Recovering the costs of irrigation water with different pricing methods under Climate Change: insights from a Mediterranean case study

Abstract

Climate change (CC) is likely to increase water requirements of crops, and thus irrigation water uses. European Water Framework Directive (WFD) asks to fully cover the costs for water services, while minimizing adverse environmental, social and economic impacts. Preference is given to pricing instruments that establish a direct linkage between water use and cost, i.e. the volumetric system. In Italy, most of the irrigation schemes are managed by Reclamation and Irrigation Boards (RIBs). RIBs impose fees on the associated farmers usually aimed to cover only water distribution costs (WDC), through pricing systems often different from the volumetric. The present analysis focuses on an area of insular Italy (Sardinia), where a RIB supplies irrigation water to the associated farms. Currently, an area-based pricing system is adopted that makes farmers cover part of the WDC. The rest is supplemented by Regional Authorities with a contribution to compensate for local orographic and climatic disadvantages. Our objective is to assess the economic, social and environmental impacts of alternative pricing systems, including the volumetric, under a scenario of near-future (2020-2030) CC. The simulations deal with four levels of cost recovery, that start from the current level and gradually come to cover the full cost for water services. We do this through an economic model calibrated using Positive Mathematical Programming (PMP), that accounts for the abolition of milk quotas, the 2014-2020 CAP reform and the trend of expansion of bioenergy crops that affected the study area in the last years. The results are expected to provide local stakeholders and policy-makers with useful indications for implementing the WFD, while not discharging the issues related to an effective adaptation to CC.