Water Quantity and Quality Issues in Mediterranean Agriculture - Water and Agriculture: Sustainability, Markets and Policies - page 71

A sharp reduction in water demand is achieved by water price increases in the range
0.12-0.18 3 . The current 2,550 hm 3 of water demand for irrigation falls by

500-600 hm 3 , but the costs to farmers in quasi-rent losses are also quite high in the range
300-400 million is the worst solution because the

fall in water demand is only 400 hm 3 , which is considerably less than the reduction
achieved by increasing prices, whereas costs to farmers are higher than under water
pricing. The combined alternative of banning overdraft, water markets and desalination,
reduces demand by almost 400 hm 3 at a much lower cost of less than 100 million

￿$￿￿￿

￿￿
terms of farmers' quasi-rent. This is a very good alternative that improves upon any other
demand management measure, and is superior in outcome to the Ebro transfer project.
Some important caveats should be emphasised concerning the difficulties of
implementing demand management measures. Decades of water resources
mismanagement in the south-eastern basins of the Iberian peninsula have created
pervasive pressures on water resources and a severe degradation problem. An aquifer
overdraft ban would be very difficult to achieve since there is at present no effective
control on the number of wells or the volume of abstractions.
Water pricing measures are also difficult to implement because farmers will oppose
price increases. An additional reason is that basin authorities may modify the water prices
charged to collective irrigation systems using surface water, but they have no control over
the costs faced by individual farmers pumping from aquifers. Even if water pricing could
be implemented on individual abstractions, price increases will not reduce demand in
irrigation areas based on greenhouse production of high-profit crops. The example is the
shadow price of water in Campo Dalías, where prices would need to rise from the current
0.21 3 to over 3 3 , in order to curb demand.

The creation of water markets is also a difficult task. Although there are informal
water transactions, the possibility of formal water markets introduced by the 1999 water
law reform has not spurred any significant trading in the last six years, due to farmers'
mistrust of formal water markets.

Augmenting water supply by publicly financed desalination is much more
straightforward. The problem arises with effective irrigation demand if water is not
subsidised and farmers have to face the high desalination prices. The potential of
desalination is given by the effective demand for desalinated seawater, which reaches a
volume of almost 400 hm 3 in coastal counties from Safor to Campo Dalías, at the
0.52

3 cost of desalinated seawater. What prevents this effective demand from
materialising is that farmers are extracting water from aquifers at pumping costs of 0.09-
0.18 cents 3 . Since pumping costs are considerably below desalination, farmers will

not buy desalinated water. Public investments in desalination plants would become
reasonable only under strict enforcement by the water authority of an aquifer overdraft
prohibition, that would force farmers to buy desalinated water.

This last point sums up the problem facing the new AGUA project, which is supposed
to replace the Ebro transfer. The AGUA project involves investing 1,200 million ￿ ￿

achieve a desalination capacity of 600 hm 3 , including around 300 hm 3 for irrigation
between Campo Dalías and Marina Alta coastal counties. As indicated above, effective
demand in these counties could hypothetically amount to 400 hm 3 , but implementation of
the AGUA project requires the strict enforcement of an aquifer overdraft prohibition,
which is a daunting challenge for the water authority.