Economic valuation of water resources in agriculture From the sectoral to a functional perspective of natural resource management

Agriculture has, arguably, been very successful at capturing the major share of the world’s exploitable water resources. However, the environmental and socio-economic rationale for this capture by the sector is now being questioned. This review presents a framework and a suite of techniques for analysing these issues and making the rationale explicit and transparent. It is not a field manual but rather an 'advocacy' brief. It sets out to bring together economic and ecological evidence and argumentation in support of the need to challenge and change the fundamentals of the prevailing technocentric view of water resources exploitation. A new and more suitable approach to water resources allocation is necessary if the world’s population is to be adequately fed, without further degradation and destruction of the planet’s critical ecosystem services. Water productivity needs to be enhanced considerably, and economic cost-benefit analysis and pricing regimes can play a significant role in such a process. However, these economic measures will not be sufficient on their own. They will need to be buttressed by technological innovation and institutional changes in order to encourage a more equitable distribution of resources and to mitigate potential international conflicts across 'shared' water basins. Water has unique characteristics that determine both its allocation and use as a resource by agriculture. Agricultural use of water for irrigation is itself contingent on land resources. An overview of economic characteristics of water and their implications is presented below. The case for improved allocation of water to the agriculture sector and improved allocation within the agriculture sector is then presented. In a situation of growing water scarcity and rising demands for non-agricultural (household and industrial) use of water, reassessment of sectoral allocations of water are inevitable. In developing countries, irrigated agriculture plays a vital role in contributing towards domestic food security and poverty alleviation. Therefore, achievement of these objectives is dependent on adequate allocations of water to agriculture.