Substitutability of Freshwater and Non‐Freshwater Sources in Irrigation: an Econometric Analysis

Abstract

Population growth is increasing the scarcity of freshwater for irrigation and accelerating its replacement with non‐freshwater sources such as treated wastewater and brackish water. Although these substitutes may be less productive agronomically, their supply is usually more stable. We develop a structural econometric framework to assess the substitution between fresh‐ and non‐fresh water as it is inferred from water‐use decisions of farmers under increasing block‐rate water pricing. We employ the model to village‐level panel data from Israel, in which 50% of the freshwater allotments were replaced during the 1990–2010 period by treated‐wastewater quotas, using a non‐freshwater/freshwater volumetric exchange rate of 1.2. Based on our estimation results, the hypothesis that the marginal rate of substitution between the two water sources is equal to one cannot be rejected. Simulations suggest that the Israeli quota‐exchange policy has increased both agricultural production value and farming profits.

Local conditions and the economic feasibility of urban wastewater recycling in irrigated agriculture: Lessons from a stochastic regional analysis in California

“…Arguments in favor of treated wastewater reuse in irrigated agriculture emphasize the relative stability of supply by that source compared to other natural water sources (Feinerman & Tsur, 2014). Additional benefits are attributed to its use as a substitute for fresh water in crop production (Finkelshtain et al, 2020), and consequently, the opportunity costs associated with water scarcity, as well as forgone investments in water supply augmentation and infrastructure projects for alternative discharge options (Reznik et al, 2017). Another supporting argument for reuse is the potential savings in fertilizer and energy costs due to the presence of plant nutrients and trace elements (Dawson & Hilton, 2011).…”