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The Eonomic Impact Of More Sustainable Water Use In Agriculture: A Computable General Equilibrium Analysis

  • Alvaro Calzadilla
  • Katrin Rehdanz
  • Richard S.J. Tol

    ()

    (Economic and Social Research Institute)

Water problems are typically studied at the farm-level, the river–catchment-level or the country-level. About 70% of irrigation water is used for agriculture, and agricultural products are traded internationally. A full understanding of water use is impossible without understanding the international market for food and related products, such as textiles. Based on the global general equilibrium model GTAP-W, we offer a method for investigating the role of green (rain) and blue (irrigation) water resources in agriculture and within the context of international trade. Since problems related to groundwater availability are getting more severe in the future, we analyze the impact of different water use options for 2025 where data is readily available. We run two alternative scenarios. The first, called water crisis scenario, explores a deterioration of current trends and policies in the water sector. The second scenario, called sustainable water use scenario, assumes an improvement in policies and trends in the water sector and eliminates groundwater overdraft worldwide, increasing water allocation for the environment. In both scenarios, welfare gains or losses are not only associated with changes in agricultural water consumption. Under the water crisis scenario, welfare not only rises for regions where water consumption increases (China, South East Asia and the USA). Welfare gains are considerable for Japan and South Korea, Southeast Asia and Western Europe as well. These regions benefit from higher irrigated production and lower food prices. Alternatively, under the sustainable water use scenario, welfare losses not only affect regions where overdrafting is occurring. Welfare decreases in other regions as well. These results indicate that, for water use, there is a clear trade-off between economic welfare and environmental sustainability.

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File URL: http://www.fnu.zmaw.de/fileadmin/fnu-files/publication/working-papers/CGEirrigationWP.pdf
File Function: First version, 2008
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Paper provided by Research unit Sustainability and Global Change, Hamburg University in its series Working Papers with number FNU-169.

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Length: 36 pages
Date of creation: Dec 2008
Date of revision: Dec 2008
Handle: RePEc:sgc:wpaper:169
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  1. Maria Berrittella & Katrin Rehdanz & Richard S.J. Tol & Jian Zhang, 2007. "The Impact Of Trade Liberalisation On Water Use: A Computable General Equilibrium Analysis," Working Papers FNU-142, Research unit Sustainability and Global Change, Hamburg University, revised Aug 2007.
  2. Deng, Xi-Ping & Shan, Lun & Zhang, Heping & Turner, Neil C., 2006. "Improving agricultural water use efficiency in arid and semiarid areas of China," Agricultural Water Management, Elsevier, vol. 80(1-3), pages 23-40, February.
  3. Maria Berrittella & Katrin Rehdanz & Roberto Roson & Richard S.J. Tol, 2006. "The Economic Impact Of Water Pricing: A Computable General Equilibrium Analysis," Working Papers FNU-96, Research unit Sustainability and Global Change, Hamburg University, revised Jan 2006.
  4. Dinar, Ariel & Yaron, Dan, 1992. "Adoption and abandonment of irrigation technologies," Agricultural Economics, Blackwell, vol. 6(4), pages 315-332, April.
  5. K. William Easter & Yang Liu, 2005. "Cost Recovery and Water Pricing for Irrigation and Drainage : What Works?," World Bank Other Operational Studies 9648, The World Bank.
  6. Kenneth M. Strzepek & Gary W. Yohe & Richard S.J. Tol & Mark Rosegrant, 2006. "The Value Of The High Aswan Dam To The Egyptian Economy," Working Papers FNU-111, Research unit Sustainability and Global Change, Hamburg University, revised Jun 2006.
  7. Pereira, Luis Santos & Oweis, Theib & Zairi, Abdelaziz, 2002. "Irrigation management under water scarcity," Agricultural Water Management, Elsevier, vol. 57(3), pages 175-206, December.
  8. Seagraves, J.A. & Easter, K. William, 1982. "Pricing for Irrigation Water," Economic Reports 8445, University of Minnesota, Department of Applied Economics.
  9. Tsur, Yacov & Dinar, Ariel & Doukkali, Rachid M. & Roe, Terry, 2004. "Irrigation water pricing: policy implications based on international comparison," Environment and Development Economics, Cambridge University Press, vol. 9(06), pages 735-755, December.
  10. Abdul Kamara & Hilmy Sally, 2004. "Water management options for food security in South Africa: scenarios, simulations and policy implications," Development Southern Africa, Taylor & Francis Journals, vol. 21(2), pages 365-384.
  11. Maria Berrittella & Katrin Rehdanz & Arjen Y. Hoekstra & Roberto Roson & Richard S.J. Tol, 2006. "The Economic Impact Of Restricted Water Supply: A Computable General Equilibrium Analysis," Working Papers FNU-93, Research unit Sustainability and Global Change, Hamburg University, revised Jul 2006.
  12. Pereira, Luis S., 1999. "Higher performance through combined improvements in irrigation methods and scheduling: a discussion," Agricultural Water Management, Elsevier, vol. 40(2-3), pages 153-169, May.
  13. Decaluwé, B. & Patry, A. & Savard, L., 1999. "When Water is no Longer Heaven Sent: Comparative Pricing Analysis in an AGE Model," Cahiers de recherche 9908, Université Laval - Département d'économique.
  14. Burniaux, Jean-Marc & Truong Truong, 2002. "GTAP-E: An Energy-Environmental Version of the GTAP Model," GTAP Technical Papers 923, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  15. Diao, Xinshen & Roe, Terry, 2003. "Can a water market avert the "double-whammy" of trade reform and lead to a "win-win" outcome?," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 708-723, May.
  16. van Heerden, Jan H. & Blignaut, James & Horridge, Mark, 2008. "Integrated water and economic modelling of the impacts of water market instruments on the South African economy," Ecological Economics, Elsevier, vol. 66(1), pages 105-116, May.
  17. Dinar, Ariel & Yaron, Dan, 1992. "Adoption and abandonment of irrigation technologies," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 6(4), April.
  18. Anthony Letsoalo & James Blignaut & Theuns de Wet & Martin de Wit & Sebastiaan Hess & Richard S.J. Tol & Jan van Heerden, 2005. "Triple Dividends Of Water Consumption Charges In South Africa," Working Papers FNU-62, Research unit Sustainability and Global Change, Hamburg University, revised Apr 2005.
  19. Lilienfeld, Amy & Asmild, Mette, 2007. "Estimation of excess water use in irrigated agriculture: A Data Envelopment Analysis approach," Agricultural Water Management, Elsevier, vol. 94(1-3), pages 73-82, December.
  20. Noelwah R. Netusil & Thomas R. Harris & Chang K. Seung & Jeffrey E. Englin, 2000. "Impacts of water reallocation: A combined computable general equilibrium and recreation demand model approach," The Annals of Regional Science, Springer, vol. 34(4), pages 473-487.
  21. Scott McDonald & Sherman Robinson & Karen Thierfelder, 2007. "Globe: A SAM Based Global CGE Model using GTAP Data," Departmental Working Papers 14, United States Naval Academy Department of Economics.
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