Price induced water irrigation: Unraveling conflicts and synergies between European agricultural and water policies

Athanasios Kampas, Athanasios Petsakos () and Stelios Rozakis

No 2010-05, Working Papers from Agricultural University of Athens, Department Of Agricultural Economics

Abstract: The 2003 CAP reform considerably affects cropping patterns in European agriculture. At the same time the imperatives of the forthcoming Water Framework Directive (WFD) is expected to modify irrigation decisions especially in Southern Europe where irrigated agriculture utilizes about 70-80% of total water. This paper examines the combined effect of CAP reform and the application of likely volumetric water pricing on water demand by taking into account three drivers of change, namely extensive margin changes, intensive margin changes and irrigation technology shift. For low rates of water prices, CAP reform contradicts the WFD objectives since it leads to cropping patterns that consume more water resources. On the contrary, as water prices increase, decoupling and water pricing display a synergistic effect on water conservation. Finally, decoupling substantially increases the efficiency of water pricing in terms of water conservation. As a result, the post CAP reform regime clearly dominates the prior CAP reform regime when an index of value for money water conservation is examined.

Keywords: irrigation; bio-economic modeling; mathematical programming; policy analysis; price endogenous model; water demand; CAP reform; WFD (search for similar items in EconPapers)
JEL-codes: C61 Q18 Q21 Q25 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2010
New Economics Papers: this item is included in nep-agr and nep-eur
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