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Water scarcity, prices and quotas: a review of evidence on irrigation volumetric pricing

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Irrigation and Drainage Systems

Abstract

Underpricing of irrigation water is frequently identified as a primary cause of excessive use of water for irrigation. Higher prices are believed to have the potential to promote conservation. Changes in user behavior are predicated on a quantitative relationship between water charges and the volume use, but volumetric management is quite rare in practice. This paper reviews irrigation schemes that combine conditions of water scarcity and volumetric pricing, either at the bulk or individual level, and provides clear evidence that scarcity is almost invariably dealt with through the definition of quotas. In contrast to the large theoretical literature that has promoted price-based regulation as a key instrument of water demand management, it appears that prices are mostly used to regulate use at the margin, beyond the quota, rather than for rationing scarce water. This is an important role but one that falls short of efficiency pricing. The advantages and drawbacks of quotas are discussed, and an interpretation of why they are selected in practice is given.

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Notes

  1. Most of the instances of water trading observed were triggered by WUAs which had exhausted their quota and could not meet the contractual demand of all their members (Kloezen 1998).

  2. The charge for the first 50% is US$ 0.24/m3; for the next 30%, 0.28/m3, and for the last 20%, 0.38/m3 (Kislev 2005).

  3. While farmers in some areas have lowered their consumption, others would readily use more water if it were available, even at higher prices (Kislev 2005).

  4. Plaut (2000) disagrees with the statement that quotas are transparent and sees the definition of quotas as secretive and rife with rent-seeking and arbitrariness.

  5. However, in 3 years out of the last 10 years, exceeding the quota was simply banned because of water shortage.

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    François Molle

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Molle, F. Water scarcity, prices and quotas: a review of evidence on irrigation volumetric pricing. Irrig Drainage Syst 23, 43–58 (2009). https://doi.org/10.1007/s10795-009-9065-y

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