Water pricing and irrigation water demand: economic efficiency versus environmental sustainability

Irrigation is by far the largest water user in Europe and this is a cause of increasing concern for European environmental policy makers. Insufficient water pricing as well as a subsidy policy that encouraged the development of irrigated crops have been blamed for having favoured an excessive development of water consumption. The policy background is now changing: the reform of the Common Agricultural Policy is gradually reducing the price bonus paid to agricultural commodities, while the Water Framework Directive requires full‐cost recovery to be adopted as the guiding rule for water price setting, thereby reducing or eliminating artificial incentives to develop irrigation. Will this reform achieve the desired effect of fostering sustainable irrigation water use? This paper, based on an original study developed in eight different test areas, suggests that this will not necessarily be the case: irrigation water use will become more efficient (in the sense that water use will be more concentrated on more valuable uses), but this does not necessarily have positive implications in terms of sustainability.