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George Kwasi Danso Water Trading: Irrigation Technology Adoption and Economic Impact of Transboundary Water Reallocation by George Kwasi Danso A thesis submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Agricultural and Resource Economics Department of Resource Economics and Environmental Sociology University of Alberta © George Kwasi Danso, 2014 Abstract The overall purpose of the study is to evaluate how water trading could improve water use efficiency in southern Alberta, Canada and how benefits of water reallocation could be achieved in the Nile River basin in Africa. The impact of water scarcity has become more prominent in these areas in recent years because of increasing population growth, urbanization rates, and unexpected changes in climate patterns. The ability to supply water to meet the needs of multiple sectors of the society is a compelling challenge to policy makers in the developed and in the developing world. In the first paper, the gain of adopting efficient irrigation technologies as a major water conservation strategy is assessed in southern Alberta, Canada. Water trading is modeled with a choice of irrigation technology adoption. Simulation results show that farmers will be willing to use efficient irrigation technologies when the net gains from adoption are higher than the cost of adoption. However, the adoption of most efficient irrigation technologies is more likely to occur when water conservation-induced polices are provided in the South Saskatchewan River Basin (SSRB). In the second paper, the economic impact of altering the current agreement governing the Nile River Basin is assessed. The Nile River basin is still governed by the 1959 agreement signed between Egypt and Sudan, without the upstream countries. With this agreement, of the annual average 84 billion cubic meters (BCM) of Nile River water, 66 percent is allocated to Egypt and 22 percent to Sudan with the remaining 12 percent going to surface evaporation and seepage at the Aswan High Dam in Egypt. The simulation results show that under certainty conditions, reallocation of water to Ethiopia would have minimal impact on the economies of Egypt and ii Sudan. However, under stochastic conditions, a greater negative impact is observed in the agricultural sector while in both countries the industrial and services sectors improve. Overall, there is a net welfare gain of 3.1 percent of Gross Domestic Product (GDP) of all the three countries under certainty conditions of water reallocation. Under stochastic conditions, however, there is a 0.53 percent net welfare loss of GDP to the three countries with water reallocation. These results tend to suggest that if these countries could cooperate, it would be possible to mitigate the negative impacts of water reallocation on Egypt and Sudan. iii Dedication To my family, wife and children iv Acknowledgments I would like to express my sincere gratitude to Professor Scott Jeffrey, my supervisor, for guidance, supervision and invaluable support that he gave me during critical stages of my PhD program. His enthusiasm and insights in research always managed to bring the best out of me. I greatly appreciate his comments and suggestions on the thesis drafts and the final version. I appreciate the time and suggestions provided by other committee members, Professors Brent Swallow and Terry Veeman; your contributions were highly valuable. I am especially grateful to Professor Terry Veeman for his support and encouragement during difficult periods in my PhD program. You said it is possible and I should never give up. My gratitude goes to Dr. Chokri Dridi for his mentorship, friendship and support during the earlier stages of my PhD program. Special thanks go to Professors Ted Horbulyk and Denise Young for their comments and suggestions on the final thesis draft. I am especially grateful to Professor James Rude for his time and encouragement towards the final thesis defense. I am also thankful to Professor Ellen Goddard for all the financial support and her friendship throughout my PhD program. I would also like to acknowledge the staff in the Department of Resource Economics and Environmental Sociology for their support. In particular, I would like to thank Robin McClelland for her friendship and priceless advice in all these years. My special thanks go to Albert Boaitey, Eileen Omosa, Violet Muringai, Pastor Emmanuel Laate and Dr. Patrick Asante for their time and friendship. I gratefully acknowledge the financial support provided by the University of Alberta, Department of Resource Economics and Environmental Sociology, Support for the Advancement of Scholarship (SAS), Co-operative Program in Agricultural Marketing and Business, Rogers Sugar Ltd Scholarship, Syngenta Graduate Scholarship in Sustainable Agriculture, Alberta Ingenuity Centre, International Development Research Centre (IDRC) and the International Water Management Institute (IWMI) for my program. I am also grateful to the IWMI-Ethiopia office for the time and support during data collection stage of the thesis. I particularly wish to thank Dr. Pay Drechsel of IWMI for his constructive criticism and valuable guidance in all these years. v Speical thanks are expressed to Dr.Siddig for sharing the Social Accounting Matrix (SAM) of Sudan and Dr. Paul Dorosh of IFPRI for sharing the SAM of Ethiopia with me. Its goes without saying that I would not have been able to complete the program without the love and support of my wife, Charlotte Amponsah. Thank you for standing beside me throughout this program. Thanks also to my children, Kwabena Danso and Joel Yaw Danso, for their love and support. Finally, thanks to the God Almighty for his protection and wisdom: Romans 8:28. The examination committee for this dissertation consisted of the following individuals: Dr. Scott Jeffrey (Resource Economics and Environmental Sociology), Dr. Terry Veeman (Resource Economics and Environmental Sociology), Dr. Brent Swallow (Resource Economics and Environmental Sociology), Dr. Denise Young (Department of Economics) and Dr. Theodore Horbulyk (University of Calgary). vi Table of Contents CHAPTER 1: INTRODUCTION TO THE RESEARCH PAPERS .................................................................... 1 1.1 INTRODUCTION ..................................................................................................................................................... 1 1.2 ECONOMIC PROBLEM ........................................................................................................................................... 2 1.3 STUDY OBJECTIVES .............................................................................................................................................. 3 1.4 THESIS STRUCTURE .............................................................................................................................................. 4 1.5 CONTRIBUTION OF THE THESIS ............................................................................................................................. 8 1.6 PLAN OF THE THESIS ............................................................................................................................................ 8 1.7 REFERENCE .......................................................................................................................................................... 9 CHAPTER 2: MODELING IRRIGATION TECHNOLOGY ADOPTION AND CROP CHOICES: GAINS FROM WATER TRADING WITH FARMER HETEROGENEITY IN SOUTHERN ALBERTA, CANADA ............................................................................................................ 13 2.1 BACKGROUND AND JUSTIFICATION ......................................................................................... 13 2.1.1 ECONOMIC PROBLEM .................................................................................................................................. 14 2.1.2 SPECIFIC OBJECTIVES ................................................................................................................................ 15 2.1.3 ORGANIZATION OF THE CHAPTER .............................................................................................................. 16 2.2 LITERATURE REVIEW ....................................................................................................................... 17 2.2.1 OVERVIEW OF WATER ALLOCATION SYSTEM IN ALBERTA ...................................................................... 17 2.2.2 EMPIRICAL REVIEW .................................................................................................................................... 18 2.3 METHODOLOGY .................................................................................................................................... 26 2.3.1 STUDY AREA ............................................................................................................................................... 26 2.3.2.1 Irrigation Districts ...................................................................................................................................... 27 2.3.2.2 Irrigation Technologies ............................................................................................................................ 29 2.3.2.2.1 Gravity Irrigation Technologies ................................................................................................... 30 2.3.2.2.2 Wheel-Move Sprinkler Irrigation Technologies .....................................................................
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