New directions in the economics of agricultural water conservation

A challenging area in agricultural water management is the assessment of policy and investment options in irrigated agriculture for conserving water and adapting to increasing water scarcity, in particular when the linkages to groundwater resources and their management are to be considered and incorporated. 

However, this is an increasingly important area of research for a number of reasons.  First, irrigated agriculture accounts for about 70% of global freshwater withdrawals,  and is a major contributing factor to the water scarcity situation in many countries.  Second, with almost a quarter of freshwater withdrawals for irrigated agriculture being made up of groundwater supplies—corresponding to 70% of total groundwater withdrawals—, agricultural water use is also a major contributing factor to aquifer overexploitation.   And, third, surface water and groundwater are closely linked in most parts of the world,  with groundwater discharge contributing to the base flow of streams and surface water contributing to groundwater recharge, and these interactions are intensified by human action, in particular water withdrawals for irrigated agriculture.  Even in cases where irrigated agriculture depends mostly on surface water, groundwater impacts therefore need to be accounted for when assessing water conservation efforts (and vice versa).

Several papers with new research on this topic were presented during the 11th Meeting of the International Water and Resource Economics Consortium (IWREC) hosted by the World Bank in Washington, DC in September 2014. Seven of these contributions, incorporating new directions in the economics of agricultural water conservation with a special consideration of the groundwater linkages, together with an outline, have recently been published as a special issue of Water Economics and Policy (Volume 2, 2016).
 
A range of options for conserving agricultural water and their relations to groundwater resources are considered in the seven papers.  This includes the conversion to more capital-intensive irrigation technologies, a popular and often subsidized intervention that increases the “efficiency” of irrigation water use on a field by reducing evaporation and “losses” from surface runoff or subsurface drainage.  Yet the effect of the intervention on water scarcity depends on the local context and the relative importance of the return flows for downstream uses, and thus requires careful assessments.  This also applies to the lining of leaky canals to achieve a higher conveyance efficiency.  Additional interventions considered include limiting the cropping area and restricting groundwater pumping.  Further explored are approaches for assessing whether such interventions, especially those aimed at increasing on-farm irrigation efficiency and/or conveyance efficiency, contribute to the widely emphasized need for improving agricultural water productivity. 
 
The seven papers incorporate the linkages of the policy and investment options to groundwater resources and their management in different ways.  These range from recognizing the importance of the linkages and emphasizing the need for offsetting any negative impacts, to integrating hydrologic models in the economic analysis for an estimation of likely impacts, and to specifying targets for groundwater levels or, in the case of a stream-aquifer system, standards for instream flows that need to be met by the interventions.
 
The papers examine different economic aspects, including:

1. Factors influencing the rate and intensity of adoption of improved irrigation technologies (Wang et al.)
2. Tradeoffs between different policy interventions in irrigated agriculture for reducing groundwater overdraft (Msangi and Cline)
3. The usefulness of subsidies for canal lining when the value of seepage as a positive externality is incorporated (Schmidt and Taylor)
4. The impact of subsidies for more capital-intensive irrigation technologies on groundwater use and depletions (Quintana Ashwell and Peterson)
5. Effects of improvements in irrigation efficiency on water flows at the basin level (Contor and Taylor)
6. The optimal design of restrictions on groundwater pumping in a stream-aquifer system with ecological standards for instream flow (Speir et al.)
7. Approaches for explicitly including water aspects in economic measurements of agricultural productivity and efficiency (Scheierling et al.)

Research on the economics of agricultural water conservation, especially with the incorporation of linkages between conservation options and groundwater resources and their management, is an evolving field, and the seven papers make important contributions.  Growing availability of data—such as on the responses of irrigators to changes in water conditions or in the policy environment, and on the basin-wide interactions between surface water and groundwater—will allow the application of more advanced methods and improve the understanding of policy and investment options for conserving agricultural water and increasing its productivity.  More efforts will have to be undertaken to carry out context-specific assessments of potential interventions that go beyond the field- or project level, not least to avoid interventions with counterproductive effects that increase agricultural water use and negatively affect downstream uses.  Given the worsening water situation in many parts of the world, policy makers will need sound advice on policies and investments related to water use in irrigated agriculture.  

Related:

• Water Economics and Policy Volume 2 (2016) – Special Issue with Contributions to the 11^th Meeting of the International Water Resource Economics Consortium – Guest edited by Susanne M. Scheierling
• Water Blog: Why water presents special challenges: a brief rationale for water resource economics
• Water Blog: New approaches in water resource economics
• 11^th Meeting of the International Water Resource Economics Consortium (IWREC), September 7-9, 2014, World Bank, Washington, DC
• 12th Meeting of the International Water Resource Economics Consortium (IWREC), September 11-13, 2016, World Bank, Washington, DC