An assessment of farmers' willingness to participate in water trading in southern Spain

Abstract

This study applies contingent valuation to assess farmers' willingness to trade irrigation water. We analyse farmers' willingness to pay for water and their willingness to accept the selling of water through a seasonal market, under both normal rainfall and drought conditions. A survey of 241 farmers (irrigators and non-irrigators) in the Guadalquivir River Basin and in the Mediterranean (Almanzora) Basin in southern Spain is used as a basis to construct the irrigation water supply and demand curves for both basins. Assuming that each basin operates as a single country, an international commerce framework is applied to study inter-basin trading. Results show that there is scope for both intra-basin and inter-basin markets. The equilibrium market price increases from 0.17 EUR/m³ in the baseline scenario to 0.21 EUR/m³ under drought conditions. These results are in line with observed market prices during 2006-2007. We also find a threshold volume under which start-up costs for irrigation infrastructure make it unprofitable for non-irrigators to enter the market. Finally, we conclude that farmers' ethical perspective of considering irrigation water as a non-tradable commodity constrains them from participating in such markets

An overview of water reallocation and the barriers to its implementation

“…Benefits derived from voluntary water reallocation often do not meet expectations because participation is relatively limited—water transfers in many markets are around 2–5% of total water demand . Giannoccaro et al, along with Tisdell and Ward, argue that the overestimation of benefits by theoretical water market models is because stakeholder's perceptions and values are not considered. Many water users, especially farmers (which hold the majority of water entitlements), exhibit a general aversion to the commoditization of water through market mechanisms, instead preferring that a public entity maintain control of water allocations .…”

“…Many water users, especially farmers (which hold the majority of water entitlements), exhibit a general aversion to the commoditization of water through market mechanisms, instead preferring that a public entity maintain control of water allocations . The distrust of water markets have been shown to stem from beliefs that markets will disadvantage low‐income farmers, perceptions water and land rights should not be separated, and views that water should not be treated as a commercial good . However, Bjornlund and Giannoccaro et al have shown that these negative perceptions of water transfers are somewhat abated over time and drought induced water scarcity acts as a catalyst to market involvement .…”

Desalination and the commons: tragedy or triumph?

“…Water accounts for a low share of total costs, but farmers are acutely aware of the politically negotiable price they pay. According to Giannoccaro, Castillo, and Berbel (2015), a representative sample of farmers from Almería are willing to pay $0.44/ m 3 under normal conditions, and $0.63/m 3 under drought conditions. Those values explain their lack of interest in desalinated supplies that cost more than other sources.…”

Water Markets in Spain: Performance and Challenges

“…Giannoccaro et al, and Ortiz and Ceña [42,59,60] show farmers' resistance to trading water in Spain due to both their view of water as a non-tradable common good and the notion that water rights should not be separated from land. Cultural barriers have been largely recognized in other countries [31,56], suggesting that farmers' perceptions and preferences play an essential role in discouraging their participation in water markets.…”

“…However, and despite the narrowness of water markets, differences in water productivity between buyers and sellers allowed water markets to achieve their targets as an instrument for water reallocation when needed [60].…”