Financial Feasibility of Water Conservation in Agriculture

Abstract

Abstract Global water use for food production needs to be reduced to remain within planetary boundaries, yet the financial feasibility of crucial measures to reduce water use is poorly quantified. Here, we introduce a novel method to compare the costs of water conservation measures with the added value that reallocation of water savings might generate if used for expansion of irrigation. Based on detailed water accounting through the use of a high‐resolution hydrology‐crop model, we modify the traditional cost curve approach with an improved estimation of demand and increasing marginal cost per water conservation measure combination, adding a correction to control for impacts on downstream water availability. We apply the method to three major river basins in the Indo‐Gangetic plain (Indus, Ganges and Brahmaputra), a major global food producing region but increasingly water stressed. Our analysis shows that at basin level only about 10% (Brahmaputra) to just over 20% (Indus and Ganges) of potential water savings would be realized; the equilibrium price for water is too low to make the majority of water conservation measures cost effective. The associated expansion of irrigated area is moderate, about 7% in the Indus basin, 5% in the Ganges and negligible in the Brahmaputra, but farmers' gross profit increases more substantially, by 11%. Increasing the volumetric cost of irrigation water influences supply and demand in a similar way and has little influence on water reallocation. Controlling for the impact on return flows is important and more than halves the amount of water available for reallocation.

Keywords

• benefit cost analysis
• cost curve
• financial feasibility
• water conservation
• reallocation
• value of water