Barriers to water markets in the Heihe River basin in northwest China

Tradable water rights systems are becoming an important way to achieve distributive efficiency for water resources. However, it is not easy for countries or regions to establish water markets due to the existence of various barriers. In early 2002, the Ministry of Water Resources (MWR) of China initiated an experimental project—Building Water-saving Society in Zhangye City. This project was the first of its kind in China. The aim of the project was to establish a new water use rights (WUR) system with tradable water quotas and to reallocate water resources reasonably and efficiently through market-based instruments. This paper presents the research done on the system and water markets. It has been found that that the system is hard to implement well and that WUR trading is not popular. The barriers to implementing a WUR system are social and administrative in nature. WUR trading faces management, legal, administrative, and fiscal barriers. We discuss why these barriers exist and we provide policy recommendations to overcome them.     

An integrated water trading-allocation model, applied to a water market in Australia

Temporary water trading is an established and growing phenomenon in the Australian irrigation sector. However, decision support and planning tools that incorporate economic and biophysical factors associated with temporary water trading are lacking. In this paper the integration of an economic trading model with a hydrologic water allocation model is discussed. The integrated model is used to estimate the impacts of temporary water trading and physical water transfers. The model can incorporate economic and biophysical drivers of water trading. The economic model incorporates the key trade drivers of commodity prices, seasonal water allocations and irrigation deliveries. The hydrologic model is based on the Resource Allocation Model (REALM) framework, which facilitates hydrologic network simulation modelling. It incorporates water delivery system properties and operating rules for the main irrigation and urban centres in a study area.The proposed integration method has been applied to a case study area in northern Victoria, Australia. Simulations were conducted for wet and dry spells, a range of commodity prices and different irrigation distribution system configurations. Some example analyses of scenarios incorporating water trading were undertaken. From these analyses potential bottlenecks to trade that constrain the economic benefits from temporary water trading were identified. Furthermore, it was found that in certain areas of the system, trading can make impacts of long drought spells worse for water users, e.g. irrigators. Thus, the integrated model can be used to quantify short-term and long-term third party impacts arising from temporary water trading. These findings also highlight the need to link “paper trades” (estimated by economic models) to physical water transfers (estimated by biophysical models).     

Efficiency gains from water markets: Empirical analysis of Watermove in Australia

We analyse supply, demand, and welfare measures in markets where the temporary trading of water rights is reasonably active and liquid on a weekly basis. We identify four important characteristics of water trading within the Watermove program: (1) demand is highly responsive to price changes, supporting evidence that farmers’ participation is driven by the advantages water markets provide in reducing seasonal risk; (2) some efficiency enhancing trades are prevented from taking place due to physical limitations of the delivery system, thereby reducing the ability of the market to move toward equilibrium. In addition, these limitations also created price premiums in some zones; (3) variations in the types of products traded are explained by differences in the administrative charges for trading and current drought conditions; and (4) relatively large gains have been made thus far, suggesting that water markets will expand and generate additional increases in consumer and producer surplus in the future.     

FSSIM, a bio-economic farm model for simulating the response of EU farming systems to agricultural and environmental policies

The disciplinary nature of most existing farm models as well as the issue specific orientation of most of the studies in agricultural systems research are main reasons for the limited use and re-use of bio-economic modelling for the ex-ante integrated assessment of policy decisions. The objective of this article is to present a bio-economic farm model that is generic and re-usable for different bio-physical and socio-economic contexts, facilitating the linking of micro and macro analysis or to provide detailed analysis of farming systems in a specific region. Model use is illustrated in this paper with an analysis of the impacts of the CAP reform of 2003 for arable and livestock farms in a context of market liberalization. Results from the application of the model to representative farms in Flevoland (the Netherlands) and Midi-Pyrenees (France) shows that CAP reform 2003 under market liberalization will cause substantial substitution of root crops and durum wheat by vegetables and oilseed crops. Much of the set-aside area will be put into production intensifying the existing farming systems. Abolishment of the milk quota system will cause an increase of the average herd size. The average total gross margin of farm types in Flevoland decreases while the average total gross margin of farms in Midi-Pyrenees increases. The results show that the model can simulate arable and livestock farm types of two regions different from a bio-physical and socio-economic point of view and it can deal with a variety of policy instruments. The examples show that the model can be (re-)used as a basis for future research and as a comprehensive tool for future policy analysis.     

Removing barriers to facilitate efficient water markets in the Murray-Darling Basin of Australia

We discuss the role and characteristics of water markets in Australia in facilitating efficient water allocation. Administrative, regulatory and/or political barriers to effective functioning of water markets are reviewed with a focus on the southern Murray-Darling Basin (MDB) region of Australia. A mathematical model is developed to estimate the costs of existing restrictions and the benefits from potential changes in water markets (e.g., removing barriers in temporary water markets). The modelling results reveal that expanding trade leads to an increase in mean annual net returns from AU $2502 million to AU $2590 million (i.e., an increase of AU $88 million). When the current volume restrictions, exchange rates, and trading charges are accounted for, mean annual net returns reduced from AU $2590 million to AU $2573 million (i.e., a reduction of AU $17 million). The exclusion of any of the three southern MDB states from the interstate water trading imposes significant costs. If South Australia, New South Wales or Victoria withdraws from the water market, net returns are reduced by AU $27 million, AU $31 million and $63 million, respectively. The paper outlines the policy implications of strategies to remove market barriers and to facilitate efficient and effective water trading.     

Using auction mechanisms to reveal costs for water quality improvements in Great Barrier Reef catchments in Australia

There is increasing interest in the use of market-based instruments such as tenders and trading systems to address water quality issues. While the focus is typically on the improvements in resource allocation that are generated, these instruments also play an important role in addressing issues of asymmetric information. The use of water quality tenders to reveal the opportunity costs of changing agricultural practices can help policy makers to understand the potential costs of misallocating public resources and to design better ways of achieving water quality improvements. This role of water quality tenders to reveal opportunity costs is demonstrated by reporting four pilot applications to improve water quality into the Great Barrier Reef in Australia. The results demonstrate the potential for opportunity costs to vary substantially between agricultural producers, and across industries, catchments and pollutants. The results from these case studies indicate that the most cost-effective water quality improvements may be generated from the horticulture and dairy sectors. In contrast, the opportunity costs of reducing emissions from the cane and grazing industries appear to be higher.     

The impact of water and agriculture policy scenarios on irrigated farming systems in Italy: An analysis based on farm level multi-attribute linear programming models

The objective of this paper is to evaluate the impacts of agriculture and water policy scenarios on the sustainability of selected irrigated farming systems in Italy, in the context of the forthcoming implementation of the directive EC 60/2000. Directive EC 60/2000 (Water Framework Directive) is intended to represent the reference norm regulating water use throughout Europe. Five main scenarios were developed reflecting aspects of agricultural policy, markets and technologies: Agenda 2000, world market, global sustainability, provincial agriculture and local community. These were combined with two water price levels, representing stylised scenarios for water policy. The effects of the scenarios on irrigated systems were simulated using multi-attribute linear programming models representing the reactions of the farms to external variables defined by each scenario. The output of the models consists of economic, social and environmental indicators aimed at quantifying the impact of the scenarios on different aspects of sustainability relevant for irrigated farming systems. Five Italian irrigated farming systems were considered: cereal, rice, fruit, vegetables and citrus. The results show the diversity of irrigated systems and the different effects that water pricing policy may produce depending on the agricultural policy, market and technological scenarios. They also highlight a clear trade-off between socio-economic sustainability and environmental (water, nitrogen, pesticide) sustainability. Water pricing will have, in most cases, less impact than agricultural markets and policy scenarios, though it appears to be an effective instrument for water regulation in the least intensive irrigated systems considered. This emphasises the need for a differentiated application of the Water Framework Directive at the local level as well as a more careful balance of water conservation, agricultural policy and rural development objectives.     

Mutual monitoring in a tradable water rights system: A case study of Zhangye City in Northwest China

Tradable water right systems are becoming important ways to achieve distributive efficiency in water resources. In 2002, China's Ministry of Water Resources initiated a pilot project in Zhangye City in Northwest China. The project was designed to establish a new water use rights system with tradable water quotas with the hope of reallocating water resources more efficiently through market-based instruments. However, the tradable water right system is not well enforced. Based on both primary and secondary data, we find that mutual monitoring can improve the effectiveness of a water allocation and trading program. For both surface water and groundwater irrigation systems, the conditions needed to stimulate mutual monitoring include: (1) a hierarchical management system; (2) well defined water rights or quotas; (3) control of total water quotas and water sources by the upper hierarchy; and (4) an approximate balance between the water supply or pumping capacity and the water quota. We describe also the institutional requirements for stimulating mutual monitoring.     

Productive efficiency and allocative efficiency: why better water management may not solve the problem

It is commonplace for scientists and professionals who are not part of national and communal water discourses to have very clear views on what is economically and environmentally sound. They are certain of the fundamental principles which they claim should guide the development of policy. They believe that it will be possible to communicate the idea that `more can be achieved with less' and that `better water management' is something over which there can be a consensus. It will be demonstrated in the following analysis that only some ideal water allocation and management options are politically feasible. More importantly, it will be shown that the measures from which the most water use efficiency gains can be achieved are the ones for which `political prices' would have to be paid. These optimum options are, therefore, rarely addressed.     

农业用水权有偿转让经济技术措施研究

从经济学角度出发,探讨了农业用水权转让的经济管理集成技术,研究内容包括农业初始水权的界定与水权分配、国家政策环境对农业用水权有偿转让的影响、农业用水权有偿转让主要内容、程序步骤等,最后结合河南省群库灌区调查,计算分析了灌区用水量转让、农业用水转移的供水价格与供水年限以及农业用水量转让后对当地工农业经济和农民收入的影响等。研究成果对我国农业用水权有偿转让以及工农业经济发展具有一定的参考价值。     

Empirical assessment of water management institutions in northern China

We examine the development of irrigation management in northern China using data from village and household panels. During the past decade, reform-oriented institutions, such as water user associations and contracting, have largely replaced the traditional institution of collective management in village-level irrigation systems. A feature unique to China is that water user associations and contractors are provided with monetary incentives to save water. Water user associations have not yet achieved the broad-based participation of farmers that some advocates consider as a primary goal for forming the associations. Many village leaders serve also as the leaders of water user associations, thus possibly reducing opportunities for receiving operational input and policy direction from farmers. However, we observe improved performance of irrigation systems managed by water user associations, relative to collective management, in terms of maintenance expenditures, the timeliness of water deliveries, and the rates of fee collection. Performance has improved also in systems managed by contractors, although not as substantially as in the case of water user associations.     

Managing water in agriculture for food production and other ecosystem services

Agricultural systems as well as other ecosystems generate ecosystem services, i.e., societal benefits from ecological processes. These services include, for example, nutrient reduction that leads to water quality improvements in some wetlands and climatic regulation through recycling of precipitation in rain forests. While agriculture has increased ‘provisioning’ ecosystem services, such as food, fiber and timber production, it has, through time, substantially impacted other ecosystem services. Here we review the trade-offs among ecosystem services that have been generated by agriculture-induced changes to water quality and quantity in downstream aquatic systems, wetlands and terrestrial systems. We highlight emerging issues that need urgent attention in research and policy making. We identify three main strategies by which agricultural water management can deal with these large trade-offs: (a) improving water management practices on agricultural lands, (b) better linkage with management of downstream aquatic ecosystems, and (c) paying more attention to how water can be managed to create multifunctional agro-ecosystems. This can only be done if ecological landscape processes are better understood, and the values of ecosystem services other than food production are also recognized.     

The effect of water supply uncertainty on farmers’ choice of crop portfolio

This paper analyzes the effect of water supply uncertainty on farmers’ choice of crop portfolio. The paper presents an innovative model to estimate the value of uncertainty of water supply, and then tests the model using data from Israel. The modeling results provide support to the hypothesis that uncertainty induces farmers to prefer crops whose growth requires less agricultural capital accumulation, despite their lower profitability (agricultural capital referring to trees and other plants which take a significant period of time to mature). This is due to the risk that in a given year water supply will fall below a certain minimal level, thereby causing loss of all accumulated capital. The paper also examines a government intervention policy for mitigating uncertainty: use of reclaimed wastewater in crop irrigation as a supplement for freshwater supply. The costs associated with constructing the required wastewater reclamation and supply facilities are compared to the benefits of additional farm income earned through a more certain on-farm water supply. It is shown that under certain conditions implementation of this policy is indeed economically worthwhile.     

Estimating the potential gains from water markets: a case study from Tunisia

Water markets can improve water use efficiency through the transfer of water to users who can obtain the highest marginal return from using it. Existing water markets are implemented among farmers or between farmers and urban water companies or hydropower companies. Several studies have shown that farmers may benefit from trading water mainly in countries where water scarcity is increasing and new water supply projects are either very costly or not possible because of environmental concerns. This paper estimates the potential benefits and losses of implementing water market among farmers and between farmers and urban water company in Tunisia. We used linear programming to examine four separate farm models and an aggregate model. The method is applied to an irrigation area of 4500 ha in Northern Tunisia. Results indicate that water trading among farmers would be quite limited and would have a minor impact on farmers’ income. In contrast, the market among farmers and the urban water company offers higher volumes of water trades to urban users and helps increase farmers’ profitability by up to 7.9%. The sale of water to the urban company is accompanied by a decrease in occasional labor by as much as 34.8% and a decrease of up to 17.6% in farmers’ expenditures for inputs and machinery. Additionally, results obtained in this paper show that inter-year storage of irrigation water may be more advantageous than selling water to the urban utility. Whether farmers would opt to sell water or inter-temporarily store it would depend on the establishment of water rights and the empowerment of farmers.     

Reducing water quality degradation through minimized leaching management

The U.S.A. has adopted a policy of enhancing water quality and of conserving natural resources. The concept of minimized leaching has been advanced to help meet these goals by reducing salinity pollution from irrigated agriculture. It has received considerable attention by those concerned with management of water resources and is promoted by some as a generally applicable method for minimizing salinity pollution. This paper reviews the basis of the concept and identifies the conditions under which minimized leaching will and will not enhance water quality.     

Water markets and soil salinity nexus: Can minimum irrigation intensities address the issue?

Agricultural water markets can facilitate adjustments to water scarcity and competition and enhance economic efficiency, but markets cannot automatically balance efficiency, equity and environmental sustainability goals. The consequences of water trading on soil salinity in irrigation areas are not yet fully understood, but recognized as an issue that needs to be analysed. This paper explores the nexus between water trading and groundwater-induced soil salinity in a selected irrigated area in the Murray-Darling Basin. Results show that minimum irrigation intensities must be met to flush salts out of the root zone especially in shallow water table/high salinity impact areas. Such minimum irrigation intensities are helpful but not necessarily in deep water table/low salinity impact areas. Should water markets lead to permanent water transfers out of mature irrigation areas, minimum irrigation intensity needs might not be met in high salinity impact areas, causing substantial negative impacts on resource quality and agricultural productivity. Water trading that adds to salinity cannot be economically viable in the long run. The tradeoffs between water trading and environmental and equity goals need to be determined. This work contributes to the wider debate on Australian water policy aimed at achieving water security through water trading in the Murray-Darling Basin.     

Water management and crop production for food security in China: A review

Food security is a high priority issue on the Chinese political agenda. China’s food security is challenged by several anthropogenic, sociopolitical and policy factors, including: population growth; urbanization and industrialization; land use changes and water scarcity; income growth and nutritional transition; and turbulence in global energy and food markets. Sustained growth in agricultural productivity and stable relations with global food suppliers are the twin anchors of food security. Shortfalls in domestic food production can take their toll on international food markets. Turbulence in global energy markets can affect food prices and supply costs, affecting food security and poverty. Policy safeguards are needed to shield food supply against such forces. China must make unremitting policy responses to address the loss of its fertile land for true progress towards the goal of national food security, by investing in infrastructure such as irrigation, drainage, storage, transport, and agricultural research and institutional reforms such as tenure security and land market liberalization. The links between water and other development-related sectors such as population, energy, food, and environment, and the interactions among them require reckoning, as they together will determine future food security and poverty reduction in China. Climate change is creating a new level of uncertainty in water governance, requiring accelerated research to avoid water-related stresses.     

Managing water in rainfed agriculture—The need for a paradigm shift

Rainfed agriculture plays and will continue to play a dominant role in providing food and livelihoods for an increasing world population. We describe the world's semi-arid and dry sub-humid savannah and steppe regions as global hotspots, in terms of water related constraints to food production, high prevalence of malnourishment and poverty, and rapidly increasing food demands. We argue that major water investments in agriculture are required. In these regions yield gaps are large, not due to lack of water per se, but rather due to inefficient management of water, soils, and crops. An assessment of management options indicates that knowledge exists regarding technologies, management systems, and planning methods. A key strategy is to minimise risk for dry spell induced crop failures, which requires an emphasis on water harvesting systems for supplemental irrigation. Large-scale adoption of water harvesting systems will require a paradigm shift in Integrated Water Resource Management (IWRM), in which rainfall is regarded as the entry point for the governance of freshwater, thus incorporating green water resources (sustaining rainfed agriculture and terrestrial ecosystems) and blue water resources (local runoff). The divide between rainfed and irrigated agriculture needs to be reconsidered in favor of a governance, investment, and management paradigm, which considers all water options in agricultural systems. A new focus is needed on the meso-catchment scale, as opposed to the current focus of IWRM on the basin level and the primary focus of agricultural improvements on the farmer's field. We argue that the catchment scale offers the best opportunities for water investments to build resilience in small-scale agricultural systems and to address trade-offs between water for food and other ecosystem functions and services.     

不同关阀规律与出水口形式对管路水锤的影响

为了研究事故工况下管线末端阀门不同关闭方式对管线末端水锤及整体水锤压力的影响,针对长距离有压输水管道建模计算存在管线简单、求解信息种类少、数据量大的特点,采用特征线法对山东莱城发电厂供水管路水力瞬态过程进行了模拟,分析了不同关阀规律对管道末端水锤的影响.结果表明,出口阀门的关闭规律对末端水锤的影响很大,由于受阀门自身限制,出口阀门按最优关闭规律关闭时仍会产生较大末端水锤,需要使用其他防护措施消除或降低末端水锤.提出并验证了一种可以有效降低末端水锤的新型管路出水口,通过对比验证发现,使用新型出水口后管线的最大内水压力由128 MPa下降至70 MPa,可以有效降低水锤压力峰值,防止由于出口阀门故障或失电而产生的管道事故,进而提高输水管道的安全稳定性,且改造成本较低.研究结果可为管道的末端水锤防护提供新的思路.     

Irrigation modernization and water conservation in Spain: The case of Riegos del Alto Aragón

This study analyzes the effects of irrigation modernization on water conservation, using the Riegos del Alto Aragón (RAA) irrigation project (NE Spain, 123354 ha) as a case study. A conceptual approach, based on water accounting and water productivity, has been used. Traditional surface irrigation systems and modern sprinkler systems currently occupy 73% and 27% of the irrigated area, respectively. Virtually all the irrigated area is devoted to field crops. Nowadays, farmers are investing on irrigation modernization by switching from surface to sprinkler irrigation because of the lack of labour and the reduction of net incomes as a consequence of reduction in European subsidies, among other factors. At the RAA project, modern sprinkler systems present higher crop yields and more intense cropping patterns than traditional surface irrigation systems. Crop evapotranspiration and non-beneficial evapotranspiration (mainly wind drift and evaporation loses, WDEL) per unit area are higher in sprinkler irrigated than in surface irrigated areas. Our results indicate that irrigation modernization will increase water depletion and water use. Farmers will achieve higher productivity and better working conditions. Likewise, the expected decreases in RAA irrigation return flows will lead to improvements in the quality of the receiving water bodies. However, water productivity computed over water depletion will not vary with irrigation modernization due to the typical linear relationship between yield and evapotranspiration and to the effect of WDEL on the regional water balance. Future variations in crop and energy prices might change the conclusions on economic productivity.