Irrigated Agricultural Adaptation to Water and Climate Variability: The Economic Value of a Water Portfolio

Monobina Mukherjee and Kurt Schwabe ()

American Journal of Agricultural Economics, 2015, vol. 97, issue 3, 809-832

Abstract: Increasing aridity, more frequent and intense drought, and greater degrees of water scarcity create unique challenges for agriculture. In response to these challenges, which often manifest themselves as lower and more variable surface water supplies, as well as depleted and degraded ground water supplies, growers tend to seek opportunities to adapt. One option for growers to reduce their exposure to water scarcity and heightened uncertainty is to diversify. Indeed, access to a portfolio of supplies is one way in which water and irrigation districts, as well as individual growers, are responding to the changing landscape of water resource availability. This article evaluates the benefits to irrigated agriculture from having access to multiple sources of water. With farm-level information on 1,900 agricultural parcels across California, we use the hedonic property value method to investigate the extent that growers benefit from having access to multiple sources of water (i.e., a water portfolio). Our results suggest that while lower quality waters, less reliable water, and less water all negatively impact agricultural land values, holding a water portfolio has a positive impact on land values through its role in mitigating the negative aspects of these factors and reducing the sensitivity of agriculture to climate-related factors. From a policy perspective, such results identify a valuable adaptation tool that irrigation districts may consider to help offset the negative impacts of climate change, drought, and population increases on water supply availability and reliability.

Date: 2015
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