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On the Scarcity Value of Irrigation Water: Juxtaposing Two Market Estimating Approaches

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Abstract

The aim of this paper is to compare the supply-side and demand-side approaches for assessing the scarcity rents of irrigation water. The results obtained from the case study confirm the expectation that the demand-side rationale provides the lower bound estimate of water scarcity rents. Specifically, a hypothetical elimination of water scarcity brings extra benefits to the local farmers, but these benefits cannot compensate the costs of the backstop technology which provide such extra water. Therefore, the lost opportunities, in terms of income forgone due to water scarcity, cannot legitimize supply-side approaches alone. A “soft” sensitivity analysis was included to examine the robustness of such a cost-effective property, while the policy implications of the results are also examined.

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Notes

  1. A groundwater may or may not necessarily be classified as a non-renewable resource depending on the specific characteristics that describe its replenish.

  2. Other, non-normative and less utilitarian formulations concerning the PU objectives are also possible. This point was brought to our attention by the anonymous reviewer.

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Acknowledgements

The authors greatly appreciate the financial support of the research project LIFE08 ENV/GR/000570: HydroSense “Innovative Precision Technologies for Optimized Irrigation and Integrated Crop Management in a Water-limited Agro-system”. Also, we kindly appreciate the useful comments and suggestions we received from the Associate Editor and the two anonymous reviewers.

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Authors and Affiliations

  1. Department of Agricultural Economics and Rural Development, Agricultural University of Athens, Iera odos 75, 18855, Athens, Greece

    Athanasios Kampas

  2. School of Environmental Engineering, Technical University of Crete, Kounoupidiana, 73100, Chania, Greece

    Stelios Rozakis

Authors
  1. Athanasios Kampas
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  2. Stelios Rozakis
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Correspondence to Athanasios Kampas.

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Highlights

1. The paper compares two different approaches for assessing scarcity rents, namely the demand-side and the supply-side alternatives.

2. The demand-side approach provides the lower bound estimates for scarcity rents, while the supply-side approach gives the upper bound these estimates.

3. Given that the appropriate estimation of water scarcity rents will determine the full cost assessment and the resulting water prices, public utilities should not uncritically rely only on supply-side approaches.

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Kampas, A., Rozakis, S. On the Scarcity Value of Irrigation Water: Juxtaposing Two Market Estimating Approaches. Water Resour Manage 31, 1257–1269 (2017). https://doi.org/10.1007/s11269-017-1574-0

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  • DOI: https://doi.org/10.1007/s11269-017-1574-0

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