Economic analysis of alternatives for eliminating aquifer overdraft in the Segura basin

Abstract

Aquifer overdraft is a major environmental and water management problem in Southeast Spain. In some coastal areas, the recent development of desalinisation provides an opportunity to address this problem at a lower social and economic cost. We analyse the economic impact of using several instruments to address this problem in the Alto Guadalentín aquifer: a tax on groundwater pumping, the buyback of groundwater rights and the subsidization of desalinised resources. Their impact is assessed using a mathematical programming model that maximises the farm net margin resulting from the use of the available water resources for irrigation in the area. Our results show that all the alternatives have significant economic impacts, although the availability of desalinised water significantly reduces them. Whereas the outright restriction of non‐renewable pumping and an environmental tax have the lowest budgetary cost, they are very unpopular and rather politically unfeasible. Although more expensive for the public budget, purchasing water rights and subsidising desalinised water in exchange for reducing groundwater pumping have the same impact on the agricultural sector, but are likely to be much better received by farmers. Moreover, the former permanently solves the problem.