Policies And Technologies For A Sustainable Use Of Water In Mexico: A Scenario Analysis

Water stress in Mexico is intimately linked to agriculture, as irrigation claims 75% of national water withdrawals. The Mexican mix of irrigation technologies is dominated by flood techniques, utilized on 93% of irrigated land, while drip and sprinkler systems, both with higher application efficiencies, are utilized on only 7% of irrigated land. This paper examines the extent to which government policies can induce the adoption of alternative irrigation technologies to promote a sustainable pattern of water withdrawals. The framework is an inter-regional input--output model formulated as a linear program that solves for cost-minimizing allocations of output that are constrained by regional factor availability. The model features endogenous choice among alternative agricultural technologies and determines commodity prices based on factor costs and on scarcity rents for limiting factors of production. The study defines and quantifies sustainable endowments of water at the regional level and analyzes scenarios that combine fees or caps on water withdrawals with the availability of alternative irrigation technologies. We find that water policies can induce technology adoption to achieve water sustainability, although the national price of agricultural output rises 5% to 8% relative to baseline levels. Furthermore, pricing water for irrigation can generate enough public revenue for the government to cover the full costs of technology adoption.