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A few thoughts on fair, efficient and sustainable management of agricultural water Warsaw – 14 Sep 2011

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A few thoughts on fair, efficient and sustainable management of agricultural water Warsaw – 14 Sep 2011. David Zetland Senior Water Economist Wageningen University. The end of abundance... Agriculture diverts most water High consumption (plus spillovers)

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A few thoughts on fair, efficient and sustainable management of agricultural waterWarsaw – 14 Sep 2011

David Zetland

Senior Water Economist

Wageningen University

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The end of abundance...

  • Agriculture diverts most water
  • High consumption (plus spillovers)
  • Increasing ag/urban/enviro demand
  • Fixed/falling supply (quality & quantity)
  • Efficiency requires reallocation
  • Fairness recognizes existing use rights
  • Sustainability means no shortages
all in auctions can help
All-in-auctions can help
  • AiAs reallocate water according to value.
  • AiAs balance supply & demand.
  • AiAs establish a local price for water.
  • AiAs recognize existing property rights.
  • AiAs can be used within a community.
  • AiAs can include new demands.
how aias work
How AiAs work
  • Water rights must be quantified and assigned to individuals. Permanent rights produce “income” (annual flows) – cf. Australia.
  • The known quantity of flows are put into an auction (“all in”).
  • Those flows are allocated to high bidders; the price they pay depends on everyone’s bids.
  • Revenue goes to owners of rights.
  • Conveyance matters!
for example
For example
  • Farmers A, B and C each own 2 units of water.
  • Six units are put into the AiA. A, B and C bid.
  • €Bids: A (4, 5, 8), B (10, 10, 3) & C (1, 2, 6)
  • Bids are ordered: 10, 10, 8, 6, 5, 4, 3, 2 & 1
  • Six highest are accepted; price set to 7th bid.
  • A gets 3 units; B gets 2 units; C gets 1 unit.
  • A pays €3; B pays nothing (€ 6- € 6); C gets € 3.
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Thank you!

AiA paper: http://tinyurl.com/3yjj8u3

Water markets in Europe: http://tinyurl.com/64t4b7e

My book: The End of Abundance: Economic solutions to water scarcity

http://endofabundance.com

This research project has received funding from the European Community’s Seventh Framework Programme (FP7/2007-2013) / grant agreement n° 265213 –Project EPI-WATER “Evaluating Economic Policy Instrument for Sustainable Water Management in Europe”.

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