Using Tradable Water Permits in Irrigated Agriculture

Abstract

One of the most important challenges facing agricultural water policy is the design of mechanisms enabling the transition from the current myopic exploitation to an efficient and sustainable use of groundwater resources. Tradable water permits systems can be very effective and efficient instruments, especially under conditions of limited water availability. The present paper examines both theoretically and empirically the efficiency potential of implementing a tradable permit system in irrigated agriculture taking into account the heterogeneity of crop agro-economic profiles within a single aquifer. We first confirm that in the absence of any water management system individual farmers deplete the available water resources very fast and that both a tradable and a non tradeable water permit management system provide the basic mechanism for sustainable water use. Βoth systems impose significant costs on farmers which can be counterbalanced if water depletion is associated with lower productivity as a result of water quality changes (i.e. water salinization). However, when trade of water is allowed the benefits of implementing a permit management system are maximized. The more diverse, in technology and market prices, are the crops sharing the same aquifer and the stricter is the water constrain, the higher are the benefits from using a tradable water permit system.

Cap-and-Trade: Understanding and Teaching a Market-Based Approach to Natural Resource Allocation

“…The strategy that has received the most widespread attention is cap‐and‐trade, which is sometimes referred to as “marketable permits,” “tradable allowances,” or “emissions trading.” We commonly hear of cap‐and‐trade strategies proposed for limiting emissions of air pollutants, such as carbon dioxide and other greenhouse gasses, but such strategies can be used to allocate a wide array of natural resources. Applications of cap‐and‐trade have been proposed for allocation issues as varied as: nutrient pollution in watersheds (“nutrient trading”) (Selman et al, 2010) logging (“tradable logging permits”) (Dragoi, 2002) fishing (“individual fishing quotas”) (Griffith, 2008) urban development (“tradable planning permits”) (Henger, 2013) water rationing (“water trading”) (Latinopoulos and Sartzetakis, 2015) …”

Controlling groundwater through smart card machines: the case of water quotas and pricing mechanisms in Gansu Province, China.

“…Other types of instruments include indirect regulation through the energy or agriculture sector (Giordano 2009;Mukherji and Shah 2005). The effect of different regulatory instruments on groundwater levels and farming conditions can be analyzed with the use of economic and coupled hydro-economic models (Kuwayama and Brozović 2013;Latinopoulos and Sartzetakis 2015;Madani and Dinar 2013;Mulligan et al 2014). While these models may include multiple behavioral characteristics of human actors, they usually assume effective enforcement of the instruments.…”

Application of Fuzzy Set/Qualitative Comparative Analysis to Public Participation Projects in Support of the EU Water Framework Directive

“…Environmental sustainability has gained increasing attention in recent years (e.g., Houba et al, 2015;Latinopoulos and Sartzetakis, 2015;Llopis-Albert and Pulido-Velazquez, 2015). The EU Water Framework Directive (WFD) establishes a framework for the protection of all water bodies.…”