Karina Schoengold

The Economics of Water, Irrigation, and Development

The post-World War II era has witnessed a drastic increase in irrigation activities that have contributed substantially to the massive growth in agricultural production that enables humanity to feed its doubling population. However, a distinction has to be made between the overall positive contribution of irrigation to agricultural productivity and economic welfare and the significant amount of misallocation and mismanagement of resources that have accompanied the expansion of irrigation. In many cases, water resources have been overdeveloped; there has been overspending on capital; and significant costs in terms of loss of ecosystems, extinction of fish species, and contamination of water sources. This chapter provides an economic perspective on the contribution of irrigation and water resources to past agricultural development and future water resource management. The efficiency of water use is affected by decisions made at many levels. The inefficiencies that can occur at different levels of water management are discussed in this chapter. The analysis first considers irrigation water use by an individual, and then moves to the importance of regional management. The importance of dynamic considerations about the future, and the role of interregional management are then covered. Together, these sections present an economic framework for designing water institutions and policies to improve water resource allocation and prevent some of the current inefficiency in water resource systems. The second part of the chapter provides an overview of the benefits and costs that have been realized through agricultural water and irrigation projects in developing countries. There is a paucity of ex-post integrated assessments of these projects, so the chapter puts the pieces together, combining data with conceptual arguments.

The Use of Pricing and Markets for Water Allocation

This paper will argue that increased demand for water resources and higher cost of development of new water resources require a transition toward water systems that enhance conservation by adoption of efficient irrigation and application technologies, improving water delivery systems, and improving the efficiency of water allocation. This can be done by a transition from systems of water queuing based on historical water rights to systems of trading and efficient pricing. The design of water pricing has to consider political-economy and equity considerations and therefore we present alternative approaches — including active and passive trading with water markets, and various institutions including tiered pricing. Incentives to adopt cleaner and “greener” technology is essential for the improvement of water quality and we will present a framework for pricing water and inputs that affect water quality taking into account heterogeneity among water users and across locations. The analysis will use illustrations from various case studies including the California water market.

The Impact of AD HOC Disaster and Crop Insurance Programs on the Use of Risk-Reducing Conservation Tillage Practices

The paper estimates the impacts of risk-reducing government programs on the use of conservation tillage (no-till and other conservation tillage) practices in agriculture. Conservation tillage can be used to reduce production risk from weather shocks. However, subsidized crop insurance and disaster payments also reduce risk through financial assistance. The paper examines the extent to which risk-reducing tillage practices and government programs are substitutes for each other. The economic model shows that a decline in average weather conditions increases the use of conservation tillage. The economic model also shows that the impact of weather risk and risk aversion on risk-reducing practices like conservation tillage are ambiguous. The effect depends on the degree that losses are offset by government payments. The paper uses county-level tillage practice data from the Conservation Tillage Information Center for the three-state region of Iowa, Nebraska, and South Dakota. Results are estimated using instrumental variables and spatial panel data techniques. Instruments for the program participation and payment data include political variables and weather data. The empirical analysis shows that recent disaster and indemnity payments are associated with an increase in the use of no-till and a decrease in the use of other conservation till. Results also show that producers in counties with recent drought and flood events are more likely to use other conservation tillage. The results imply that there may be unintended impacts of changes to agricultural policies like disaster payments and crop insurance on the use of on-farm conservation practices.

Lessons to Be Learned from Groundwater Trading in Australia and the United States

This chapter provides an overview of the issues and challenges facing policy makers intending to establish groundwater markets. It studies in detail two developed countries that have introduced groundwater trading and have some experience in its implementation—Australia and the United States of America—and draws out lessons from these countries that need to be considered for the development of groundwater markets around the world. The key lessons that this chapter stresses are: the importance of establishing institutions and regulations; investing in high quality economic and scientific research; that opportunities arise from crises; and that social concerns are not always the most important considerations to be aware of for efficient and effective groundwater markets.

The Joint Impact of Drought Conditions and Media Coverage on the Colorado Rafting Industry

Decreased instream flows are thought to negatively impact river recreation, such as whitewater rafting. Runoff declines are often accompanied by high temperatures, wildfires, and associated media coverage. Very few studies have examined the impact of these accompanying factors, and none have disentangled their influence. Using regression analysis of data from the Arkansas River in Colorado, we find that reduced flows usually decrease the number of whitewater rafting customers, although very high flows also deter rafting activities. More importantly, negative media coverage of wildfires also appears to have adverse impacts on rafting tourism, controlling for instream flows and weather.

Irrigated agriculture in an era of high energy prices.

Rising energy prices will alter water allocation and distribution. Water extraction and conveyance will become more costly and demand for hydroelectric power will grow. The higher cost of energy will substantially increase the cost of groundwater, whereas increasing demand for hydroelectric power may reduce the price and increase supply of surface water. High energy prices and geopolitical considerations drive investment in landand water-intensive biofuel technology, diverting land and water supplies to energy production at the expense of food production. Thus, rising energy prices will alter the allocation of water, increase the price of food and may have negative distributional effects. The impact of rising energy prices and the introduction of biofuels can be partly offset by the development and adoption of new technologies, including biotechnology. The models considered here can be used to determine the effects of rising energy prices on inputs, outputs, allocation decisions and impact on distribution.

Carbon emissions control policies in China's power generation sector

Purpose - The purpose of this paper is to examine the potential for emissions control policy using the example of the power generation sector in China. Design/methodology/approach - The analytical model is developed using a joint production function, where carbon emissions and electricity are jointly produced using capital and fossil fuel inputs. Abatement of emissions can be achieved by investment in production capital that improves the production efficiency or abatement capital that removes the emissions. The results are estimated using data from Chinas electricity generation sector. Findings - The analytical model shows that economic growth can be achieved while still keeping the emission stock at a stable level. The results show that the level of the tax required to stabilize emissions depends greatly on the efficiency of abatement activities. As an illustration of this result, one finding shows that the required emission tax would be reduced greatly from 16 to 5 yuan/ton of emission when the abatement technology is improved from removing 10 to 30 percent of emissions flow. Research limitations/implications - The lack of carbon capture and storage technology in the real-world limits the ability to estimate some of the results from the economic growth model. Originality/value - Unlike many other papers, the empirical analysis is based on conditions from the economic model. In contrast to previous work that models emissions as an input into the production process, the model and estimation are consistent with the joint nature of electricity and emissions production.