess the impacts of the price control and quota mechanisms on agricultural water use and associated changes in farm income. It compares the effectiveness of these two policy instruments in water scarce regions based on a case study of the Heihe River Basin in northwest China. By quantitatively determining the shadow price and the effects of the two policy measures with consideration of spatial variations, this study will shed light on agricultural water management in water scarce regions and provide a reference for implementing compensation schemes to alleviate the negative impacts on farm income and food security
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