Priority Water Rights for Irrigation at the River Basin Level. Do They Improve Economic Efficiency During Drought Periods?

Abstract

This paper assesses the potential efficiency gains of reforming the water rights regime in the Spanish agricultural sector by replacing current allocation procedures based on the proportional rule with a priority allocation procedure based on two tiers of security-differentiated water rights. This assessment is useful for evaluating whether said change in water rights can be considered a suitable policy instrument to improve water management during droughts events. For this purpose, a mathematical programming model is built to simulate the performance of the proposed reform. The empirical analysis is implemented at the basin scale, where water rights holders are highly heterogeneous, considering different climate scenarios accounting for changes in water supply reliability. The Guadalquivir River Basin (GRB) in southern Spain is used as a case study. The results obtained show that this change in the water allocation regime would yield only modest economic efficiency gains under the current climate scenario. However, it is also evidenced that this policy instrument could play a more relevant role as an efficiency enhancer in a climate change scenario, given that more frequent and intense drought episodes are expected. Moreover, priority rights represent an interesting risk management instrument for farmers, allowing the most vulnerable farmers to reduce income volatility. These findings suggest that the combined implementation of the proposed shift in the allocation regime with spot or allocation water markets would lead to successful outcomes, significantly improving drought management in the irrigation sector.