Economic and public policy instruments for the allocation of groundwater for agricultural use in Mexico.
Abstract
One third of Mexico´s aquifers are overexploited. One of the main drivers of overexploitation is the excessive extraction of groundwater for agricultural purposes. The agricultural sector uses 77 per cent of concessioned water with an average irrigation efficiency of 46 per cent. There are two main causes for excessive extraction: the subsidized electricity fees for agricultural groundwater pumping and institutional weakness in assigning, monitoring and enforcing water concessions. These policy failures do not send the correct scarcity signals and do not provide incentives for a more efficient use of water. This paper analyzes the political economy associated with the current quantity allocation mechanism and evaluates an institutional reform towards an indirect pricing mechanism as well as the associated sustainability gains for the aquifers due to a decrease in the groundwater extraction rate.
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