21 May 2012

Conservation subsidies and agricultural water use

Macarena Dagnino-Johns wrote this guest post based on her article analyzing the effectiveness of subsidies for water conservation programs in the Rio Grande Basin in NM.*

Water conservation programs are under debate in areas where water is scarce, irrigation is significant, and food security is compelling. Subsidies for drip irrigation increase farm income, raise the value of food production, and reduce the amount of water applied to crops. However, our research findings in the Rio Grande Basin in New Mexico produced the unexpected result in that water conservation subsidies that promote conversion to drip irrigation can increase the demand for water depleted by crops. Our analysis showed that where water rights exist and water rights administrators need to guard against increased depletion of the water source in the face of growing subsidies for drip irrigation.

We used a model that analyzed five drip irrigation subsidies (a capital subsidy for converting from surface to drip irrigation that varied from 0% to 100% in 25% increments) in two water supply scenarios. For each run, income-maximizing water applications and water depletions were allocated among crops and irrigation technologies.

The results show that the shadow price will vary considerably according to the water conservation subsidy level and water supply scenario. A higher conservation subsidy raises the scarcity value of water. A lower water supply scenario also raises the shadow price of water. For example, when there are under base (full) water supply conditions, the shadow price of water is zero with no drip irrigation subsidy. However, that value gradually increases US$37.57 per 1000 m3 as the drip irrigation subsidy grows to 100%.

The substitution of drip for surface irrigation in the face of a rising drip subsidy increases crop yields, raises profitability of farming, and raises crop water depletion (ET) per unit of land irrigated. This growing economic value of depletable water with a rising drip irrigation subsidy occurs because water administration in New Mexico protects water rights by guarding against increased river depletions with alternative policies... water rights in New Mexico are based on the right to consume water, not the right to apply it.

Our findings suggest the need for continued work on the definition and implementation of the term "water conservation" since water conservation subsidies do not provide farmers with economic incentives to reduce water depletions and therefore are unlikely to make new water available for alternative uses.

Drip irrigation is important for many reasons, including greater water productivity, higher crop yields, and increased food security, but it cannot be relied on to save water depletions when considered from a basin scale.

What actions could be taken by water administrators to guard against increased water depletions in the face of growing drip irrigation subsidies? The right to an upper bound on ET associated with a water right could be posted in a central place available for all irrigation water rights holders and all water stakeholders to see. With greater crop ET induced by a subsidy to increase irrigation efficiency, farmers would be allowed to take any action to respond to the greater profitability of drip irrigation as long as total crop water ET did not increase.

Bottom Line: Water conservation programs should also observe crop water and land use patterns that can be altered in the face of a drip irrigation subsidy and maximize farm income while protecting existing formal or informal water rights holders.
* The article -- “Economics of Agricultural Water Conservation: Empirical Analysis and Policy Implications in the Rio Grande Basin, NM, USA” -- is available here.

Macarena Johns worked at Unesco-IHE as a researcher/lecturer and assistant program coordinator for the MSc program in Water Management. She holds an MA in Agriculture and a BSc degree in Geography. Her main interests include agricultural policy, food security and irrigation water management systems. During her time at Unesco-IHE, she actively engaged international organizations and multiple partners in the coordination of projects and teamwork related to the MENA region and WWF 6. She also instructed on-line modules in "Integrated River Basin Management, (IRBM)” with focus on strategies for the optimal use of land and water resources. After the World Water Forum 6, she is looking for a job as a researcher assistant or as a project officer in human geography, land grabbing, rural development, or similar.

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