The Economic Limits of Irrigation Water Reuse

Dear Colleagues,

This Special Issue focuses on the benefits and limits of irrigation water recapture and recycling. Fresh water has become increasingly vulnerable and scarce, and is likely to become even scarcer, per capita, in the future because of climate change. (i) “Due to water scarcity and poor water quality, it has been predicted that by 2050, at least one in four people (on earth) are likely to live in a country with a shortage of fresh water”. (ii) Consider also that approximately 69% of freshwater resources are withdrawn for irrigation in the agricultural sector (FAO 2016), and that irrigation demands continue to increase. Demands from other sectors will grow ever stronger that agriculture give up a portion of its share of the freshwater ‘pie” to the needs of other sectors. (iii) Increasing willingness to pay from other sectors has induced technical innovations to reduce water consumption (microirrigation), efficient drainage, or to exploit new sources (deep extraction), but the rapidly-increasing demands for water from other societal sectors is likely to make allocation decisions ever more difficult. In order to define irrigation as “renewable” or “sustainable”, the plant-growing enterprises of agriculture must apply economically-efficient levels of all production inputs consistent with desired outputs. One of the productive inputs that is complex to value and utilize efficiently is irrigation water. A sSustainable farm irrigation system should be able to collect and store from groundwater, surface water, or precipitation, utilize the resource for the most cost-efficient crop irrigation, and recapture the portion of surface and groundwater that would otherwise be lost as site runoff or leaching. Irrigation water is commonly extracted from lakes, rivers, streams, drainage ditches, private ponds, and public or private groundwater sources, and drainage returns to some or all of the sources. Some irrigators in the agricultural sector have inherent advantages for reducing, or indeed eliminating, water withdrawals. Some farms conduct careful water resource planning in order to achieve sustainable use. We see a growing number of operators organizing their farms to produce “more crop per drop”, sustainable water sourcing, and economically-efficient production, and avoid the impacts of unforeseeable events. The most common tools of economic efficiency assessment for multi-year water projects are cost-benefit analysis and cost-effectiveness analysis. Traditional cost-benefit analysis tries to determine if a project promises (1) economic justification, or (2) the lowest discounted net cost over the life of a project for the planned output. Each assessment typically considers the costs and benefits in current and future periods (usually annual). Each year’s benefits and costs are multiplied by a time index value of money (the discount rate) to estimate the benefits and costs in present value terms. More complete estimates of efficiency arising from this type of assessment and include consideration of both non-monetary benefits, as well as costs. Economically-efficient allocation of water is sought because it maximizes the welfare that society obtains from available water resources. Cost-effectiveness is a special case of cost-benefit analysis, in that the level of defined benefits is pre-determined, and only the costs to achieve the goal are compared, usually in current value terms. In traditional cost-benefit and cost-effectiveness analyses, the societal distribution of wealth is assumed constant throughout the project, although weighting certain economic strata is possible. As a decision tool for leaders, a project is economically efficient if discounted net returns are greater than discounted net costs, while in the cost-effectiveness analysis, the economically efficient alternative should have the lowest discounted cost to achieve the target benefit. Water recapture poses some unique issues for economic analysis. Given that water reuse will be evaluated against returns from surface and groundwater sourcing, public water systems, and rainwater retention, opportunity costs and benefits must be assessed. The opportunity cost of water discharged from a farm is difficult to consistently estimate. The limits of recapture involve the maximum exploitable area in a given topography and climate, as well as consideration of transpiration and other loss of water resources by leaching. Is captured water renewable, or might it be lost forever to productive use? To the landowner and the larger society, how can the opportunity cost of uncaptured water be valued? These and other challenges to water recapture and reuse must be addressed at the farm, regional water system, and basin levels.

1. Goonetillleke, A.; Vithanage, M. “Water Resources Management: Innovation and Challenges in a Changing World.” Water 2017, 9, 281; doi:103390/w9040281. 2. FAO (2016), “Water withdrawal by sector, around 2010”. Aquastat, http://www.fao.org/nr/aquastat/. Accessed on 14 May 2017. 3. Oster, J.D.; Wichelns, D. Economic and agronomic strategies to achieve sustainable irrigation. Irrigation Science (2003) 22, 107. doi:10.1007/s00271-003-0076-4.

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• Economic Assessment of Irrigation
• Sustainable Irrigation
• Irrigation Water Re-use
• Opportunity costs