The South-North Water Transfer Project (SNWTP), if fully developed, could divert 40-50 km3/yr from the Yangtse basin to the North China plain, alleviating water scarcity for 300-325M people living in what even then will be a highly water-stressed region. Construction of the next stage, diverting up to 20 km3 at a cost of about $17,000M (including $7000M in ancillary costs), is to start in 2002/3. A recent World Bank study suggests that the project is economically attractive. This conclusion has been disputed by the World Wildlife Fund (now the Worldwide Fund for Nature). This paper concludes that little confidence can be placed in either of these analyses. It therefore seeks to throw light on how the project fits within a broader regional and agricultural development setting. The project is hugely expensive, and would at the margin tend to preserve water in low value agriculture and require the resettlement of upwards of 300,000 people. On the other hand, the pace and scale of socio-economic change in China are without precedent, and adjustment problems on the North China plain are greatly exacerbated by water scarcity. Reallocation of water from irrigation to municipal and industrial uses or to the environment is socially divisive and in some instances physically impracticable. The transfer project would greatly alleviate these difficulties. It is these arguments (which are ultimately political and pragmatic), rather than those based strictly on economic or food security concerns, that make the Government's decision to proceed with the project fully understandable.

This report first assesses the scale of the energy-irrigation nexus in South Asia. This is followed by a section describing what it would take to make a metered tariff regime work, the main comparison being with North China where such a regime does seem to work. The potential for indirect management of the groundwater economy through the specific mechanism of electricity pricing and supply policies is discussed.

Water demand management, or making better use of the water we have — as opposed to augmenting supply — is increasingly proposed as a way of mitigating water‐scarcity problems. Moving water away from agriculture to uses with higher economic value is one of the main measures widely seen as desirable. Sectoral “allocation stress” is seen as resulting from the disproportionate share, and inefficient use of water in the agricultural sector. This apparent misallocation is often attributed to the failure of government to allocate water rationally. This paper revisits this commonly‐accepted wisdom and examines the nature of urban water scarcity, showing the importance of economic and political factors, shaped by incentives to decision‐makers, and sometimes compounded by climatic conditions. It shows that cities’ growth is not generally constrained by competition with agriculture. In general, rather than using a narrow financial criterion, cities select options that go along the “path of least resistance,” whereby economic, social and political costs are considered in conjunction. The question of allocation stress is thus reframed into an inquiry of how transfers effectively occur and can be made more effective.

This review provides a broad discussion of water pricing in agriculture. First, the practicalities and effectiveness of current water charging practices are described. Then, the main roles commonly attributed to irrigation water pricing are discussed: (1) cost recovery; (2) water conservation; (3) enhanced water productivity; (4) intersector reallocation; and (5) control of water quality.

This paper reviews the European irrigation sector and its water pricing policies. An overview is given of the irrigation sector in terms of surface water, economic importance and water usage. Some of the issues that have called the attention of the European Union (EU) and the Organization for Economic Cooperation and Development (OECD) with respect to pricing irrigation water in Europe and OECD countries are discussed. The water pricing policies that were in place in EU's various member states and accession countries prior to the promulgation of the Water Framework Directive (WFD) are examined. Finally, the likely implications and effects of the application of the WFD in the European irrigation sector are analysed.