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

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 water Warsaw – 14 Sep 2011

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  1. A few thoughts on fair, efficient and sustainable management of agricultural waterWarsaw – 14 Sep 2011 David Zetland Senior Water Economist Wageningen University

  2. 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

  3. 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.

  4. 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!

  5. 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.

  6. 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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