An Analysis of Storage Capacity Reallocation Impacts on the Irrigation Sector.

Significant attention has been given to the improvement of environmental flows in recent years. An important factor to reduce the opportunity cost of flood creation needed for the environment is the access to storage capacity. Reallocating storage capacity from agriculture to environment, however, may have important impacts on irrigation water prices and the vitality of irrigation enterprises. In this paper, the long term impacts of storage capacity reallocation on the agricultural sector are analysed. It is shown that a reduction in storage capacity for irrigation water will reduce water prices for each level of dam content and shift the distribution of dam content to the left. As a result, the value of the irrigation sector is reduced. The impact on average water price is, however, indeterminate, implying that results from previous empirical studies may be valid only locally and that sensitivity analysis is important to show the robustness of empirical results. [ABSTRACT FROM AUTHOR]