Large‐Scale Desalination and the External Impact on Irrigation‐Water Salinity: Economic Analysis for the Case of Israel
Yehuda Slater, Israel Finkelshtain, Ami Reznik, Iddo Kan
Abstract
Abstract Recent agroeconomic studies in water‐scarce countries such as Spain, Australia, Saudi Arabia, and Israel have revealed the economic viability of irrigating high‐value crops with desalinated water. However, the worldwide growth of large‐scale desalination capacities is primarily designed to resolve urban‐water scarcity, disregarding the impact of desalination on irrigation‐water salinity. We develop a dynamic hydroeconomic programming model where infrastructure capacities and allocations of water quantities and salinities in a regional water distribution network are endogenous. We show that subsidizing desalination is socially warranted because the associated reduction in irrigation‐water salinity is an external effect of water consumption by all water users. Empirical application to the entire state of Israel indicates that large‐scale desalination of seawater and treated wastewater for irrigation is optimal. This result stems from the large share of irrigation‐intensive salinity‐sensitive high‐value crops, motivated by Israel's policies to support local agriculture. Ignoring salinity results in a 45% reduction in desalinated irrigation water, a 29% reduction in farming profits, a 250% increase in water suppliers' profits, and an average deadweight loss of $1,200 a year per hectare of arable land.