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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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  • Alvaro Calzadilla & Katrin Rehdanz & Richard S.J. Tol, 2008. "The Eonomic Impact Of More Sustainable Water Use In Agriculture: A Computable General Equilibrium Analysis," Working Papers FNU-169, Research unit Sustainability and Global Change, Hamburg University, revised Dec 2008.
  • Handle: RePEc:sgc:wpaper:169

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    References listed on IDEAS

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    Cited by:

    1. Nicholas Rivers & Steven Groves, 2013. "The Welfare Impact of Self-supplied Water Pricing in Canada: A Computable General Equilibrium Assessment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(3), pages 419-445, July.
    2. Howard, Peter & Sterner, Thomas, 2014. "Raising the Temperature on Food Prices: Climate Change, Food Security, and the Social Cost of Carbon," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170648, Agricultural and Applied Economics Association.
    3. Carlo Orecchia & Ramiro Parrado, 2013. "A Quantitative Assessment of the Implications of Including non-CO2 Emissions in the European ETS," Working Papers 2013.100, Fondazione Eni Enrico Mattei.
    4. Alvaro Calzadilla & Katrin Rehdanz & Richard Betts & Pete Falloon & Andy Wiltshire & Richard Tol, 2013. "Climate change impacts on global agriculture," Climatic Change, Springer, vol. 120(1), pages 357-374, September.
    5. Bosello, Francesco & Eboli, Fabio & Parrado, Ramiro & Nunes, Paulo A.L.D. & Ding, Helen & Rosa, Renato, 2011. "The economic assessment of changes in ecosystem services: and application of the CGE methodology," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 11(1).
    6. Jaume González, 2011. "Assessing the Macroeconomic Impact of Water Supply Restrictions Through an Input–Output Analysis," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 25(9), pages 2335-2347, July.
    7. Feng Wu & Jinyan Zhan & Qian Zhang & Zhongxiao Sun & Zhan Wang, 2014. "Evaluating Impacts of Industrial Transformation on Water Consumption in the Heihe River Basin of Northwest China," Sustainability, MDPI, Open Access Journal, vol. 6(11), pages 1-14, November.
    8. Chokri Thabet, 2014. "Water Policy and Poverty Reduction in Rural Area: A Comparative Economy Wide Analysis for Morocco and Tunisia," Working Papers 860, Economic Research Forum, revised Nov 2014.
    9. Bosello, Francesco & Orecchia, Carlo & Raitzer, David A., 2016. "Decarbonization Pathways in Southeast Asia: New Results for Indonesia, Malaysia, Philippines, Thailand and Viet Nam," MITP: Mitigation, Innovation,and Transformation Pathways 250260, Fondazione Eni Enrico Mattei (FEEM).
    10. Calzadilla, Alvaro & Rehdanz, Katrin & Tol, Richard S.J., 2011. "The GTAP-W model: Accounting for water use in agriculture," Kiel Working Papers 1745, Kiel Institute for the World Economy (IfW).
    11. Li Jiang & Feng Wu & Yu Liu & Xiangzheng Deng, 2014. "Modeling the Impacts of Urbanization and Industrial Transformation on Water Resources in China: An Integrated Hydro-Economic CGE Analysis," Sustainability, MDPI, Open Access Journal, vol. 6(11), pages 1-15, October.
    12. Wei Yang & Junnian Song & Yoshiro Higano & Jie Tang, 2015. "An Integrated Simulation Model for Dynamically Exploring the Optimal Solution to Mitigating Water Scarcity and Pollution," Sustainability, MDPI, Open Access Journal, vol. 7(2), pages 1-24, February.
    13. Bosello, Francesco & Marangoni, Giacomo & Orecchia, Carlo & Raitzer, David A. & Tavoni, Massimo, 2016. "The Cost of Climate Stabilization in Southeast Asia, a Joint Assessment with Dynamic Optimization and CGE Models," MITP: Mitigation, Innovation,and Transformation Pathways 251810, Fondazione Eni Enrico Mattei (FEEM).
    14. Ouraich, Ismail & Tyner, Wallace E., 2014. "Climate change impacts on Moroccan agriculture and the whole economy: An analysis of the impacts of the Plan Maroc Vert in Morocco," WIDER Working Paper Series 083, World Institute for Development Economic Research (UNU-WIDER).
    15. Jason F. L. Koopman & Onno Kuik & Richard S. J. Tol & Roy Brouwer, 2017. "The potential of water markets to allocate water between industry, agriculture, and public water utilities as an adaptation mechanism to climate change," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 22(2), pages 325-347, February.
    16. Yu Liu & Xiaohong Hu & Qian Zhang & Mingbo Zheng, 2017. "Improving Agricultural Water Use Efficiency: A Quantitative Study of Zhangye City Using the Static CGE Model with a CES Water−Land Resources Account," Sustainability, MDPI, Open Access Journal, vol. 9(2), pages 1-15, February.
    17. Nicholas Kilimani, 2014. "Water Taxation and the Double Dividend Hypothesis," Working Papers 201451, University of Pretoria, Department of Economics.
    18. Anne-Kathrin Faust & Camille Gonseth & Marc Vielle, 2012. "The economic impact of climate driven changes in water availability in Switzerland," EcoMod2012 4177, EcoMod.

    More about this item


    Agricultural Water Use; Computable General Equilibrium; Groundwater Use; Irrigation; Sustainable Water Use; Water Scarcity;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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