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Pricing of irrigation water under alternative charging methods: Possible shortcomings of a volumetric approach

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  • Dono, Gabriele
  • Giraldo, Luca
  • Severini, Simone

Abstract

The European water framework directive aims to protect the environmental quality of water and encourage its efficient use. EU member states are required to implement efficient water management systems and appropriate water-pricing methods. This paper examines the economic effects that may arise given the introduction of two different methods for pricing irrigation in the Mediterranean area. The considered pricing methods charge farmers for the costs incurred by water user associations (WUAs) in managing water distribution networks. The first method, based on the metered use of water by farms, is known as the volumetric pricing method. The second is an area-based pricing method, whereby fees are charged per hectare according to the estimated average water use for each crop. The economic effects and the impacts on the water usage of these two schemes are analyzed using a mathematical model that represents the farm sector in a Mediterranean area that relies on a dam for irrigation. The possible effects are analyzed under two scenarios: first, the methods are applied to the observed water-pricing conditions, second, an additional charge is introduced to recover unaccounted costs of the water supply system (e.g., long-term costs related to infrastructure, and the operational and maintenance costs of dams) in line with the water framework directive principle of cost recovery. The results show that the introduction of an additional charge via the volumetric pricing method could stimulate the substitution of water provided via collective networks with groundwater. This could adversely affect the financial situation of the WUA and have negative environmental consequences. This negative outcome does not arise in the case that an additional charge is applied via the area-based pricing method.

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  • Dono, Gabriele & Giraldo, Luca & Severini, Simone, 2010. "Pricing of irrigation water under alternative charging methods: Possible shortcomings of a volumetric approach," Agricultural Water Management, Elsevier, vol. 97(11), pages 1795-1805, November.
  • Handle: RePEc:eee:agiwat:v:97:y:2010:i:11:p:1795-1805
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    1. Humblot, Pierre & Jayet, Pierre-Alain & Petsakos, Athanasios, 2017. "Farm-level bio-economic modeling of water and nitrogen use: Calibrating yield response functions with limited data," Agricultural Systems, Elsevier, vol. 151(C), pages 47-60.
    2. Buchholz, Matthias & Holst, Gesa & Musshoff, Oliver, 2015. "Water and irrigation policy impact assessment using business simulation games: evidence from northern Germany," Department of Agricultural and Rural Development (DARE) Discussion Papers 260781, Georg-August-Universitaet Goettingen, Department of Agricultural Economics and Rural Development (DARE).
    3. Gabriele Dono & Luca Giraldo & Simone Severini, 2012. "The Cost of Irrigation Water Delivery: An Attempt to Reconcile the Concepts of Cost and Efficiency," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(7), pages 1865-1877, May.
    4. Prakashan Veettil & Stijn Speelman & Guido Huylenbroeck, 2013. "Estimating the Impact of Water Pricing on Water Use Efficiency in Semi-arid Cropping System: An Application of Probabilistically Constrained Nonparametric Efficiency Analysis," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(1), pages 55-73, January.
    5. Christian Franco-Crespo & Jose Maria Sumpsi Viñas, 2017. "The Impact of Pricing Policies on Irrigation Water for Agro-Food Farms in Ecuador," Sustainability, MDPI, vol. 9(9), pages 1-18, August.
    6. Buchholz, Matthias & Musshoff, Oliver, 2014. "The role of weather derivatives and portfolio effects in agricultural water management," Agricultural Water Management, Elsevier, vol. 146(C), pages 34-44.
    7. Bennie Grové & Johannes Jacobus Bezuidenhout & Nicolette Matthews, 2023. "Farm-level Hydroeconomic Analysis of Alternative Water Tariff Charges Using a Hybrid Solution Method," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 37(12), pages 4679-4692, September.
    8. Reidsma, Pytrik & Janssen, Sander & Jansen, Jacques & van Ittersum, Martin K., 2018. "On the development and use of farm models for policy impact assessment in the European Union – A review," Agricultural Systems, Elsevier, vol. 159(C), pages 111-125.
    9. Dono, Gabriele & Giraldo, Luca, 2011. "Cost Analysis for Water Distribution in Agriculture," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114435, European Association of Agricultural Economists.
    10. Zhisong Chen & Huimin Wang & Xiangtong Qi, 2013. "Pricing and Water Resource Allocation Scheme for the South-to-North Water Diversion Project in China," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(5), pages 1457-1472, March.
    11. Portoghese, Ivan & Giannoccaro, Giacomo & Giordano, Raffaele & Pagano, Alessandro, 2021. "Modeling the impacts of volumetric water pricing in irrigation districts with conjunctive use of surface and groundwater resources," Agricultural Water Management, Elsevier, vol. 244(C).
    12. Cortignani, Raffaele & Dell’Unto, Davide & Dono, Gabriele, 2018. "Recovering the costs of irrigation water with different pricing methods: Insights from a Mediterranean case study," Agricultural Water Management, Elsevier, vol. 199(C), pages 148-156.

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