ISSUE 6
OCT-DEC 2004

Irrigation Pricing

As in most places in Greece, irrigation water is not charged or an area charging system is used. In the case of Paros, with the exception of the municipal department of Naoussa, there is no central irrigation system and normally irrigation activities are supported through private boreholes operated by the farmers themselves or by farmer associations.

Although no data exist either for prices or for demand elasticities, an assumption is made for estimating the impact that a small pricing system would have on irrigation demand. For this purpose it is assumed that initially (2004) prices for irrigation are set at 0.07 €/m³ and they are gradually increased by 0.02 €/m³ every two years during the period 2005-2009. The elasticity of demand on price is assumed to be equal to -0.8 (almost double to the one assumed for tourism demand).

Option results

Irrigation demand under the selected pricing scheme is presented in Figure 1.

Figure 1. Irrigation demand before and after the implementation of a pricing scheme

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Effectiveness

As with domestic pricing, irrigation pricing has a significant impact on agricultural demand. The high price increase and the relatively high tentative elasticity assumed lead to a considerable improvement of domestic and irrigation deficits. This improvement is adequate to stabilise the effectiveness to domestic demand coverage up to the year 2010, provided of course that water availability is constant (Figure 2). Similarly, the improvement of domestic deficits reaches a maximum of 62% during the same period (Figure 3). It should be noted that during wet years the option has particularly no effect, since it is during these periods that domestic deficit is at a minimum and no further improvements can be achieved.

Figure 2. Percent demand coverage effectiveness of Irrigation Pricing to Domestic use

Figure 3. Percent Improvement of deficit in Domestic use with respect to the reference scenarios

The impact on the effectiveness to irrigation demand coverage is higher (Figure 4). It reaches approximately 90% under the LD+HW scenario, while under the BAU+Normal scenario it drops at 87% due to the increase of domestic demand. The improvement with respect to each reference case shows a stabilising trend, around 80%.

Figure 4. Percent demand coverage effectiveness of Irrigation Pricing to Irrigation use

Figure 5. Percent Improvement of deficit in Irrigation use
with respect to the reference scenarios

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Direct and Environmental Costs

Reduction of irrigation demand results in the augmentation of supply delivered to domestic uses. This in turn, increases the operating costs of the system and leads to an average increase of about 4-8% on direct costs. (Figure 6).

Figure 6. Total direct cost difference of the Irrigation Pricing option
under the three scenarios (Present Value – Million €)

The decrease of environmental costs is marginal for the application of irrigation pricing on the BAU+Normal and on the BAU+HD scenaria (Figure 7). However, under the LD+HW, this decrease reaches 4%; the large reduction of irrigation demand leads to a more sustainable exploitation of groundwater resources, limiting groundwater abstractions.

Figure 7. Total environmental cost difference of the Irrigation Pricing option
under the three scenarios (Present Value – Million €)

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