- Any system of water allocation that is (a) based on quantitative withdrawal rights, and (b) results in scarcity at the individual farm level encourages the farmer to increase the “consumed fraction” (that is, the proportion of water delivered that is consumed). Adoption of hi-tech irrigation is a typical route to achieve this — the consumed fraction may reach 90% under drip compared to 50% under flood irrigation.
- The impact of this trend is to reduce return flows to aquifers and the environment more generally, hence (typically) increasing downstream scarcity.
- Allowing trade in withdrawal rights also tends to increase consumption because one attribute of a more “efficient and productive” farmer (a likely buyer) is maximisation of the consumed fraction. Any trading system further exacerbates scarcity beyond the impact of adopting more “efficient” on farm technology.
- Either water accounting is fully based on consumption rather than withdrawals, or withdrawals are controlled and adjusted so that desired outcomes, such as minimum river flows or aquifer stability, are met.
- In the US, the consumed fraction is a consideration in assessing “buy backs” (thus if it is assessed that on farm efficiency is 70%, a farmer is only compensated for that fraction if the water right is acquired by the State for environmental purposes. In Australia, 100% of “buy back” water is counted as an increment to environmental availability, and any nominal “savings” from increased “on farm” efficiency are similarly assumed to be incremental environmental flows.
- In consequence, the current program of massive subsidies in the Murray Darling Basin to on farm efficiency improvements (some $4 billion to date) without due reference to local geohydrology, is a tax on society in general that, at least in some cases, is making the environment worse.
- The impact of introducing hi-tech irrigation is to increase the availability of water available for consumption per unit of land. If the quantity of water delivered varies from year to year, the effect is to increase the assured supply of water for consumption at any specific reliability level (e.g., 75% exceedance, average flow, etc).
- An increase in the assured supply of water for consumption tends to encourage expansion of the area under high value crops — often perennials.
- This change reduces the capacity of farmers to respond flexibly to periods of drought: Annual crops (grain, cotton, forage) can be abandoned at relatively low cost, or not planted at all, when water is particularly scarce. The consequence of periods of drought for high value perennials is thus EITHER a heavy financial loss as perennials are abandoned, OR severe depletion of groundwater to protect investments. (This appears to be exactly what has happened in California in recent years.)
- Hi-tech irrigation benefits the environment by reducing excess application of chemicals; it benefits farmers through savings in labour and pumping costs, allowing increased irrigated area, increased yields, reduced pumping costs.
- However, in the absence of full control of water allocations (surface and groundwater), hi-tech tends to increase consumption (reducing water availability to the environment and to aquifer recharge); increase demand for water allocations from surface and groundwater because of the potential to increase beneficial consumption and expand high value crops; and decrease the flexibility of farmers to respond to drought.
- The understanding of these issues by policymakers (donors, politicians, activists) is limited: The simple logic that flows from the law of conservation of mass that underpins sound water accounting is largely misunderstood or ignored.
- The more complex implications for incentives, the environment, and the capacity of farmers to respond to changing water availability — whether through aquifer exhaustion, transfer of water to environmental restoration, or climate change — is as yet not even in the “misunderstood” category.
* Chris and I (seem to) disagree on whether it's better to define rights with respect to withdrawal (100 units of rights means you can take 100 units out) or consumption (100 units of rights means you can take 200 units out, as long as 100 units "flow back" in some way that allows others to use the water. I prefer withdrawal because it puts an upper bound on how much water is used (return flows are a "bonus" added to existing environmental set-asides) and thus solves a common problem. Chris has spent a lot of time arguing in favor of consumption (besides the above), so you can read more here, here, here, and here.