Cost-Effectiveness of Sustainable Agricultural Water Policies: Source Switching versus Irrigation Buyout Auctions in Georgia’s Lower Flint River Basin

Abstract

In this paper, a new methodology for comparing the cost-effectiveness of sustainable agricultural water policies during times of drought is developed. The methodology explicitly accounts for regional economic impacts from policy implementation and uncertainty related to drought frequency. The methodology is applied to two policy options being considered by the state of Georgia in the lower Flint River basin: irrigation buyout auctions and source switching. The results demonstrate the following: (1) the importance of modeling uncertainty associated with both the frequency and timing of drought, and the hydrologic effects of source switching; (2) as the frequency of drought increases, the cost-effectiveness of irrigation buyout auctions decreases. Failure to incorporate the regional economic impacts of each policy significantly underestimates the costs of both, but more so for irrigation buyout auctions than source switching. The ability to proactively manage the uncertainty associated with source switching through research and the judicious site selection of new irrigation wells increases its cost-effectiveness.