Increasing Water Prices Research Articles

Water resource policies and management in Korea

Although the annual precipitation in Korea is 30% higher than the world average, increased population, urbanization and industrialization, as well as improved living standard have caused problems such as water shortage, flood damage, and water pollution. Additional multi-purpose dams and infra-structures are supposed to be constructed by 2011. On the other hand, water demand control is also suggested. This includes water saving by increasing water price, reuse of treated water, development of new water resources and rainfall management. Beside the Comprehensive Measures on the Provision of Clean Water, Comprehensive Water Quality Management Measures for the Four Major Rivers and Act on Watershed Management and Community Support are the main policies to be implemented for improving the quality of major rivers. Recently, Total Water Pollution Load management is voluntarily pursued for sustainable management of water resources.

A Trade—off Analysis for the Use of Different Water Sources for Irrigation (The Case of Southern Shounah in the Jordan Valley)

Jordan is one of the poorest countries in terms of water resources. Hence, the government constantly searches for the optimal use of water. This is especially important in agriculture, which accounts for about 71% of water consumption. In the main agricultural production zone, the Jordan Valley, the Jordan Valley Authority (JVA) has applied different water policies. In particular, in recent years, the JVA effectively prohibited production in the spring season by greatly reducing the water supplied to agriculture. The objective of this study is an analysis of trade—offs among the use of different water resources in Southern Shounah in the Jordan Valley and to estimate the optimal allocation of water in order to investigate the efficiency of JVA policies. In light of the findings outlined below, we have concluded that the spring-season policy was not effective since the main crop produced in the Southern Shounah is banana. Water consumption in the region remained as it was before applying this policy: 32.48 million cubic meters (MCM). Because banana production depends on groundwater resources, which are only owned by a small number of rich farmers, we found that, if banana planting were prohibited, water savings would reach 13.08 MCM but would be accompanied by a reduction in net income of 59%. Similarly, we find that saving water by increasing water prices would be an expensive policy if the price raised were that of groundwater used for bananas. The study suggests changing the current cropping pattern to one that can come close to the highest agricultural income of US$33.85 million, while reducing water consumption by about 13.0 MCM.

Impact of Increased Access and Price on Household Water Use in Urban Bolivia

Using the 1994 Bolivian Integrated Household Survey, this study analyzes the equity implications of urban water sector reform including both increased water prices and increased access to piped water. Household water expenditures are examined by income decile, and low-income households are found to spend a higher percentage of income on water than high-income households. However, households purchasing from private water vendors could benefit from obtaining piped water, because regression analysis shows that on average, these households spend more on water than those with piped water inside their buildings or yards. This differential was the greatest in the city of Cochabamba, which also had the largest percentage of households purchasing from private water vendors. To understand the equity impact of water reform, the effects on both prereform users of piped water and those without access to piped water must be considered.

Evaluating options for irrigated dairy farm systems in northern Victoria when irrigation water availability decreases and price increases

A case study and spreadsheet modelling approach was used to examine options for two dairy farms in northern Victoria that would enable them to maintain profit, or ameliorate a decline in profit, under changes in irrigation water availability and price. Farm 1 obtained 43% of estimated metabolisable energy requirements for the milking herd from supplements, had a predominantly spring-calving herd, and used mainly owner/operator labour. Farm 2 obtained 54% of estimated metabolisable energy requirements for the milking herd from supplementary feeds, had a split-calving herd, and used owner/operator and employed labour. When long-term allocation of irrigation water declined from 160% to 100% water right (WR), the ‘base farm’ system for both farms was maintained by purchasing temporary water. At a water price of $35/ML and allocation of 160% WR, the operating profit of Farms 1 and 2 was AU$52 000 and $315 000, respectively. This declined to $30 000 and $253 000 at a water availability of 100% WR. In response to changes in water availability and/or price, Farm 1 could purchase more supplements (a mix of grain and fodder) or replace some irrigated perennial pasture with irrigated annual pasture. Purchasing more supplements was not as profitable as buying irrigation water on the temporary market in the long term. At an irrigation water allocation of 130% WR, a water price of $35/ML and assumed response to extra supplement of 1.4 L milk/kg, operating profit was $24 000 compared with $44 000 when the base farm system was maintained by purchasing temporary water. At an allocation of 100% WR, increased supplement use was not profitable as a long-term option, unless exceptionally high responses in milk production to extra supplement were achieved. For this farm, converting an area of perennial pasture to annual pasture slightly increased operating profit compared with maintaining the base farm system when water availability decreased or price increased. The options analysed for Farm 2 involved converting some of the irrigated annual pasture to perennial pasture and, associated with this, additional options of reducing the area of maize grown or reducing the amount of nitrogen fertiliser applied to perennial pasture. Farm 2 had already implemented significant farm system changes to deal with reduced irrigation water availability in recent years, including increased supplementary feeding and growing annual pastures and maize. Hence, the options analysed for Farm 2 focused more on whether less significant changes would be more profitable. Converting 16 ha of annual pasture to perennial pasture, and growing 2.2 ha less maize appeared to be marginally more profitable than both the base farm system and the option of reducing nitrogen fertiliser use on the perennial pasture (operating profit $295 000 v. $291 000 or $292 000 at a water allocation of 130% WR and price of $35/ML). Reductions in irrigation water availability or increases in water price would need to be substantial to make the option of growing more perennial pasture and less maize unattractive. While the maize and annual pasture dry matter yield per megalitre of water were higher than for perennial pasture, the costs associated with harvesting, storing and feeding maize and annual pasture meant they were unlikely to be more profitable than a productive perennial pasture.

Regional Impact of Irrigation Water Pricing in Greece under Alternative Scenarios of European Policy: A Multicriteria Analysis

Manos B., Bournaris T., Kamruzzaman M., Begum M., Anjuman A. and Papathanasiou J. (2006) Regional impact of irrigation water pricing in Greece under alternative scenarios of European policy: a multicriteria analysis, Regional Studies 40, 1–15. This study simulates the impact that various policies based upon the water price have on agricultural production and analyses the economic, social and the environmental implications of alternative irrigation water policies using a multicriteria model. For the purpose of scenario analysis, narratives and quantitative indicator values have been compiled. The results show that the increase of water price causes almost similar impacts with those observed in the status quo scenario. The results also stress that water pricing as a single instrument for controlling irrigation water use is not a satisfactory tool for significantly reducing water consumption in agriculture. Manos B., Bournaris T., Kamruzzaman M., Begum M., Anjuman A. et Papathanasiou J. (2006) L'impact régional du prix de l'eau d'irrigation en Grèce sous des optiques de politique européenne différentes: une analyse à plusieurs variables, Regional Studies 40, 1–15. Cette étude cherche à simuler l'impact que pourraient avoir sur la production agricole diverses politiques fondées sur le prix de l'eau et, à partir d'un modèle à plusieurs variables, analyser les retombées économiques, sociales et écologiques des politiques alternatives pour ce qui concerne l'eau d'irrigation. Pour analyser des scénarios, on a établi des histoires narratives et des indicateurs quantitaifs. Les résultats laissent voir que la hausse du prix de l'eau entraîne des impacts qui sont plus ou moins similaires au statu quo. Les résultats soulignent aussi que la tarification de l'eau comme le seul moyen de contrôler l'eau d'irrigation ne s'avère pas un outil satisfaisant pour réduire sensiblement la consommation de l'eau dans l'agriculture. Retombées économiques, sociales et écologiques Agriculture irriguée Modèle à plusieurs variables Analyse par le prix de l'eau Manos B., Bournaris T., Kamruzzaman M., Begum M., Anjuman A. und Papathanasiou J. (2006) Die regionalen Auswirkungen der Preise von Bewässerungswasser in Griechenland unter verschiedenen Szenarien der Europapolitik: eine Multikriterien-Analyse, Regional Studies 40, 1–15. In dieser Studie werden mit Hilfe eines Multikriterien-Modells die Auswirkungen verschiedener auf dem Wasserpreis aufbauender Politiken auf die landwirtschaftliche Produktion simuliert, und es werden die wirtschaftlichen, sozialen und Umweltauswirkungen unterschiedlicher Bewässerungswasser-Politiken analysiert. Für die Szenario-Analyse wurden Berichte und quantitative Indikatorwerte erfasst. Aus den Ergebnissen geht hervor, dass eine Erhöhung des Wasserpreises beinahe ähnliche Auswirkungen hat wie die im Status-quo-Szenario beobachteten Auswirkungen. Ebenso bekräftigen die Ergebnisse die These, dass der Wasserpreis alleine als Mittel zur Kontrolle des Bewässerungswasserkonsums nicht ausreicht, um den Wasserverbrauch in der Landwirtschaft wesentlich zu senken. Wirtschaftliche, soziale und Umweltauswirkungen Bewässerungslandwirtschaft Multikriterien-Modell Analyse von Wasserpreis-Szenarien Manos B., Bournaris T., Kamruzzaman M., Begum M., Anjuman A. y Papathanasiou J. (2006) Impacto regional del precio del agua en la irrigación en Grecia bajo diferentes casos según la política europea: un análisis de varios criterios, Regional Studies 40, 1–15. Con ayuda de un modelo de varios criterios, en este estudio simulamos el impacto que tienen en la producción agrícola las diferentes políticas sobre el precio del agua, y analizamos las repercusiones económicas, sociales y medioambientales de las políticas alternativas del agua en la irrigación. Para fines analíticos hemos recopilado valores indicativos narrativos y cuantitativos. Los resultados indican que el aumento del precio del agua causa impactos casi similares con los que observamos en el caso de status quo. Los resultados también indican que el precio del agua como método único para controlar el uso de agua en la irrigación no es una herramienta satisfactoria para reducir en gran medida el consumo del agua en la agricultura. Economía, repercusiones sociales y medioambientales Agricultura de irrigación Modelo de muchos criterios Análisis de casos sobre el precio del agua

생활용수에 대한 소비자의 지불의사 추정 및 정책적 의미

경제이론에 의하면 소비자들은 언제나 효용을 극대화하기 위한 선택에 직면한다. 이 같은 소비자의 선택은 생활용수의 가격, 공급 및 수요 등에 정보가 시장을 통해 나타나고 정책결정자들은 이를 정책 지표로 이용하게 된다. 그러나 수자원의 경우는 시장이 형성되어 있지 않기 때문에 시장에서의 그 같은 정보 획득이 제한적이다. 본 연구는 생활용수의 수질개선에 따른 소비자 지불의사를 1,000 가구를 대상으로 조사하고 이를 추정하였다. 또한 생활용수에 대한 소비행태에 대한 분석도 시도되었다. 소비자들은 현재의 물 값에서 50%의 인상에 대해서는 강한 절수 의지를 보인 반면 25% 이하의 물 값 인상에 대해서는 거의 절수 의지가 없는 것으로 나타나 현행 물 값이 절수를 유도하는 데는 낮은 수준임을 나타내고 있다. 수돗물의 수질이 향상된다는 조건으로 소비자는 매월 현행 물 값의 16%, <TEX>$1m^3$</TEX>당 약 153원을 지불할 수 있음을 보였다. 이 같은 정보를 토대로 생활용수에 대한 정책 제언을 하였다. Economic theory tell us, consumers always make a choice to maximize their utility. In the market system, consumers' choices are revealed and policy maker taking into account the aggregated consumers choice such as price, supply and demand. However, water resources as a public goods, therefore typically there is no market and does no aggregated information for residential water use. This study explore the consumers' willingness to pay for higher quality for residential water. Over 1,000 households responded for this survey and willingness to pay has been estimated. Furthermore, consumers' behaviors of residential water are examined. Consumers are willing to reduce the amount of water use with more than 50% of increasing water price, but stay almost constant with less than 25% of increasing which mean that current price level is not high enough to derive water saving. If consumers can have better quality of water, they willing to pay additional 16%, <TEX>$153\;won/m^3/month$</TEX>, more than their current price. Based on the derived information, we suggested policy direction for residential water policy.

The French model of water supply management challenged by users' empowerment

Since the early 1990s, in France, the increase in water prices and the denunciation of public–private partnerships have encouraged the state, water companies and local authorities to enhance management transparency and develop their relationships with consumer groups. The opening to user representatives is challenging the French model of water supply management. These transformations are resulting in tensions between different representations of users as consumers or citizens. Between consumer and citizen, which representation is actually emerging and how is the user's status affected? At the national level, the state and consumer groups tend to develop a pro-consumerist policy involving reflection on price levels, the efficiency of utilities and consumer information. On the other hand, companies are trying to highlight the representation of the citizen concerned about the environment and water quality. At the local level, user status varies with context. The user can be perceived either as a simple consumer or as a citizen–consumer hybrid. The examples of Grenoble and Ardèche show that consumption issues can be open to debate about public choices, investment strategies or drinking water quality. This opening up of debate depends on local authorities' competence and communication strategies, consumer groups' agendas and specific local issues (e.g. resource scarcity, corruption).

Irrigation Water Pricing in Tunisia: Issues for Management Transparency

Tunisia is facing increasing competition for water among users due to population and economic growth. Projections show that the water resources will be fully used by 2010. As a result, the opportunity cost of water has risen significantly. In order to cope with potential water shortages, the Tunisian government has undertaken a set of policies and technical measures, such as institutional reforms, improving the efficiency of water delivery network and water pricing policies reforms. It has been observed that cost estimation of water produced and delivered is not transparent. Thus any increase in water price is opposed by farmers. Data is not consistent, making the establishment of a water pricing scheme difficult. Besides, the water authority lacks accurate information on water productivity at farm level leading to asymmetric information on the side of the authorities as well as on the side of the farmers. For a successful reform of the irrigation water pricing policy two conditions have to prevail: i) integration of the accounting system of capital costs with an analytical approach and ii) assessing farmers’ willingness to pay for irrigation water. Finally, the implementation of a water rights system could be an alternative to solve the asymmetric information problem and improve the economic efficiency.

Integration of approaches to increasing water use efficiency in rice-based systems in southeast Australia

Australian rice growers are under considerable pressure to increase water use efficiency to remain profitable and avoid soil salinisation. In particular, profitability is threatened by decreasing water availability and certainty of supply and by increasing water price, as a result of environmental and National Competition Policy agendas. Field irrigation water productivity has more than doubled in the past 20 years from an average of around 0.34 g paddy rice per kg water to around 0.77 g kg −1, largely due to increased yield from the development and adoption of improved varieties and management strategies, and to a lesser degree due to the introduction of rice water use and soil suitability policies. Future increases in rice field water productivity will come from greater yields through breeding for increased cold tolerance, precision agriculture and improved crop establishment, and from reduced water use due to reduced duration of ponding. A key challenge of the next decade will be to increase cold tolerance to the extent that deep water ponding for low temperature protection is no longer required, possibly allowing a complete shift away from ponded culture and reducing irrigation water requirement. While increasing the water productivity of rice is important, water productivity and profitability of the entire cropping system is of ultimate importance. Growing winter crops after rice and permanent bed systems offer potential benefits of increased productivity of crops traditionally grown in rotation with rice and increased cropping diversity and flexibility. Irrigation water productivity is also being improved through on-farm and regional technologies such as on-farm recycling systems and automatic data acquisition and control systems in irrigation supply systems. To increase water use efficiency and achieve sustainability of rice-based farming systems in Australia, irrigation communities are implementing a range of on-farm and regional technologies and policies. An integrated approach is required to evaluate options, prioritise investments, maximise economic returns, guide policy and balance the environmental demands of river ecosystems with the needs of irrigated agriculture and its dependent regional communities. Significant progress is being made, through the development and application of farm and irrigation area hydrologic models linked with production models and economics, combined with strong stakeholder participation. The progress in integrating science, people and policy makers was recognised in 2002 by the award of the first “Reference” catchment status to the lower Murrumbidgee catchment, a major Australian rice-growing region, under the UNESCO/WMO HELP (Hydrology for Environment, Life and Policy) program.

Simulating the impact of water pricing on households behaviour: the temptation of using untreated water

Recent studies on urban water demand have suggested that the water price increase observed during the last ten years in France has led to a reduction in the consumption of urban water by households. Whereas certain households have reduced their water consumption, others have turned to substitute water resources (collection of rainwater, borehole drilling, wells supplied with untreated mains water, grey water recycling systems, etc.). This article presents the results of a case study, which describes and analyses the phenomenon of resorting to untreated groundwater as a complement to or a substitute for the urban water supply. After highlighting the risks associated with uncontrolled development of private boreholes, the paper presents a survey conducted in Southern France to understand the motivations of households drilling boreholes. The results of this survey are utilised to develop a micro-economic model of households' behaviour, which is then used to assess the probability of development of private boreholes on a regional scale. The impact of various economic and regulatory scenarios on borehole development and the related impact on urban water demand and financial sustainability of water and wastewater management utilities are assessed.

Analysis of water application cost with permanent set sprinkler irrigation systems

In order to identify the subunit design incurring the lowest costs, it is necessary to consider various factors, thereby assuring the correct hydraulic performance of the subunit. Water application costs with a sprinkler irrigation system comprise: investment cost (pumps plant, pipes, sprinklers, ditches), energy, manpower, maintenance and water costs. This work analyses the influence of different design and performance factors, such as subunit arrangement, spacing, working pressure, average application rate, and application efficiency on water application costs in a permanent set sprinkler irrigation subunit. The results show that the most important factor is the spacing between sprinklers. The next most important factor is the shape of the subunit (number of laterals and number of sprinklers per lateral). Working pressure is important too, since a decrease in pressure will result in a decrease in energy costs, although pipe diameter will need to increase. The higher the average application rate of the system, the higher the water application cost. The influence of irrigation efficiency is higher as water price increases. The water application cost can be reduced by 40% when application efficiency increases from 60% to 90%.

Measuring the willingness of farmers to pay for groundwater in the highland areas of Jordan

The main objective of this paper is to estimate the willingness of farmers to pay for groundwater resources under different conditions of water supply regimes. Information available on water supplies, areas under irrigation and market conditions were the basis of the calculations. In order to identify solutions that maximize the total net income subject to resource restraints, parametric linear programming models were used to derive farmers’ willingness to pay for irrigation water. Results showed that there is potential to decrease water consumption and to reallocate it in an optimal way. Optimal reallocation increased the net agricultural income in the study area. The water demand for agriculture reacts to increasing water prices in a quite elastic manner over a long interval, whereas it reacts inelastic in the case of a decrease of the overall water supply by 15%. Farmers are willing to pay two and a half times the prevailing price of groundwater. The results show that the water values in the region are underestimated and the decision makers can impose a price level for groundwater from US$ 0.14 to 0.35/m 3 without having any impact on the cropping pattern or the planted area.

Political economy of water pricing policy: Empirical evidence from public utilities in Mauritius

This paper examines whether political economy considerations are important in the formulation of water pricing policy in Mauritius. Empirical models are developed incorporating current and lagged electoral years as dummy variables in order to test whether politicians make strategic use of water pricing policy to further their partisan electoral objectives. Political economy concerns are also included into our analysis by looking at the impact of lobby groups on the implementation of water prices. In the case of potable water prices, a disaggregated analysis according to consumer categories provides weak evidence of political manipulation. However, political manipulation is established in terms of subsidy allocations to the residential sector, which is the largest consumer category. As regards irrigation water, the results lend support to the contention that political parties indeed manipulate irrigation subsidies allocated to the Irrigation Authority. Evidence on the lobby effect emerges from our empirical analysis on potable water. More specifically, we find that smaller groups have successfully been able to use their political influence to obtain smaller water price increases.

Measuring the willingness of farmers to pay for groundwater in the highland areas of Jordan

The main objective of this paper is to estimate the willingness of farmers to pay for groundwater resources under different conditions of water supply regimes. Information available on water supplies, areas under irrigation and market conditions were the basis of the calculations. In order to identify solutions that maximize the total net income subject to resource restraints, parametric linear programming models were used to derive farmers’ willingness to pay for irrigation water. Results showed that there is potential to decrease water consumption and to reallocate it in an optimal way. Optimal reallocation increased the net agricultural income in the study area. The water demand for agriculture reacts to increasing water prices in a quite elastic manner over a long interval, whereas it reacts inelastic in the case of a decrease of the overall water supply by 15%. Farmers are willing to pay two and a half times the prevailing price of groundwater. The results show that the water values in the region are underestimated and the decision makers can impose a price level for groundwater from US$ 0.14 to 0.35/m 3 without having any impact on the cropping pattern or the planted area.

The real price of water

Water issues are among the top priorities of the international community. As humanity's numbers have more than doubled over the past half century and the world's economy has increased seven-fold, water use has tripled. Agricultural, industrial, and residential demands are outstripping the sustainable supply. As a result, water tables all over the world are falling, wells are running dry, and rivers and lakes are being drained. Meanwhile, pollution corrupts the dwindling water resources. The burden of our water shortage, regretably, falls on the vast majority of poor people of the world. Largely without access to piped water, they pay a great deal more for water and sanitation services than their wealthy neighbors – sometimes between ten and one hundred times more. They also pay more in terms of physical effort to obtain water, as well as an enormous price in terms of health costs as a result of water-related diseases. A number of strategies and technologies are required for efficient, environmentally sustainable water management and expanding the provision of water services to the poor. They include raising agricultural and urban water productivity and rainwater harvesting. Perhaps the most important management approach to providing water for drinking and sanitation, and the system that could most benefit and furnish a fair share for all, especially the poor, would be progressive water pricing. Admittedly, pricing is a complicated issue, and in some cases the poor have suffered from excessive water price increases. But, I believe progressive pricing is the recommended approach on economic, environmental, and equity grounds. Progressive pricing is also referred to as increasing block pricing, and involves setting a price structure that charges more per unit the more water is used. A basic-needs amount of water should be sold at a low price, and subsidized if necessary, so that poor people can afford the minimum required for a healthy existence. Increasing levels of consumption are charged at progressively higher tariffs per unit sold, with the price increasing in steps. The highest level of tariff should reflect the long-run marginal cost of supply – that is, the cost of the next or incremental unit of water supply. There is sound economic justification for such an approach. The cost of supply increases as additional investments in water infrastructure are required, because the cheapest options are invested in first. Supplying a basic amount of water to each person involves a lower level of consumption and investment in water supply infrastructure than does a higher level of supply to large-scale users. Furthermore, large-scale users require the construction of new water supply infrastructure earlier. Also, the public good benefits of supplying the poor with clean water are very high in many developing countries. While existing large-scale users may protest that they cannot afford to pay unsubsidized prices for water, careful analysis suggests this may not be true over the long term. Some of the increased revenue from water price increases could be used to assist large-scale users to improve the efficiency with which they use water, for example, through investment in more modern irrigation technologies. And this assistance might also be economically efficient, in that the water saved through current users adopting more efficient technologies could be used elsewhere, and saved at a lower cost than that of building a new reservoir. It may be that some large-scale users cannot afford to pay the true cost of water, which suggests that their activities were not economically efficient in the first place. Fixing leaks and largely eliminating water theft – which in many African cities costs 40% of the water supply – might also control price increases by raising revenue. This growth in water utility revenue could be used to improve water services to poor people. It is important to remember, of course, that increasing water prices is only one aspect of improving water management. Such pricing must be part of a comprehensive approach to improving water governance and management, generating new and creative sources of finance for environmentally-sustainable water technologies, and applying sound science to support water management and policy decisions. For only if we are able to bring the benefits of fresh water to the majority of the world's people in an environmentally sustainable and equitable manner can we achieve our internationally agreed development goals of halving by 2015 the proportion of people living without access to safe drinking water and basic sanitation. Progressive water pricing will help us do that. Klaus Töpfer Under-secretary General of the United Nations and Executive Director of the United Nations Environment Program

The economic unsustainability of the Spanish national hydrological plan

This paper analyses the economic aspects of the Ebro water transfer, which have been overlooked in the Spanish National Hydrological Plan. The questions exam ined are the cost of transferred water, and irrigated agriculture in the Levante and south-eastern regions, which are the main water transfer destinations. Results show that the water transfer is not economically sustainable, because the costs of the diverted water are higher than the current marginal value of water in agriculture, and crop profitability is insufficient to pay for the whole volume of transferred water. A compromise solution between increasing water supply and demand management measures will combine a reasonable water price increase with water desalination in coastal counties. This solution would reduce water demand with a moderate effect on farmers' revenue and net income. Spain could find alternative investment projects to the water transfer, able to improve social welfare.

Input Use and Capacity Constraint under Uncertainty: The Case of Irrigation

In this paper we consider a two periods model of cropping using irrigation. The farmer takes two kind of decisions, one related to the level of investment in irrigation capacity and the other one to the irrigation level in each period. In the first period, decisions are taken under uncertainty on the rainfall level which is resolved at the beginning of the second period. Assuming a CARA utility function, we show that taxing the investment may entail an increase in preventive irrigation although the investment decreases. Moreover, in the case of a logistic production function, the total water use is non monotonic with respect to the price of investment. Indeed, taxing capital may induce the farmer to increase the total level of irrigation although the irrigation capacity decreases. Surprisingly, the impact of an increase of water price is generally ambiguous even assuming risk neutrality.

Agroeconomic Analyses of Drip Irrigation for Sugarbeet Production

Sugarbeet (Beta vulgaris L.) is a major cash crop in Wyoming where overuse of water and agrochemicals is a concern in furrow‐irrigated areas. Drip irrigation, an alternative technology, is not well developed for row crops within the state. Therefore, our objective was to evaluate the economic feasibility of implementing drip irrigation practice for sugarbeet production. Capital budgeting analyses, including net present value (NPV) and rate of return (ROR), were used for 10 to 40 ha. Sensitivity analyses were conducted with drip system size and life span, interest rate, water price, and weed control cost. Sugarbeet and sugar yields were higher under drip irrigation than furrow irrigation at P = 0.05. The drip system investment cost decreased with increasing size. Total variable costs for drip irrigation were lower than those for furrow irrigation. Sugarbeet returns were $2080 and $2310 ha−1 for furrow and drip irrigation practices, respectively. Higher returns and shorter payback time were observed for large conversion areas. The sensitivity was more pronounced with small‐scale farming. Increasing interest rates caused delays in positive return and profit and contributed to larger differences in payback time between drip system sizes. For all conversion sizes, ROR increased with system lifetime. Higher profitability was observed for areas with increased water prices and weed control costs. The overall findings indicated that sugarbeet production under drip irrigation would be most profitable for a 40‐ha area with payback periods ranging from 7 to 10 yr.

Water pricing and markets in the Near East: policy issues and options

The paper briefly reviews the impact of water scarcity, degradation of its quality and lack of funds on the maintenance and development of irrigation systems. It also argues that these are symptoms of deeper problems related to policy, institutional and market failure, all of which impact the overall development and management of water resources in the Near East. Except for a few countries, the region has been slow to adopt policy measures that would reduce the gap between private and social prices. From an economic point of view, scarcity of water means that agriculture should release water to other uses, because the economic value of water is much lower in farming than for domestic or industrial use. In many cases, however, political lobbies strongly oppose initiative to improve allocative efficiency and increase water prices. In many countries, existing weak regulatory and economic policies have led to mining of groundwater. At the same time, water quality in rivers and aquifers is deteriorating because of a number of externalities, that if not corrected, will result in enormous long term costs to the society. This in turn could lead to irreversible damage to the quantity and quality of available water resources. Developing water markets is a policy option that could help solve these issues. This paper argues that in the absence of well defined, transparent and freely traded water rights, markets may encourage higher use rather than conservation of water.

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

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.