Design of Efficient Water Pricing Policies Integrating Basinwide Resource Opportunity Costs

By ignoring the opportunity cost of water use, water is undervalued, which can lead to significant errors in investments and water allocation decisions. The marginal resource opportunity cost (MROC) varies in time and space, as resource availability, demands, and users’ WTP vary. This spatial and temporal variability can only be captured by basinwide hydro-economic models integrating water demands and environmental requirements, resources, infrastructure, and operational and institutional restrictions. This paper presents a method for the simulation of water pricing policies linked to water availability, and the design of efficient pricing policies that incorporate the basinwide marginal value of water. Two approaches were applied: priority-based simulation and economic optimization. The improvement in economic efficiency was assessed by comparing the results from simulation of the current system operation and the pricing schedule. The difference between the benefits for the simulated current management and the upper bound benefits from optimization indicates the maximum gap that could be bridged with pricing. In the application to a synthetic case, a storage-dependent step pricing schedule derived from average MROC values led to benefits that capture 80% of the gap of net benefits between management without pricing and the economically optimal management. Different pricing policies were tested, depending not only on reservoir storage but also on previous inflows. The results show that the method is useful for designing pricing policies that enhance the economic benefits, leading to more efficient resource allocations over time and across the competing uses.This study has been partially funded by the EU 6th FP project AQUAMONEY (SSPI-022723), the 7th FP GENESIS project (226536), and SAWARES (Plan Nacional I+D+i 2008-2011, CGL2009-13238-C02-01 and C02-02) and SCARCE (Consolider-Ingenio 2010 CSD2009-00065) of the Spanish Ministry of Economy and Competitiveness.Pulido-Velazquez, M.; Álvarez Mendiola, E.; Andreu Álvarez, J. (2013). Design of Efficient Water Pricing Policies Integrating Basinwide Resource Opportunity Costs. Journal of Water Resources Planning and Management. 139(5):583-592. https://doi.org/10.1061/(ASCE)WR.1943-5452.0000262S583592139

Water accounting for stressed river basins based on water resources management models

[EN] Water planning and the Integrated Water Resources Management (IWRM) represent the best way to help decision makers to identify and choose the most adequate alternatives among other possible ones. The System of Environmental-Economic Accounting for Water (SEEA-W) is displayed as a tool for the building of water balances in a river basin, providing a standard approach to achieve comparability of the results between different territories. The target of this paper is to present the building up of a tool that enables the combined use of hydrological models and water resources models to fill in the SEEA-W tables. At every step of the modelling chain, we are capable to build the asset accounts and the physical water supply and use tables according to SEEA-W approach along with an estimation of the water services costs. The case study is the Jucar River Basin District (RBD), located in the eastern part of the Iberian Peninsula in Spain which as in other many Mediterranean basins is currently water-stressed. To guide this work we have used PATRICAL model in combination with AQUATOOL Decision Support System (DSS). The results indicate that for the average year the total use of water in the district amounts to 15,143 hm3/year, being the Total Water Renewable Water Resources 3909 hm3/year. On the other hand, the water service costs in Jucar RBD amounts to 1634 million per year at constant 2012 prices. It is noteworthy that 9% of these costs correspond to non-conventional resources, such as desalinated water, reused water and water transferred from other regions.The authors thank the anonymous reviewers for their valuable comments, suggestions and positive feedback. All remaining errors, however, are solely the responsibility of the authors. We would also like to express our gratitude to the Jucar River Basin Authority – Confederación Hidrográfica del Júcar (Spanish Ministry of Agriculture, Food and Environment) for providing data to develop this study. The authors wish to thank the Spanish Ministry of Economy and Competitiveness for its financial support through the NUTEGES project (CGL2012-34978). We also value the support provided by the European Community's Seventh Framework Program in financing the projects ENHANCE (FP7-ENV2012, 308438) and IMPREX (H2020-WATER-2014-2015, 641811).Pedro Monzonís, M.; Solera Solera, A.; Ferrer Polo, FJ.; Andreu Álvarez, J.; Estrela Monreal, T. (2016). Water accounting for stressed river basins based on water resources management models. The Science of The Total Environment. 565:181-190. https://doi.org/10.1016/j.scitotenv.2016.04.161S18119056

The potential impact of markets for irrigation water in Italy and Spain: a comparison of two study areas

none3The viability of irrigated systems in Southern Europe is closely linked to efficient institutional settings and water-allocation mechanisms. A significant, although not widely used, mechanism for water allocation is an intra-sectorial water market. The objective of this paper is to evaluate to what extent water markets may contribute to the improvement of the efficiency of water allocation and to the profitability of irrigated agriculture. The related issues of water allocation among farm types and farm specialisation are also addressed. The analysis is based on a basin-level linear programming model, comparing the situation with and without a market. It includes both fixed and variable transaction costs and estimates their combined effects on market performances. The model is applied in two areas in Southern Italy and Spain, and simulates the behaviour of different farm types, derived from cluster analysis on a sample of farms in each area. The paper confirms that water markets could potentially improve the economic efficiency of water use, in terms of higher profit per hectare, given limited water availability. The potential improvements are associated with a more intense specialisation of farms and are strongly differentiated among farmers, particularly where significant restrictions to water availability occur. This corroborates the expectations of institutional difficulties in implementing water markets. However, the exchanges, and consequently the potential effects of water markets, are heavily affected by the actual level of water availability, as well as the size and the structure (fixed vs. proportional) of transaction costs. The paper calls for a more in-depth analysis of the connections between market performances and institutional settings, as related to the issue of water-agriculture policy design and coordination.http://www.blackwellpublishing.com/journal.asp?ref=1364-985X&site=1 ISI Journal Citation Reports® Ranking: 2005: 3/9 (Agricultural Economics & Policy); 54/175 (Economics) Impact Factor: 0.867noneJ. Pujol; M. Raggi; D. ViaggiJ. Pujol; M. Raggi; D. Viagg