Water Authorities’ Pricing Strategies to Recover Supply Costs in the Absence of Water Metering for Irrigated Agriculture

Abstract

Most of the irrigated agricultural regions in Europe are supplied by surface irrigation networks managed by local water authorities (WAs). Under such conditions, WAs are not able to fully monitor water usage and farmers have an information advantage vis-a-vis the WA. This results in the water authority suffering 'pricing failure' if it decides to apply an incentive pricing strategy (tariffs proportional to the alleged water uses). Indeed, farmers could exploit their information advantage by behaving in an opportunistic manner, withdrawing more water than declared, and ultimately paying less than they should. This situation could also undermine the efficacy and the efficiency of the WA incentive pricing strategies. This paper analyses incentive water pricing schemes under asymmetric information by the means of a Principal-Agent model. The Agency problem between the WA and farmers is addressed by introducing a monitoring strategy that would enable the WA to detect farms action. In doing so, we compare incentive strategies with flat rate water pricing and investigate under what conditions the WA might provide/not provide incentive water pricing in the absence of water metering.

Gobernanza y ecología política en la gestión del regadío multifuncional. Aplicación al corredor agroecológico El Hondo-Los Carrizales (Alicante)

“…Gestión, gobernanza y ecología política: sumando actores para asumir nuevos retos El recurso agua es diferente de otros elementos naturales, ya que no solo se utiliza para numerosos fines económicos y técnicos, sino que también tiene dimensiones culturales, sociales y simbólicas -dimensiones que se intensifican en ámbitos que sufren escasez hídrica y/o situaciones de sequía (Boelens, 2014). Ello repercute en la forma de asumir y superar problemáticas o retos futuros, de manera que las propuestas para resolver estos retos no dependan solamente de la disponibilidad o escasez de agua (Perramond, 2018), sino también de aspectos como el modelo de gestión del agua (Franzen et al, 2015); la competencia entre usos y la capacidad institucional para establecer acuerdos y convenios (Forouzani et al, 2013); las condiciones sociopolíticas y los requisitos ambientales prevalecientes que afectan los procesos y prácticas de planificación, desarrollo y gestión (Page y Bellotti, 2015); la adecuación e implementación de los marcos legales y regulatorios en materia de agua (Yao et al, 2017); las concesiones de agua y los costes asociados (Lika et al, 2017); la capacidad de inversión en infraestructuras (Levidow et al, 2014); las condiciones climáticas, sociales y ambientales de la matriz rural (Jafary y Bradley., 2018); la innovación tecnológica (Chartzoulakis y Bertaki, 2015); las actitudes y percepciones de los usuarios ante el consumo de agua (Marcantonio et al, 2018); o el nivel de gobernanza y transparencia en la toma de decisiones (Gupta et al, 2013).…”

The Design of Pricing Policies for the Management of Water Resources in Agriculture Under Adverse Selection

“…Water pricing is considered to be one of the most important instruments used to affect the demand for water, as encouraged by the WFD [8,9] and by the Blueprint to Safeguard Europe's Water [10]. In fact, the "implementability" and the effectiveness of water pricing depends on several factors [11,12] and needs to take into account eventual disproportionality issues [13].…”

A Pricing Model for Groundwater Rights in Ningxia, China Based on the Fuzzy Mathematical Model

“…There are many classical surface water pricing methods, such as the shadow price method [19], the supply and demand price model [20], cost pricing method [21], real option method [22], game method [23], and principal-agent method [24]. Many pricing factors have been proposed for water rights, including resource utilization efficiency and cost [25], ecological sustainability [26], seasonality [27], and water users and market [28].…”