Investment in irrigation systems under precipitation uncertainty

Heumesser C, Fuss S, Szolgayova J, Strauss F, & Schmid E (2012). Investment in irrigation systems under precipitation uncertainty. Water Resources Management 26 (11): 3113-3137. DOI:10.1007/s11269-012-0053-x.

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Abstract

Efficient agricultural water management is indispensable in meeting future food demands. The European Water Framework Directive promotes several measures such as the adoption of adequate water pricing mechanisms or the promotion of water-saving irrigation technologies. We apply a stochastic dynamic programming model (SDPM) to analyze a farmer's optimal investment strategy to adopt a water-efficient drip irrigation system or a sprinkler irrigation system under uncertainty about future production conditions, i.e. about future precipitation patterns. We assess the optimal timing to invest into either irrigation system in the planning period 2010 to 2040. We then investigate how alternative policies, (a) irrigation water pricing, and (b) equipment subsidies for drip irrigation, affect the investment strategy. We perform the analysis for the semi-arid agricultural production region Marchfeld in Austria, and use data from the biophysical process simulation model EPIC (Environmental Policy Integrated Climate) which takes into account site and management related characteristics as well as weather parameters from a statistical climate change model. We find that investment in drip irrigation is unlikely unless subsidies for equipment cost are granted. Also water prices do not increase the probability to adopt a drip irrigation system, but rather delay the timing to invest into either irrigation system.

Item Type: Article
Uncontrolled Keywords: Agriculture; Irrigation investment; Stochastic dynamic programming model; Water policy; EPIC; Austria
Research Programs: Ecosystems Services and Management (ESM)
Bibliographic Reference: Water Resources Management; 26(11):3113-3137 (September 2012) (Published online 25 July 2012)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:46
Last Modified: 12 Sep 2016 13:40
URI: http://pure.iiasa.ac.at/9922

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