Groundwater Management Instruments in a Conjunctive Use System: Assessing the Impact on Farmers' Income Using Mixed Integer Linear Programming (MILP)

The objective of this paper is to compare the "relative" and the "absolute" impact on farmers' income of several economic instruments which may be implemented to mitigate farmers' groundwater withdrawals in a multi-resource system. We conducted fine-tuned field work with farmers in order to understand the key factors of substitution between underground and surface water at the farm level. A mixed integer linear programming framework has been used to model fruit and vegetable production systems and to infer the impact of instruments on farmers` income. Assuming this impact will sharply influence the acceptability of the instruments by the agricultural sector, we demonstrate why farmers' acceptance is of central concern for both the design and the implementation of an environmental policy. We further assessed the potential financial transfers that could be undertaken to increase acceptability. Our results echo scholars' doubts about the capacity of taxes to manage irrigation water use. We suggest that a policy relying on a "well-priced" substitutable resource would be greatly favoured by farmers and potentially by policy makers, since it will sharply decrease the transaction costs arising from the implementation of the instrument.