Groundwater in Spain, as in other arid or semiarid countries worldwide, has been intensely used for the expansion of irrigated agriculture. This booming development has induced a remarkable socioeconomic development in many rural areas but has produced far-reaching environmental problems. In the Spanish Western La Mancha Aquifer, the excessive, and sometimes illegal, water abstraction for irrigation agriculture has resulted in the Aquifer’s overexploitation and has been responsible of the degradation of the associated wetlands “Tablas de Daimiel”, an internationally reputed, Ramsarnominated aquatic ecosystem. To undertake this analysis, a mathematical programming model has been developed to simulate farmers’ behaviour and their responses to different water policy scenarios. Specifically, the policy simulations selected are: alternative water pricing schemes (uniform volumetric and block-rate water tariffs), water use quota systems and water rights market. Results show that controlling illegal water mining is a necessary condition but it is not sufficient to recover the aquifer. Consequently, other measures will be necessary for an effective water management in this area. Among these, the block-rate water pricing scheme seems the most cost-effective system to reach the goal of aquifer sustainability but will entail important income losses in several farms. Therefore, we cannot conclude that a unique water conservation policy instrument will be the best overall solution for all types of holdings that will respond to efficiency as well as to equity considerations. It seems reasonable to make a combination of the tools proposed, even including additional measures that promote an environmental protection and develop sustainable agricultural systems.Environmental degradation, water policies, cost-effectiveness analysis, Resource /Energy Economics and Policy,

Blanco, Irene

Flichman, Guillermo

Varela-Ortega, Consuelo

English

Research Papers in Economics

  1 
12
th Congress of the European Association of Agricultural Economists – EAAE 2008 
Cost-Effectiveness of Water Conservation Measures:  
A Multi-level Analysis with Policy Implications 
Blanco I.
 1, Varela-Ortega C.
 2 and Flichman G.
3 
1 Polytechnic University of Madrid/Department of Agricultural Economics, Research Assistant, Madrid, Spain  
2 Polytechnic University of Madrid/Department of Agricultural Economics, Associate Professor, Madrid, Spain 
3 International Centre for Advanced Mediterranean Agronomic Studies/Mediterranean Agronomic Institute of Montpellier, Professor 
Emeritus, Montpellier, France  
Abstract— Groundwater in Spain, as in other arid 
or semiarid countries worldwide, has been intensely 
used for the expansion of irrigated agriculture. This 
booming development has induced a remarkable 
socioeconomic development in many rural areas but 
has produced far-reaching environmental problems. 
In the Spanish Western La Mancha Aquifer, the 
excessive, and sometimes illegal, water abstraction for 
irrigation agriculture has resulted in the Aquifer’s 
overexploitation and has been responsible of the 
degradation of the associated wetlands “Tablas de 
Daimiel”, an internationally reputed, Ramsar-
nominated aquatic ecosystem. To undertake this 
analysis, a mathematical programming model has 
been developed to simulate farmers’ behaviour and 
their responses to different water policy scenarios. 
Specifically, the policy simulations selected are: 
alternative water pricing schemes (uniform volumetric 
and block-rate water tariffs), water use quota systems 
and water rights market. Results show that 
controlling illegal water mining is a necessary 
condition but it is not sufficient to recover the aquifer. 
Consequently, other measures will be necessary for an 
effective water management in this area. Among these, 
the block-rate water pricing scheme seems the most 
cost-effective system to reach the goal of aquifer 
sustainability but will entail important income losses 
in several farms. Therefore, we cannot conclude that a 
unique water conservation policy instrument will be 
the best overall solution for all types of holdings that 
will respond to efficiency as well as to equity 
considerations. It seems reasonable to make a 
combination of the tools proposed, even including 
additional measures that promote an environmental 
protection and develop sustainable agricultural 
systems.  
Keywords— Environmental degradation, water 
policies, cost-effectiveness analysis. 
I. INTRODUCTION  
Groundwater in Spain, as in other arid or semiarid 
countries worldwide, has been intensely used for the 
expansion of irrigated agriculture due to its easy 
access, low cost of irrigation infrastructure and high 
farming profitability [1][2][3].  
This booming development has contributed 
significantly to stimulate the socioeconomic 
development and household food security in the 
rural areas. However, in many cases, the largely 
uncontrolled agricultural groundwater use has 
produced far-reaching environmental and social 
problems (water table depletion, groundwater 
quality degradation, destruction of associated 
wetlands and water ecosystem, proliferation of free-
riding behaviors) [4][5]. This is an outstanding fact 
in several Spanish aquifers, in which groundwater is 
the primary water source for all uses, but it is 
specially remarkable in the Western La Mancha 
Aquifer, situated in the inland central region of 
Castilla-La Mancha in the Upper Guadiana river 
basin. In this area, the excessive, and sometimes 
illegal, water abstraction for irrigation agriculture 
has resulted in the Aquifer’s overexploitation and 
has been responsible of the degradation of the 
associated wetlands of the national park “Tablas de 
Daimiel”, an internationally reputed, Ramsar-
nominated aquatic ecosystem of high ecological 
value. 
II. OBJECTIVE OF THE RESEARCH 
In this context, the objective of this paper is to 
propose and analyze alternative water conservation 
policies that will attain a reduction in water 
consumption, compatible with the natural recharge   2 
12
th Congress of the European Association of Agricultural Economists – EAAE 2008 
rate of the Western La Mancha aquifer that will, 
ultimately, promote a sustainable groundwater 
management in the Upper Guadiana basin. 
III. METHODOLOGICAL FRAMEWORK 
The methodology can be summarized in the 
following scheme (see figure 1). 
Fig. 1 Methodological scheme 
This analysis comprises the following parts:   
1.  Elaboration of a database supported by an ample 
field work carried out between 2005 and 2007 in 
the region that consists in formal and informal 
surveys and interviews to the main stakeholders 
involved. 
2.  Selection of the representative farms from an 
elaborated farm typology and irrigation 
associations’ typology that represent the 
agricultural sector in the area. 
3.    Elaboration of an aggregated non-linear 
Mathematical Programming Model of 
constrained optimization built to simulate 
farmers’ behavior under different water policy 
scenarios and risk situations as a result of 
climate as well as market prices variability. The 
MPM maximizes the regional expected utility, 
while keeping the specificity of the individual 
constraints (techniques, economic, social and 
political). This dual characteristic of the model 
permits the analysis at aggregated level (basin) 
as well as at disaggregated level (farm) and it 
complements previous modeling work carried 
out in the area of study;  
4.  Selection of simulated scenarios, both policy-
driven and stakeholder-driven. They are namely 
the implementation of the on-going national 
water use quota system (water allotment rights), 
the application of alternative water pricing 
schemes (uniform volumetric and block-rate 
water tariffs), and the establishment of a water 
rights market. In all the simulated scanarios, it 
has been previously considered that all illegal 
wells have been legalized beforehand by paying 
an entry right fee;  
5.  Cost-effectiveness analysis at different levels of 
aggregation: sub-basin level that is the aquifer 
perimeter and farm level, focusing on the two 
sides of the conflict (the “legal water 
abstractions” and the “illegal water 
abstractions”). A set of indicators has been used 
to represent the economic, social and 
environmental performances of irrigated 
systems. 
IV. RESULTS AND DISCUSSION 
 
Results (in figure 2) show that controlling illegal 
water mining is a necessary condition but it is not 
sufficient to recover the aquifer. This policy option 
will contribute to reduce conflicts and social unrest 
among irrigators, establishing the basis for 
cooperation among economic agents, but this option 
will not decrease the volume of water extracted to 
+ Statistical research 
Region and study area; Field work 
Database 
Stakeholders’  
consultation 
Technical coefficients & parameters 
Selection  
of the 
representative 
farms 
A
g
g
r
e
g
a
t
i
o
n
 
p
r
o
c
e
s
s
 
Obj. function  Income  Risk 
Economic 
Technical Social 
Constraint 
system  Description 
of policy 
scenarios 
Non-linear mathematical programming model 
Water rights 
market 
Water pricing 
(Uniform volumetric &  
Block-rate w.prices) 
Simulated 
scenarios 
Results 
Water use 
quota 
Policy option 
(Legalization of illegal wells) 
+ 
Water policy instruments 
Environmental impact: 
-  groundwater 
consumption 
-  farmers’ strategies 
Economic impact: 
-  farmers’ income 
-  public 
collection/exp. 
Cost-
effectiveness 
analysis 
Policy 
Results   3 
12
th Congress of the European Association of Agricultural Economists – EAAE 2008 
the optimum desired level (230 Hm
3, which is the 
Natural Recharge Rate of the Western La Mancha 
Aquifer (NNR)).  
NRR: Natural Recharge Rate of the Western La Mancha Aquifer. 
Fig. 2 Total water consumption with different 
policy options 
Consequently, other measures will be necessary 
for an effective water management in this area. 
Figure 3 shows the results of the application of 
uniform volumetric and block-rate water prices on 
water demand in the Western La Mancha Aquifer. 
The results indicate that to induce a reduction in 
water consumption of 30% close to the aquifer’s 
sustainability target (NNR), higher prices are needed 
in the uniform volumetric system than in the block-
rate system. Indeed, the uniform volumetric system 
produces a higher income loss than the block-rate 
pricing system but it also provides greater 
collections for the water agencies [6][7].  In both 
cases, the water demand responses are very different 
according to the farm analysed. The aggregated farm 
F2 shows a much more stressed inelastic trend than 
the aggregated farm F1.  
 
 
 
 
 
 
 
 
 
 
 
Fig. 3 Water demand curves 
A quota use system and a water rights market 
have been also simulated to meet the objective of 
attaining the aquifer’s recharge. Following [8] and 
other previous works of the authors [3][9][10], we 
have use cost-effectiveness analysis to identify the 
most cost-effective policy option for achieve the 
aquifer sustainability. Results (summarized in table 
1) indicate that the most cost-effective instrument is 
the block-rate water pricing system (ranked 1) 
because it allows reaching the objective with the 
lowest social cost (179.51 €/ha). The uniform 
volumetric water pricing system (ranked 2) produces 
shyly a higher social cost (179.71 €/ha). The water 
rights market policy is ranked in third position 
(social cost of 180.25) but it entails the lowest 
private cost (249.71 €/ha). Finally, the water use 
quota system is ranked in forth position. This 
management instrument produces the highest net 
social cost (193.57 €/ha) and the lowest public 
benefits (60.08 €/ha).  
0
100
200
300
400
500
Init.Situat Leg. Vol.w.p
(0.054€ /m 3)
Block w.p
(P1 =0.042€ /m 3;
P2=0.048€ /m 3)
Quotas Market
Hm3 Aggregated "legal" farm type F1 Aggregated "illegal" farm type F2
NRR = 
230 Hm
3 
Western La Mancha Aquifer
0
0,02
0,04
0,06
0,08
0,1
0,12
0,14
150 180 210 240 270 300 330 360 390
Water demand (Hm
3)
P
r
i
c
e
 
(
€
/
m
3
)
Uniform volumetric w.prices Block-rate w.prices
NRR ≈230 Hm
3
P1=0.054 €/m
3 
P2=0.045 €/m
3 
Aggregated representative farms (F1, F2)
0
0,02
0,04
0,06
0,08
0,1
0,12
0,14
500 700 900 1100 1300 1500 1700 1900 2100
Water demand (m
3/ha)
P
r
i
c
e
 
(
€
/
m
3
)
F1_Volumetric w.p F2_Volumetric w.p
F1_Blocl-rate w.p F2_Block-rate w.price
F1 ≈ 993 m
3/ha
F2 ≈ 1705 m
3/ha  4 
12
th Congress of the European Association of Agricultural Economists – EAAE 2008 
Table 1 Net social cost of the water policies 
simulated in the Western La Mancha aquifer 
V. CONCLUSIONS AND POLICY 
RECOMMENDATIONS 
 
•  Controlling illegal water mining (i.e. legalizing 
illegals) is a necessary condition but it is not 
sufficient to recover the aquifer. Complementary 
policies for water conservation have to be put in 
place.  
•  Aggregated results show that overall cost-
effectiveness is not substantially different across 
policy options. However, there are important 
differences between private and public costs: 
water tariffs are the most cost-effective system 
but entails important income losses to small 
farms; the quota system has the highest social 
cost but induces lower income losses to the 
farmers; the w. rights market has the lowest 
private cost but higher public costs. Its cost-
effectiveness is ranked medium casting doubts 
about the potential of this type of water market 
(non-perfect market).  
•  The choice of a political instrument will require 
the carrying out of additional studies where 
other criteria, not considered in this research, 
should be taken into consideration, such as long 
term recurrent costs, policy enforcement 
capacity and level of social acceptance. 
•  Along these lines, it seems advisable for the 
region of the Upper Guadiana Basin to promote 
the integration of agricultural policies and water 
policies to develop sustainable agricultural 
systems (cross compliance measures) and the 
protection of water bodies according to the 
principles of the WFD and the new CAP.  
ACKNOWLEDGMENT 
The authors wish to acknowledge the research 
funds provided by the project NEWATER (New 
Approaches to Adaptive Water Management under 
Uncertainty)(IP) (nº: FP6-2003-GLOBAL-2-
SUSTDEV-6.3.2 – 511179-2) (2005-2009), DG 
RTD, European Commission,  and Caja Madrid 
Foundation. This paper has been based on the work 
developed for the CIHEAM MSc at the 
Mediterranean Agronomic Institute of Montpellier 
(IAMM), in collaboration with the Polytechnique 
University of Madrid (UPM) and within the 
framework of the EU project NeWater.  
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Index 
Water policy option 
Uniform V.w.p 
(P=0.054 €/m
3) 
Block-Rate w.p 
(P’=0.045 €/m
3) 
Water use 
quotas 
Water rights 
market 
Private cost 
(€/ha)  315.25 303.82  253.66  249.71 
Public cost 
(€/ha)  -135.54 -124.31  -60.08  -69.46 
Net social 
cost (€/ha)  179.71 179.51  193.57  180.25 
Range
  2 1  4  3   5 
12
th Congress of the European Association of Agricultural Economists – EAAE 2008 
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Corresponding author: 
•  Author: Irene Blanco   
•  Institute: Universidad Politécnica de Madrid, ETSI 
Agrónomos, Dpto. Economía y CC.SS Agrarias 
•  Street:   Av. Complutense s/n 
•  City: Madrid 
•  Country: Spain 
•  Email: irene.blanco@upm.es   
 
 
 

Cost-effectiveness of water policy options for sustainable groundwater management: a case study in Spain.

Economic consequences of wetland degradation for local populations in Africa.

Economic valuation of water resources in agriculture. From the sectoral to a functional perspective of natural resource management.

Groundwater: a global assessment of scale and significance. In: Comp.Ass.Wat.Mng in Agr.. Water for Food, Water for Life: A Comp. Ass.Wat.Mng

Integrating agricultural policies and water policies under water supply and climate uncertainty.

Policy-driven determinants of irrigation development and environmental sustainability: a case study in

Significance of the Silent Revolution of intensive groundwater use in world water policy. In:

The Agricultural Groundwater Revolution: Opportunities and Threats to Development. CABI Publication,

Cost-Effectiveness of Water Conservation Measures: A Multi-level Analysis with Policy Implications

Cost-Effectiveness of Water Conservation Measures: A Multi-level Analysis with Policy Implications

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