Economic Impact of Regulation on Sustainable Irrigation Schemes: a Case Study on a Plant Nursery

Abstract

In agriculture, water is a fundamental but increasingly scarce resource that requires careful use. The goal of fostering water-savings could be achieved with a regulation that imposes more efficient irrigation systems. This might represent the only policy option when water withdrawals cannot be controlled and when the operational context does not allow filling the information asymmetry between policy makers and farmers with metering systems, quotas, or market rights. The regulation could involve higher costs for farmers. However, it could represent an opportunity to increase farm revenues if consumers are willing to pay a higher price for goods produced according to an ecological standard. Knowledge of the costs and possible benefits is relevant because it would enable us to understand the potential cost allocation among stakeholders according to how the policy is designed. The results of this study indicate that the management cost of a sustainable irrigation system could be at most 48% greater than that of a wasteful, traditional system. However, the higher costs of the regulation could be compensated for because consumers are willing to pay 6.8% more for less intensive water-use agricultural products. Therefore, a regulation associated with the promotion of hypothetical water-saving label can be the best strategy to irrigation efficiency in agriculture.