Economics of irrigation water conservation: Dynamic optimization for consumption and investment

Measures to protect irrigation water supplies for food security continue to receive international attention to address growing water scarcity when faced by increased food demands combined with reduced water supply reliability. Yet, a common problem where water is delivered with earthen canals is delivery inefficiency combined with low economic values per unit of water. In many of the world's arid regions, climate stressed water shortages have raised the importance of discovering measures to improve irrigation delivery efficiency. However, little research grade work to date has presented an integrated analysis of the economic performance of irrigation delivery improvements faced by drought and climate stressed regions. This paper's unique contribution is to investigate the economic performance of water conservation infrastructure combined with dynamically optimized use of saved water. We develop a state-of-the arts empirical dynamic optimization model to discover land and water use patterns that optimize sustained farm income. Results from the upper watershed irrigation region of the Canadian Basin in the southwestern US show that canal and delivery system lining can raise the sustained economic value of water for crop irrigation. The saved water can see immediate use in dry years. It can also be stored in wet years to mitigate the most adverse impacts of future climate water stress. This double dividend is especially important in rain-fed watersheds for which surface water supplies for irrigation are difficult to forecast accurately. Findings light a path for water managers and other stakeholders who bear responsibility of finding economically responsible measures to improve irrigation water productivity in the world's dry regions.