Economics of Agricultural Water Conservation: Empirical Analysis and Policy Implications

Abstract

Climate change and recurrent drought in many of the world's dry places continue to inspire the search for economically attractive measures to conserve water. This study analyzes water conservation practices in irrigated agriculture in a sub-basin in North America's Rio Grande. A method is developed to estimate water savings in irrigated agriculture that result from public subsidies to farmers who convert from surface to drip irrigation. The method accounts for economic incentives affecting farmers' choices on irrigation technology, crop mix, water application, and water depletion. Findings show that farmers will invest in technologies that reduce water applications when faced with lower financial costs for converting to drip irrigation. Subsidies for drip irrigation increase farm income, raise the value of food production, and reduce the amount of water applied to crops. However, an unexpected result is that water conservation subsidies that promote conversion to drip irrigation can increase the demand for water depleted by crops. Our findings show that where water rights exist, water rights administrators will need to guard against increased depletion of the water source in the face of growing subsidies for drip irrigation. Our approach for analyzing water conservation programmes can be applied where water is scarce, irrigation is significant, food security is important, and water conservation policies are under debate.

Literature Review on Rebound Effect of Water Saving Measures and Analysis of a Spanish Case Study

“…PMP is a quadratic programming method and does not analytically integrate agronomic concepts such as efficiency or deficit irrigation. Dagnino and Ward (2012) provided another approach to analyse the rebound effect using a farm microeconomic model and budget analysis. They concluded that although subsidies for drip irrigation in North America's Rio Grande increased farm income and reduced the amount of water applied to crops, such subsidies could increase water depletion in the basin.…”

Optimal Water Resources Allocation under the Constraint of Land Use in the Heihe River Basin of China

“…Therefore, taking effective measures to relieve the pressure of water resources exploitation and supply in the river basin is imminently needed. As for the aspect of agriculture, each county should make use of water-saving measures or adjust agricultural planting structure properly to lower irrigation water loss rate and improve irrigation efficiency to alleviate the pressure of agricultural water use [35]. For ecological water, we should minimize its occupation but improve the degree of construction land intensity, and transform construction land expansion into exploitation from its own potentialities to guarantee sufficient ecological water supply for maintaining ecological security of river basin.…”

Microeconomics of Deficit Irrigation and Subjective Water Response Function for Intensive Olive Groves

“…Furthermore, widespread adoption of deficit irrigation strategies may have agronomic and basin-scale hydrological consequences in terms of the so-called "rebound effect" described by Dagnino and Ward [25], who conclude that water administrators need to guard against increased depletion of the water sources with growing subsidies that reward reduced water applications. A complete review of the evidence regarding this effect can be found in the work of Berbel et al [26].…”