Welfare Differences Between Gross Water Pumped and Consumptive Use as Alternative Policy Control Variables to Meet Aquifer Management Objectives

The welfare cost of using gross water pumped instead of consumptive use as a control variable to meet consumptive use goal was estimated for Southwestern Nebraska. Crop simulation models for corn, grain sorghum, wheat and soybeans were estimated by EPIC. The models were then optimized for profit maximization under each irrigation scenario where groundwater is constrained through successive reductions. The results indicate that the social cost of reducing consumptive use is substantially overstated when using gross water pumped instead of consumptive use as the control variable, with the percentage difference declining as the size of the reduction increases. For example, the social cost of reducing consumptive use by 10 percent was 43 percent lower if it were achieved by directly controlling consumptive use instead of using the traditional approach of limiting gross water pumped. On a per acre basis, the average cost of a 10 percent reduction was $87.65 per acre foot of consumed water if consumptive use was controlled, and $156 per acre-foot of consumed water if gross water was the control variable.