Dennis Wichelns

The role of `virtual water' in efforts to achieve food security and other national goals, with an example from Egypt

Abstract The term ‘virtual water’ has been used previously to describe the volume of water embodied in food crops that are traded internationally. This paper describes the economic dimension of the ‘virtual water’ concept as an application of comparative advantage, with particular emphasis on water as the key factor of production. The paper also extends the discussion of ‘virtual water’ by describing a nation’s goals regarding food security within a broader framework that includes other objectives such as providing national security, promoting economic growth, and improving the quality of life for citizens. The analysis suggests that land, labor, and capital must also be considered when evaluating a nation’s production and trade opportunities. In countries where one or more of those resources is limiting, focus on ‘virtual water’ alone will not be sufficient to determine optimal policies for maximizing the social net benefits from limited water resources. In countries where labor is relatively abundant, public policies that promote labor-intensive crop production and processing activities may be desirable. The role of ‘virtual water’ within a broader policy framework is demonstrated using crop production and international trade data from Egypt, where substantial amounts of ‘virtual water’ and ‘virtual land’ are embodied in wheat and maize imports. Policies that promote increased exports of labor-intensive crops will improve rural incomes and enhance food security.

An economic model of waterlogging and salinization in arid regions

Abstract Waterlogging and salinization arise in arid areas largely because two essential resources, irrigation water and the assimilative capacity of unconfined aquifers, are not priced or allocated correctly to reflect scarcity values and opportunity costs. Farm-level and project-level models of crop production are examined to identify policies that will encourage farmers to consider opportunity costs and the effects of irrigation and leaching on depth to regional water tables. Appropriate policies include volumetric water pricing, water markets, tradable water allotments, adjustments in area-based cost recovery programs, and incentives for farmers to use irrigation methods that reduce deep percolation. Implementing appropriate versions of these policies may reduce the rate of increase in waterlogged and saline areas.

An economic perspective on the potential gains from improvements in irrigation water management

In recent years, several researchers have introduced new terms describing irrigation efficiency to enhance the information available when evaluating water policy alternatives. Some of the definitions expand the physical boundary considered when evaluating water use, while others account for the changes in water quality that occur as drainage water is reused in an irrigated area. While the concepts of basin, global, and effective efficiency have enhanced our understanding of water use in agriculture, public officials may derive incorrect policy implications when reviewing empirical estimates of those measures, particularly if information describing the economic impacts of water use and allocation decisions is not available. For example, some authors suggest that when estimates of basin-wide efficiency approach 100%, there is little opportunity to save water by improving water management and achieving higher levels of classical, farm-level efficiencies in upstream portions of an irrigated region. However, there may be significant opportunities to increase the net values generated with limited water resources by improving the distribution of water among farmers and reducing the negative, off-farm effects of irrigation and drainage activities. Economic analysis is helpful in identifying those opportunities and in designing policies that encourage farmers and water agency personnel to improve water management practices in ways that enhance social net benefits.

Evaluating the Impact of Irrigation and Drainage Policies on Agricultural Sustainability

Farmers in the Broadview Water District in central Californiahave been improving irrigation practices in response to risingirrigation water prices and reductions in water supply since1989, when incentive policies were first implemented to reducethe volume of subsurface drain water generated in theDistrict. The average salinity of water deliveries hasincreased, over time, as the District has recycled largeamounts of drainage water to achieve regional restrictions ondrainage water discharge. We review irrigation and drainageactivities in Broadview since 1986 with an emphasis on thesustainability of crop production when drainage discharge islimited. Average cotton yields in Broadview have declined inrecent years, both nominally and in comparison with averageyields reported for the large county in which Broadview islocated. Average tomato yields in Broadview have increased inrecent years, but county-wide yields have exceeded Broadviewyields with greater frequency than in the late 1980s. Theseobservations suggest that average crop yields in Broadview maybe starting to reflect the increasing salinity of soil andwater resources, which may be due in part to persistentrestrictions on drainage water discharge.

Increasing Block-Rate Prices for Irrigation Water Motivate Drain Water Reduction

This chapter reviews the potential role of price incentives in modifying farm-level irrigation decisions to coincide with socially optimal choices when drainwater contains toxic elements. An optimization framework for irrigation districts facing drainwater discharge constraints is presented and implications for water pricing structures are discussed. Details of a block-rate pricing program that was implemented in a California irrigation district during 1989 are described and farm-level responses to the program are discussed. Results of the program include reductions in applied water for some crops in 1989 and reductions in the total volume of drainwater collected in the district.

Economic Efficiency and Irrigation Water Policy with an Example from Egypt

Irrigation water policies can be enhanced by considering the economic dimensions of farm-level decisions and public goals regarding limited land and water resources. The definitions of three efficiency terms used to describe the performance of irrigation systems-irrigation, water use and economic efficiency-are reviewed, with a focus on the unique role of economic efficiency in policy analysis. Policies that modify economic parameters can motivate farmers to choose crops and irrigation methods that are consistent with public goals. Such policies include water prices or allotments, subsidies for improving irrigation methods, and the removal of output price distortions that favour crops with large water requirements in water-short regions. An example of economic issues regarding water policy in the Nile Valley and Delta is included.

Economic incentives reduce irrigation deliveries and drain water volume

This paper describes the application of an economic incentive program to achieve water quality objectives by motivating improvements in farm-level water management practices. The program includes farm-specific water allotments, tiered water pricing, and low-interest loans for purchasing irrigation equipment. The implementation of this program in a California water district has resulted in significant reductions in irrigation deliveries and drain water volume. Since the program was implemented, average irrigation depths have declined by 25% on cotton fields, 9% on tomatoes, 10% on cantaloupes, 30% on seed alfalfa, and 29% on grain fields. The average volume of drain water collected each year in subsurface drainage systems has declined from 4.8 million m3 during 1986 through 1989 to 2.6 million m3 during 1990 through 1993. These results confirm that economic incentives can be effective in generating improvements in water quality.

Enhancing water policy discussions by including analysis of non-water inputs and farm-level constraints

Abstract Water resource professionals have many opportunities to contribute to policy discussions regarding agricultural productivity. Often those discussions are focused on increasing the output generated with limited water supplies, such as maximizing the “crop per drop” or improving irrigation efficiencies, either at the field level or throughout a river basin. Policy discussions involving water resources in developing countries can be enhanced by placing greater emphasis on the roles of non-water inputs and resource constraints in farm-level production and marketing decisions. Three categories of policies that lie outside the water resource realm, but have substantial impacts on water use and agricultural productivity, are examined: (1) policies that modify farm-level input and output prices directly; (2) international trade policies; and (3) policies that modify key institutions, such as land tenure and the sources of investment funds.

Wastewater: Economic Asset in an Urbanizing World

The challenge of providing food, water, and nutritional security for households and communities in 2050 will be greater than the challenge today. The increasing demands, especially from urban areas, will place significant pressure on land, water, and energy resources. While water recycling and reuse offer the opportunity to augment water resources, there are other valuable resources that can be recovered, as well. Innovative technologies are available that can transform wastewater and bio-solids into energy, fertilizer and other useful materials. With additional investment in resource recovery and reuse, the potential for achieving cost recovery in the sanitation sector increases. A key step is to introduce ‘business thinking’ and private sector investments in a sector that traditionally relies on public funding. With continued applied research, effective policies, supportive institutional capacities, private sector involvement, and successful business development and advocacy, the prospects of transforming wastewater from an environmental burden into a safe economic asset are quite promising.

The Virtual Water Metaphor Enhances Policy Discussions Regarding Scarce Resources

Abstract In a recent issue of Water International, three authors discuss their views of the virtual water metaphor that is used to describe the water embedded in crops that are traded in international markets. The term ‘virtual water’ was created originally to gain the attention of public officials responsible for choosing policies that influence water use in arid regions. Over time, both the terminology and the scope of the virtual water metaphor have been extended beyond the original purpose. This paper supports the view that the virtual water metaphor is helpful in encouraging public officials to consider the scarcity value (opportunity cost) of water when designing policies that influence water use. The paper proposes, also, that the policy relevance of the virtual water metaphor is found primarily in its application to issues regarding the supply of agricultural products, rather than demand. The distinction between supply and demand issues and the potential value of the virtual water metaphor in policy discussions regarding supply are demonstrated using three examples of water allocation decisions, described within the framework of economic optimization. The examples include wheat production in Saudi Arabia and the production of sudangrass and ethanol in the United States.