instruments reflect the financial incentives that
may drive the decision of the stakeholders; this
could be directly influenced by groundwater fees
related to infrastructure, location, and services
(Zilberman et al. 2008). Furthermore, the joint
analysis of physical conditions and institutional
settings that consider asymmetric information are
critical factors for the design and implementation
of policies (Dinar 2000). A systematic review of
planning and policy instruments is essential to
achieve a comprehensive governance structure of
public institutions (Theesfeld et al. 2010).
Energy policies that subsidize groundwater
withdrawals are commonly referred to as illconceived policies (Bailis 2011). Since the marginal cost of acquiring water for irrigation
decreases, it is possible that economic agents
continue or start employing water inefficiently.
As expected, diminishing subsidies translate
into higher tariffs for producers, who initially
constrained their energy consumption for agricultural irrigation. Later, the prevailing scenario
of water scarcity and the recovery of grapevine
prices led to a subsequent increase in groundwater use. However, there remains no good
estimate of the demand function of groundwater
for agriculture in the study area. Regarding other
areas in the northern basin in Mendoza, the price
elasticity is −0.57 for producers that only use
groundwater and −1.28 for users with access to
both types of irrigation systems (Barbazza 2005).
This means that a 1% increase in groundwater
price will diminish consumption by 0.57% for
farmers that rely completely on groundwater,
whilst a 1% increase in water abstraction will
diminish consumption by 1.28% for conjoint
users.
Other studies conducted in India analyzed the
effect of a 10% reduction in energy subsidies and
found a reduction of the pumped water between
4.4 and 6.7% (Badiani and Jessoe 2011; OECD
2015; Shah et al. 2012). For Mexico, Sun et al.
(2016) showed that doubling the cost of pumping
would only reduce demand by 6%. However, the
total withdrawal of the energy subsidy would
decrease pumping by 15% in the short run and
settle at 19% in the long term (OECD 2015).
Often, energy subsidies for irrigation efficiency
are interpreted as a double-edged sword in
groundwater management (OECD 2015).
Acquiring higher efficiency standards on irrigation is more beneficial for farmers but could
deteriorate soil quality or aquifer recharge. Some
additional measures should foster the cultivation
of less water demanding crops to avoid the
negative effects of the measure. Coady et al.
(2015) propose that efficient pricing from energy
producers to suppliers should equal the cost of
production. In addition, Pigouvian taxation is a
tool to correct externalities that are not covered
by other political measures. Moreover, Sun et al.
(2016) showed that the effectiveness of electricity price-based policies is certainly a reason to
consider the Pigouvian tax for groundwater as a
common pool resource.
6 Results and Discussion
The review of economic tools and policies utilized in the agricultural sector presented above
depicts the active participation of the state. One
perspective could call this state-dependence the
result of the institutions and organizations that
have not done enough to ensure the independence of the farming sector as well as not putting
in place self-regulatory processes for water
institutions. Another view is that proper regulation has been developed as a result of the state
intervention but the implementation is failing
because of weak monitoring.
The Carrizal aquifer provides irrigation to a
prestigious wine region and has been the subject
of numerous political and environmental conflicts with respect to water management, resource
quality, and groundwater exploitation reviewed
in detail in Table 5. Initially, the zoning restriction aimed to control the water quality pollution
and monitor the oil pollution in the aquifer.
Assisted by the National Institute of Water
(INA), the DGI seeks to improve the understanding of the aquifer characteristics, promoting
research with pumping trials, water table monitoring, and quality control. The budget for these
expenses is now obtained from groundwater
users through the annual fee, which has increased
Political Economy of Energy …
139
may drive the decision of the stakeholders; this
could be directly influenced by groundwater fees
related to infrastructure, location, and services
(Zilberman et al. 2008). Furthermore, the joint
analysis of physical conditions and institutional
settings that consider asymmetric information are
critical factors for the design and implementation
of policies (Dinar 2000). A systematic review of
planning and policy instruments is essential to
achieve a comprehensive governance structure of
public institutions (Theesfeld et al. 2010).
Energy policies that subsidize groundwater
withdrawals are commonly referred to as illconceived policies (Bailis 2011). Since the marginal cost of acquiring water for irrigation
decreases, it is possible that economic agents
continue or start employing water inefficiently.
As expected, diminishing subsidies translate
into higher tariffs for producers, who initially
constrained their energy consumption for agricultural irrigation. Later, the prevailing scenario
of water scarcity and the recovery of grapevine
prices led to a subsequent increase in groundwater use. However, there remains no good
estimate of the demand function of groundwater
for agriculture in the study area. Regarding other
areas in the northern basin in Mendoza, the price
elasticity is −0.57 for producers that only use
groundwater and −1.28 for users with access to
both types of irrigation systems (Barbazza 2005).
This means that a 1% increase in groundwater
price will diminish consumption by 0.57% for
farmers that rely completely on groundwater,
whilst a 1% increase in water abstraction will
diminish consumption by 1.28% for conjoint
users.
Other studies conducted in India analyzed the
effect of a 10% reduction in energy subsidies and
found a reduction of the pumped water between
4.4 and 6.7% (Badiani and Jessoe 2011; OECD
2015; Shah et al. 2012). For Mexico, Sun et al.
(2016) showed that doubling the cost of pumping
would only reduce demand by 6%. However, the
total withdrawal of the energy subsidy would
decrease pumping by 15% in the short run and
settle at 19% in the long term (OECD 2015).
Often, energy subsidies for irrigation efficiency
are interpreted as a double-edged sword in
groundwater management (OECD 2015).
Acquiring higher efficiency standards on irrigation is more beneficial for farmers but could
deteriorate soil quality or aquifer recharge. Some
additional measures should foster the cultivation
of less water demanding crops to avoid the
negative effects of the measure. Coady et al.
(2015) propose that efficient pricing from energy
producers to suppliers should equal the cost of
production. In addition, Pigouvian taxation is a
tool to correct externalities that are not covered
by other political measures. Moreover, Sun et al.
(2016) showed that the effectiveness of electricity price-based policies is certainly a reason to
consider the Pigouvian tax for groundwater as a
common pool resource.
6 Results and Discussion
The review of economic tools and policies utilized in the agricultural sector presented above
depicts the active participation of the state. One
perspective could call this state-dependence the
result of the institutions and organizations that
have not done enough to ensure the independence of the farming sector as well as not putting
in place self-regulatory processes for water
institutions. Another view is that proper regulation has been developed as a result of the state
intervention but the implementation is failing
because of weak monitoring.
The Carrizal aquifer provides irrigation to a
prestigious wine region and has been the subject
of numerous political and environmental conflicts with respect to water management, resource
quality, and groundwater exploitation reviewed
in detail in Table 5. Initially, the zoning restriction aimed to control the water quality pollution
and monitor the oil pollution in the aquifer.
Assisted by the National Institute of Water
(INA), the DGI seeks to improve the understanding of the aquifer characteristics, promoting
research with pumping trials, water table monitoring, and quality control. The budget for these
expenses is now obtained from groundwater
users through the annual fee, which has increased
Political Economy of Energy …
139