the problem of sustainable groundwater management: the case of la mancha aquifers, spain; le...

The problem of sustainable groundwater management: the case of La

Mancha aquifers, Spain

Encarna Esteban & José Albiac

Abstract Gisser and Sánchez (Water Resour Res 16(4):638–642, 1980) compared two different strategies tomanage aquifers: “free market” and policy regulation.They stated that the outcome of both is practically thesame, and that policy regulation could not improve socialwelfare. This study challenges this argument by analyzingthe management strategies in two large aquifers located insouthern Spain, the Eastern La Mancha and the WesternLa Mancha aquifers. The appeal of this case stems fromthe fact that management of the Eastern La Manchaaquifer is almost sustainable. In stark contrast, itsneighboring Western La Mancha aquifer is being grosslymismanaged. The results engage two major questionsfrom previous groundwater literature. The first question iswhether or not aquifer management requires policyintervention. The answer depends upon the considerationand magnitude of environmental damages in the model.The second question addresses the nature of groundwaterpolicies. The contrast in management outcomes betweenthe Western and the Eastern La Mancha aquifers is relatedto the different types of policy instruments implementedfor each aquifer. The results of these policies underline theimportance of nurturing the stakeholders’ collective actionunder the appropriate institutional setting.

Keywords Groundwater management . Cooperation .Environmental damages . Socio-economic aspects . Spain

Introduction

Groundwater is an important source of freshwater, storingalmost 90 % of the total non-frozen freshwater availableon the Earth (Koundouri 2004). Aquifers are depletableresources, and their recharge water comes from rainwater,snow and returns from irrigated agriculture. Groundwateris employed for domestic, industrial, and agricultural uses,but the largest use is for irrigation.

In recent decades, aquifer systems have been sufferingsubstantial pressures in arid and semi-arid regions, withextraction rates well above recharge. Significant negativeimpacts are already occurring in many basins worldwide,because the degradation of water bodies limits economicactivities and endangers ecosystems. The damage costs tosociety are great and call for regulation and policies ongroundwater management to revert the depletion of entireaquifer systems (UNEP 2003; WWAP 2006). Withoutintervention, groundwater resources are misallocated byindividual agents who do not internalize the extractioncost and the environmental externalities in their pumpingdecisions. In this context, government regulation can be ameans to control agents’ pumping in order to preventmarket failure caused by these externalities.

Groundwater overdraft results in immediate quantityand quality problems for small aquifers, or in moredelayed problems for large aquifer systems. Problems ofquality derive from polluted return flows from urban,industrial, and agricultural activities. Quantity problemsmost often result from the depletion of aquifers in arid andsemi-arid regions.

Groundwater depletion not only makes pumping forhuman usage more difficult, but it also affects aquifer-dependent ecosystems. Ecosystems such as wetlands,small streams, rivers or lakes are fed by water fromaquifers. The progressive fall in the water table deterio-rates these habitats and may lead to extensive degradation.The conflict between groundwater use in agriculture andthe ecosystem conservation requirements is an importantissue for sustainable management (Martínez-Santos et al.2008).

The theory of depletable resources such as groundwateris an important field in economic theory. The problemarises because of the difficulties in establishing propertyrights, leading to excessive groundwater depletion. Extrac-tions by one user reduce the water storage (i.e. volume of

Received: 24 March 2011 /Accepted: 29 March 2012Published online: 4 May 2012

* Springer-Verlag 2012

E. EstebanWater Sciences and Policy Center, Department of EnvironmentalSciences,University of California,Geology Building 2228, Riverside, CA 92521 USA

J. Albiac ())Department of Agricultural Economics,Agrifood Research and Technology Center (CITA-DGA),Av. Montañana 930, 50059 Saragossa, Spaine-mail: [email protected].: +34-97-6716351Fax: +34-97-6716335

Hydrogeology Journal (2012) 20: 851–863 DOI 10.1007/s10040-012-0853-3

water stored), and because every user believes thatcompetitors will not conserve water for future use, thereis no incentive to protect the water storage. This is thereason for market failure and the need for appropriateinstitutional arrangements to correct the failure. Therefore,the key issue in depletable resources is whether or notmarkets are capable of achieving a balanced intertemporalallocation of resources (Dasgupta and Heal 1979).

This study analyzes the social welfare attained underalternative aquifer management regimes. Social welfare isthe difference between benefits and costs for society underalternative water extractions patterns over time. Socialbenefits are the private profits of users, and social costsinclude both economic and environmental negative exter-nalities. A groundwater model is used to optimize socialwelfare taking into account all of the externalities, andthen comparing welfare with the solution under myopicindividual pumping where externalities are ignored. Alarge difference in social welfare justifies public (i.e.policy) intervention to deal with the market failure (Howe2002). The contribution of this study is to take ecosystemdamage into consideration when modelling aquifer man-agement regimes.

Early studies on groundwater management used the“mine theory” coupled with very simple hydrologicalmodels (Milliman 1956; Kelso 1961). Since the 1960s,hydrologic modeling has advanced substantially alongwith the analysis of groundwater allocation by usingdynamic programming. One of the first contributions wasmade by Burt (1964, 1966), who identified the waterprices or quantities that optimize social welfare, indicatingalso that trading of water rights could be used to achievethe social optimum.

Since then, several policy instruments have been pro-posed such as taxes (Brown and Deacon 1972; Brown 1974),quotas, and water rights (Cummings and McFarland 1974;Provencher 1993), to improve aquifer management. Themajority of this literature has concluded that no publicintervention is needed in groundwater resources, becausepublic interventions are unable to improve upon the socialwelfare that is attained under unrestrained individualpumping (Lee et al. 1981; Allen and Gisser 1984;Nieswiadomy 1985; Dixon 1989; Knapp and Olson 1995;Burnes and Brill 2001).

This argument is called the Gisser-Sánchez effect(GSE), which takes its name from the major contributionby Gisser and Sánchez (1980). The GSE is based on thefinding that social welfare under the “free market”solution is almost the same as under policy regulation,represented by the optimal control solution. Koundouri(2004) summarizes the literature on the GSE indicatingthat it holds in most cases, and the validity of the resultdepends on two assumptions: the key assumption that theaquifer has to be quite large, and the secondary assump-tion that the slope of the water-demand function has to besmall. The intuition underlying the GSE is that the free-market solution does not take the future into account,whilst the social planner solution does, and the differenceis explained by the time-path of the water stock and

discounting. For very large aquifers, the effects of thewater-table drawdown are pushed into the future, which isheavily discounted, resulting in the convergence of thefree-market and the social-planner solutions.

A more recent strand of the literature suggests someconditions under which externalities are large and publicintervention is desirable (Knapp and Baerenklau 2006;Brozovic et al. 2004; Katic and Grafton 2011). Knapp andBaerenklau address the issue of groundwater quality, andfind welfare gains from policy regulation that suggestgreater policy efforts than recommended by previousliterature. Brozovic et al. indicate that the spatial hetero-geneity of aquifers drives externalities. If wells are closetogether, externalities are large and there are gains fromregulation; but if wells are far apart, externalities are smalland there are no gains from regulation. Katic and Graftonexamine the trade-off between resilience and economicpay-offs when there is a risk of irreversible events. Theirfindings show that multiple instruments such as limitingboth the rate of extractions and the depth of extractions,are preferred to a single control instrument.

In their model, Gisser and Sánchez (1980) onlyconsider a subset of externalities, namely, that open accesslowers the water table and increases the cost of extrac-tions, reducing the water storage available in the future.Groundwater externalities can be classified consideringdifferent dimensions such as contemporary or inter-temporal externalities, groundwater quantity or qualityexternalities, and economic or environmental externalities.Contemporary externalities of human economic activitiesare created by the open access to the aquifer, becauseusers affect each other by lowering the water table andincreasing the cost of extractions. Inter-temporal external-ities are the consequence of the change in the aquifer stockthat modifies the water availability in the future. Thegroundwater-quality externality can be both contemporaryand inter-temporal, and it is a consequence of thedegradation of the aquifer by pollution loads and by thefall in the water table. Environmental externalities arecreated by the existence of ecosystems that are linked anddependent upon groundwater such as wetlands andhabitats close to water streams.

Environmental externalities are not taken into accountin the Gisser-Sánchez model. The questions asked hereare: (1) What are the consequences of having a significantenvironmental externality in addition to the extraction costexternality? (2) Can the environmental externality modifythe validity of the Gisser-Sánchez effect? The consider-ation of environmental externalities seems justified by thepervasive mismanagement of large aquifer systems inmany arid and semi-arid regions worldwide, which isleading to large-scale degradation of aquatic ecosystems inmany basins of these regions.

The paper first describes the irrigated agriculture in theLa Mancha region in southern Spain, and the ensuingecosystem damages, along with the empirical model usedin the analysis. The results of three different managementregimes are then presented: free market or no regulation,partial cooperation, and full cooperation. These

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management regimes are simulated in two large aquifers—the Western and Eastern La Mancha aquifers—and theresults are compared with the current managementsituation. The policy implications are then analyzed,comparing the types of policy instruments implementedin each aquifer. Finally, the conclusions are presented,with an assessment of the management regimes in bothaquifers and implications for the Gisser-Sánchez effectargument.

Results indicate that social welfare could be enhancedby policy intervention, especially in the case of consider-able ecosystem damages from depletion. Another impor-tant result deals with the type of policies to achieve a moresustainable groundwater management. The empiricalevidence seems to indicate that policies that are purelybased on command and control and economic instrumentshave failed in the Western La Mancha aquifer, whilstpolicies mostly based on institutional instruments haveimproved the management of the Eastern La Manchaaquifer. These empirical findings from the La Manchaaquifers corroborate the importance of cooperation andcollective action for the sustainable management ofaquifers.

Groundwater in La Mancha: irrigationand ecosystem damages

The Western and Eastern La Mancha aquifers are locatedin Castilla-La Mancha, where agriculture is still animportant source of income compared with the rest ofSpain (Fig. 1). The participation of agriculture in the gross

domestic product (GDP) of Castilla-La Mancha is 8.2 %compared to 2.7 % for the whole of Spain. The percentageof farm labor in the total labor force is 6.3 % in Castilla-La Mancha compared to 4.0 % in Spain. Irrigationdevelopment during recent decades in the region of theWestern and Eastern La Mancha aquifers has been quiteimportant for the local economy, and irrigated agricultureremains a major source of income in these rural areas,where the percentage of the working population engagedin farming is close to 30 %. The aquifers support irrigatedagriculture in central and eastern Castilla-La Mancha, witha large acreage (land area), close to 300,000 ha, that yieldsaround 500 million Euros annual revenue.

Agricultural production on both aquifers is based oncultivation of cereals, fruit trees and vegetables. The totalarea on both aquifers of cereals, fruit trees and vegetablesis 140,000, 80,000 and 50,000 ha, respectively. The directfarm labor in these production activities is around 15,000workers. The main crops are barley, wheat, water melon,garlic, vineyards and olive trees in Western La Mancha,and barley, wheat, corn, alfalfa, onion, garlic andvineyards in Eastern La Mancha. Cereals use a largeshare of land and water, although their economicproductivity is quite low in terms of revenue and quasi-rent (net income). Both fruit trees and vegetables are muchmore valuable, especially vegetables. The profitability ofthese irrigated crops can be measured by the quasi-rent percubic meter, which ranges from 0.10–0.15 Euros/m3 forcereals, to 0.40–0.42 for fruit trees and 1.02–1.14 forvegetables. The quasi-rent per cubic meter of each crop isobtained from Table 1, dividing the variable quasi-rent perhectare by the variable water use by hectare.

Fig. 1 Location of the Western La Mancha and Eastern La Mancha aquifers in Spain

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The Western La Mancha aquifer is one of the largestaquifers in the Iberian Peninsula, covering 5,500 km2 inthe upper Guadiana basin. The aquifer is divided into twosub-aquifers which are partially connected (Martínez-Santos et al. 2008), with irrigation extractions around600 million (M) m3. The Eastern La Mancha aquifer is thelargest aquifer in the Iberian Peninsula, covering7,300 km2 in the upper Jucar basin; the aquifer is usedto supply around 400 Mm3 of water to irrigated crops, andit provides part of the urban use of the town of Albacete(275,000 inhabitants), supplying 8 Mm3/year (Sanz et al.2009). Intensive development of irrigated agriculture overthe last 30 years has caused a significant depletion in bothaquifers.

Depletion of aquifers is a source of considerabledamage to wetland ecosystems. Inland wetlands provideimportant ecosystem services such as provisioning, regu-lating, cultural, and supporting services. Examples are thesupply of freshwater, food, biological regulation, hydro-logical regimes, pollution control, erosion protection, aswell as spiritual, recreational and aesthetic values. Wet-lands play a key role in supporting biodiversity, soilformation, and nutrient cycling. Information on the totalvalue of these services provided by wetlands is quitescarce.

Some valuation studies on the global economicimportance of wetlands give highly variable estimations,with figures of up to 15 trillion US dollars (1USD=0.76Euros). Other studies estimate the total value of non-market and market benefits of particular wetlands,demonstrating that the total value of unconverted wetlandsis greater than converted or altered wetlands. Finlaysonand D’Cruz (2005) report the conversion of marshes toagriculture in one of the most productive areas in Canada.They indicate that the private benefits have been substan-tial, but the social benefits of retaining wetlands are evenhigher. The net present value of intact wetlands isestimated at 5,800 USD (dollars)/ha compared to 2,400

USD/ha of converted wetlands. In contrast, the totalannual value of wetlands is estimated by Woodward andWui (2001) at 10,000 USD/ha. These estimates arestrongly debated by some economists, who question themethodologies applied (Finlayson and D’Cruz 2005).

The Western La Mancha aquifer is located in the upperGuadiana River basin, and the Eastern La Mancha aquiferis located in the upper Jucar River basin. The intensive useof groundwater for agriculture in La Mancha has causedconsiderable damage to the aquatic ecosystems of both theupper Guadiana and upper Jucar, but also to aquaticecosystems and human uses downstream because of thereduction of river flows.

The upper Guadiana area was characterized for havingtablas (wetlands) fed with overflow water from theGuadiana and Cigüela rivers, and these tablas used to bethe home to very rich aquatic ecosystems with uniquespecies of flora and fauna. They also used to be a place forwaterfowl migrating between Europe and Africa. TheTablas de Daimiel wetland is a marshy area covering20 km2 of the aquifer, which was declared a national parkin 1973, a UNESCO biosphere reserve in 1981, part of theRamsar Convention in 1982, and a special bird and Natura2000 protected area by European Union regulation.Several other successions of tablas were located along80km of the upper Guadiana River and called Ojos delGuadiana (Guadiana eyes). Since the 1980s, all thesetablas disappeared together with 80km of the upperGuadiana river course.

An important problem for the tablas system is that theextreme water scarcity since the mid-1980s has dried theground in the tablas, and the peat in the soil is prone toburning spontaneously. These fires can burn undergroundundetected for long periods of time, propagating in acreeping fashion through the subsoil peat layers. Thedepletion of the aquifer dries up the wetland subsoil,which loses volume and collapses. The combination ofcracks and combustion in wetlands is producing anirreversible degradation process in the entire tablas system(Fig. 2).

The damage to the ecosystem caused by depletion ofthe Western La Mancha aquifer is not restricted to thetablas system in the upper Guadiana or the Tablas deDaimiel Natural Park. The ecosystem damage is muchmore extensive, because the depletion of the aquifer isaffecting connected neighboring aquifers such as theCampo de Montiel aquifer to the southeast. The Campode Montiel aquifer feeds important aquatic ecosystems, forinstance the Lagunas de Ruidera and the Sierra deAltomira wetlands.

The depletion of the Eastern La Mancha aquifer is alsoproducing important ecosystem damage in the wetlands ofthe upper Jucar basin. Additional damage is produced bythe impact of reduced flows in aquatic ecosystems in themiddle and lower Jucar basin. The Eastern La Manchaaquifer used to feed water to the Jucar in the past, but atpresent it is draining water from the Jucar. The conse-quence is that the lower Jucar is undergoing severeproblems of low flows and water-quality degradation.

Table 1 Hydrologic and economic parameters of the Western LaMancha aquifer

Parameters Description Value (units)

bc Quasi-rent of cereals 630 (Euros/ha)bv Quasi-rent of vegetables 3,500 (Euros/ha)bf Quasi-rent of fruit trees 1,200 (Euros/ha)wc Water use by cereals 4,300 (m3/ha)wv Water use by vegetables 4,000 (m3/ha)wf Water use by fruit trees 3,100 (m3/ha)C0i Pumping cost intercept 0.08–0.11(Euros/

m3·ha)C1 Pumping cost coefficient 0.0004 (Euros/

m·m3·ha)α Return flow coefficient 0.2H0 Water table current elevation 640 (masl)R Recharge (without return flows) 360 (Mm3)A Area of the aquifer 5,500 (km2)s Storativity coefficient 0.023SL Elevation of the aquifer surface 665 (masl)β Environmental damage of

depletion0.05 (Euros/m3)

Source: Esteban and Albiac (2010b); masl meters above sea level

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The most important aquatic ecosystem in the Jucarbasin is the Albufera wetland, which is a natural park onthe Mediterranean coast. The Albufera receives waterfrom the returns of the irrigated district fed by the AcequiaReal canal, but the water supplied by the canal has fallenfrom 700 to 200 Mm3/year in recent decades because ofthe falling river flows in the lower Jucar. The outcome isthat irrigation returns to Albufera are dwindling, and theecosystems in Albufera are seriously degraded.

The following sections of the article present theempirical case of aquifer management and mismanage-ment in La Mancha, the analysis of these alternativemanagement regimes, and the policy implications thatextend and modify the Gisser and Sánchez argument. Theappeal of the reported study stems from the fact that theEastern La Mancha aquifer is, to the best of the authors’knowledge, the only documented case in the world of alarge aquifer being managed towards sustainability in anarid or semi-arid region. In contrast, the neighboringWestern La Mancha aquifer is grossly mismanaged.

The essential issue regarding sustainable aquifermanagement is the fact that, in a process that began inthe mid-1990s, water users have been cooperating inEastern La Mancha to manage the aquifer. Several factorsexplain the cooperation efforts by farmers to controlextractions, but the main reason seems to be the pressurefrom downstream users and the water authority tomaintain river flows in the middle and lower Jucar.

Groundwater model

The purpose of the analysis is to devise a model thatsimulates three different groundwater managementregimes, and to compare these regimes with the current

management of theWestern and Eastern LaMancha aquifers.The first regime, called free market, is myopic pumping byagents disregarding the extraction cost and environmentalexternalities. Under myopic pumping, farmers maximizetheir current private profits. The second regime, called“partial cooperation”, is pumping by agents that account forthe extraction cost, but not for the environmental externality.Under this regime, agents maximize the value of their futurestream of collective private profits. The third regime, called“full cooperation”, is pumping by agents that account forboth the extraction and environmental costs of aquiferdepletion. This cooperative arrangement among agentsachieves optimum social welfare.

The model is set up with three types of farmers thatproduce cereals (c), vegetables (v), or fruit trees (f). Thesecrops are irrigated and require a fixed amount of water.Therefore, the relevant variable for water consumption isirrigated acreage, which drives the level of extractions.The water input demand function embodies Leontief cropproduction technology, so the water-price-demand func-tion is discontinuous. The water-input demand is formedby three rectangles corresponding to the “shadow” waterprice and the water used by vegetables (high water price),fruit-trees (medium price), and cereals (low price). Theprivate profit of farming is the sum of net income fromcrops, given by the expression:

V haðtÞ½ � ¼ hacðtÞ � bc þ havðtÞ � bv þ haf ðtÞ � bf ð1Þwhere V [ha (t)] is net income from acreage ha (hectares),with components hac (cereals), hav (vegetables), and haf(fruit trees). Parameters bc, bv, and bf are net income inEuros per hectare corresponding to cereals, vegetables andfruit-trees, respectively. V [ha (t)] is the cumulative profitfor all farmers drawing upon the aquifer.

Fig. 2 Irreversible degradation of Tablas de Daimiel ecosystems

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The water extraction costs are given by:

C haðtÞ;Ht½ � ¼ ðC0c � hacðtÞ � wc þ C0v � havðtÞ� wv þ C0f � haf ðtÞ � wf ÞþC1 � SL � Htð Þ� hacðtÞ � wc þ havðtÞ � wv þ haf ðtÞ � wfð Þ

ð2Þ

where C0c, C0v, and C0f are the fixed pumping costsfor cereals, vegetables and fruit trees, and C1 is themarginal cost of pumping. The water extractions incubic meters per hectare for cereals, vegetables, andfruit trees are given by parameters wc, wv, and wf,respectively. The fall in the water table is given by thedifference between the natural level SL, and the water-table level Ht.

The costs of ecosystem damage result from the fallingwater table and the progressive reduction of flows thatfeed aquatic ecosystems. These ecosystem damage costsare defined as linear in the volume of the aquiferdepletion, and they are computed as the damage cost percubic meter of storage depleted, multiplied by the volumeof depletion.

The costs of ecosystem damages during period t aregiven by the expression:

D haðtÞ½ � ¼ b � ½ 1� að Þ � ðhacðtÞ � wc þ havðtÞ� wv þ haf ðtÞ � wf Þ � R�

ð3Þ

where depletion is calculated as net extractions minus thenatural recharge R, and α is the return flow coefficient.The damage cost is given by the aquifer water depletion1� að Þ � hacðtÞ � wc þ havðtÞ � wv þ haf ðtÞ � wf

� �� R��multi-

plied by parameter β, the cost of damages caused by eachunit of water depletion, assuming a constant damage perunit for simplicity reasons. Parameter β has beenestimated based on the contingent valuation study byJúdez et al. (2000).

Ecosystem damages from depletion are driven bycomplex underlying biophysical processes (with non-linear, dynamic, spatial and threshold features), whichare very difficult to specify because of the lack ofknowledge. A further problem is that ecosystems mayundergo abrupt shifts leading to dramatic transitions,and restoration of the previous stock is not sufficient forthe recovery of ecosystems (hysteresis). Given thelimited knowledge and information on ecosystem dam-ages from depletion, simplifying assumptions seemreasonable, and the damage cost function has beenspecified as linear in the volume of depletion. Parameterβ has been calculated as the value of ecosystemssupported by the aquifer (based on the contingentvaluation study), divided by the water storage of theaquifer. Because this is only an approximation todamages, a sensitivity analysis of β has been undertaken.Aquifer depletion is inversely related to damages; it is lowerwhen damages are high (large β) and higher when damagesare low (small β). See Esteban and Albiac (2010b) for thesensitivity results.

The hydrological behavior of the aquifer is representedby the difference equation that explains the change inwater storage:

AS � Ht � Ht�1ð Þ ¼ ½R� 1� að Þ � ðhacðtÞ � wc þ havðtÞ� wv þ haf ðtÞ � wf Þ� ð4Þ

where A is the area of the aquifer, S is the storativitycoefficient, and Ht–Ht – 1 is the change in the water tablelevel. The term AS•(Ht–Ht – 1) is the change in theaquifer storage, which is equal to natural recharge minusnet extractions.

Social welfare is the private profit of farming, minusthe private cost of water extractions, minus the social costsof ecosystem damages. The expression for social welfareis given by:

P haðtÞ;HðtÞð Þ ¼ V haðtÞ½ � � C haðtÞ;HðtÞ½ �� D haðtÞ½ � ð5Þ

where Π is social welfare, V is net income from farming,C is cost of extractions, and D is damage to ecosystems.

Under a "free-market" management regime, farmersmaximize the net income of their crops in each period,ignoring the extraction cost and environmental externalities.Every individual farmer ignores the extraction cost external-ity, because when there is no cooperation, the water not takenby him will be taken by another farmer. For each period,farmers equate their individual marginal profit of usinggroundwater for crop irrigation with their individual marginalcost of pumping, and these decisions lead to market failure.

A partial cooperation management regime emergeswhen farmers are willing to cooperate by internalizing theextraction costs externality, but not the environmentalexternality. Under this regime, farmers cooperate tomaximize their collective private profit given byP haðtÞ;HðtÞð Þ ¼ V haðtÞ½ � � C haðtÞ;HðtÞ½ �, for the entireplanning horizon. This is the partial cooperation regimeanalyzed by Gisser and Sánchez (1980), which they call“regulation”. The optimal control problem for partialcooperation is given by Eq. (6), without including thecosts of ecosystem damages in the objective function.

A full cooperation management regime emerges whenfarmers are willing to cooperate by internalizing allexternalities, including both the extraction cost and theenvironmental externalities. The full cooperation regimemaximizes social welfare, and the management solution isfound by optimizing a dynamic control problem. Theproblem maximizes the present value of social welfare,subject to the change of the water table through time:

MaxPðtÞ ¼ e�rtPnt¼1

½Pi½haiðtÞ � bi � C0i � haiðtÞwi � C1

� SL � Htð Þ � haiðtÞwi� � b � f 1� að Þ�P

iðhaiðtÞwiÞ � Rg�

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subject to

Ht � Ht�1 ¼ 1

ASRþ

Xia � 1ð ÞwihaiðtÞ

h i; Hð0Þ ¼ H0

ð6Þwhere i = {c, v, f}, and r is the discount rate.

The model is applied to the Western La Mancha andEastern La Mancha aquifers, and the hydrologic andeconomic parameters of these two aquifers are presentedin Tables 1 and 2. The software package GeneralAlgebraic Modeling System (GAMS) has been used tomanage data and run calculations. The model is calibratedusing the positive programming procedure (Howitt 1995).See Esteban and Albiac (2010a, b, 2011) for additionalinformation about the theoretical and empirical back-ground on the model, with descriptive data on crops andaquifers, detailed results on the management regimes, andthe GAMS code used in the analysis. The empirical resultscould help assess past policy initiatives, and also provideevidence on the type of policies needed.

Applying the model to the La Mancha aquifers

The groundwater model presented in the previous sectionis used to simulate three alternative management regimesin the La Mancha aquifers: free market, partial coopera-tion and full cooperation. These regimes are thencompared with the current management of both aquifers.The results show a large difference between the outcomesof the alternative management regimes, and justify policyintervention to induce cooperation in groundwatermanagement.

Results in the Western La Mancha aquiferThe time-path of the water table and water extractions,under the free-market regime, is shown in Fig. 3. Water

extractions per year increase from the current 650 to1,000 Mm3, and depletion of the Western La Manchaaquifer drains the total aquifer storage, which is around7,000 Mm3. The aquifer collapses in one and a halfdecades, and farmers are forced to abandon productionbecause they cannot extract more water from theexhausted aquifer. The collapse of the aquifer wouldinvolve considerable quality problems that could hamperthe subsequent recharge and gradual recuperation of theaquifer.

The second management regime is partial cooperation.Farmers reduce pumping from 650 to 370 Mm3, with afall in acreage from 193,000 to 100,000 ha, which largelyreduces cereal production, but also the production of fruittrees and vegetables. The steady state is attained in twodecades, with a recovery of the water table (Fig. 4). Thetotal water storage in the aquifer recovers from the current4,000 to 5,400 Mm3, which is below the 7,000 Mm3 offull storage. The last management regime is full cooper-ation. The water table recovers fully and goes back to thenatural level of the aquifer (Fig. 5). Extractions aresubstantially reduced, from 650 to 260 Mm3, with adecrease in acreage from 193,000 to 80,000 ha and thecomplete abandonment of cereal production.

The present value of social welfare for a 30-yearplanning period indicates the welfare gains amongmanagement regimes. Welfare is 1,670 million Eurosunder free market, 2,020 million Euros under partialcooperation, and 2,110 million Euros under full coopera-tion. Welfare under free market is low, because the aquifercollapses in one and a half decades, precluding furtherirrigated crop production. These welfare gains amongregimes show that the Gisser-Sánchez effect does not holdin the case of the Western La Mancha aquifer.

The current management of the Western La Manchaaquifer is examined to find out which regime betterdescribes the aquifer management. The comparisonbetween the current management and the simulatedregimes shows that the Western La Mancha aquifer isclose to free market. The overdraft of the Western LaMancha aquifer at the end of the 1990s was 110 Mm3/year, resulting from extractions around 600 Mm3 andrecharges around 490 Mm3.

This overdraft has been unabated in Western LaMancha over the last decade, and all yearly extractionshave been above recharge, except for 2 years. The averageextractions during the last decade are still at 600 Mm3—well above average recharges. This unrelenting overdraftconfirms that the market failure in the Western La Manchaaquifer is not being corrected, and the current manage-ment situation is near the free-market regime. If thisoverdraft trend continues, the aquifer could be destroyedin the coming decades.

Results in the Eastern La Mancha aquiferThe free-market regime results in a large aquifer deple-tion, analogous to Western La Mancha (Fig. 6). Farmersincrease their extractions up to 550 Mm3 with the

Table 2 Hydrologic and economic parameters of the Eastern LaMancha aquifer

Parameters Description Value (units)

bc Quasi-rent of cereals 540 (Euros/ha)bv Quasi-rent of vegetables 4,900 (Euros/ha)bf Quasi-rent of fruit trees 1,300 (Euros/ha)wc Water use by cereals 5,800 (m3/ha)wv Water use by vegetables 4,800 (m3/ha)wf Water use by fruit trees 3,100 (m3/ha)C0i Pumping cost intercept 0.06–0.11 (Euros/

m3·ha)C1 Pumping cost coefficient 0.0004 (Euros/m·

m3·ha)α Return flow coefficient 0.2H0 Water table current elevation 660 (masl)R Recharge ( without return flows) 245 (Mm3)A Area of the aquifer 7,260 (km2)s Storativity coefficient 0.034SL Elevation of the aquifer surface 690 (masl)β Environmental damage of depletion 0.05 (Euros/m3)

Source: Esteban and Albiac (2010b)

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accumulated depletion reaching 6,100 Mm3 after a decadeand then stabilizing. This depletion level does not collapsethe aquifer because total water storage is above10,000 Mm3, which is much higher than the storage inWestern La Mancha.

Under partial cooperation, the water table recovers asfarmers reduce pumping (Fig. 7). Extractions decreasefrom 420 to 120 Mm3 over the first 4 years, with adecrease in acreage from 77,000 to 40,000 ha, and theabandonment of cereal production. This yields a strongrecovery of the water table, followed by a more gradualrecovery until a steady state is reached.

The third management regime is full cooperation, witha rapid recovery of the water table (Fig. 8). Extractionsplunge from 420 to 120 Mm3 for a period of 10 years,with a decrease in acreage from 77,000 to 28,000 ha.Cereal production is abandoned, and there is a reductionin the acreage used for fruit trees and vegetables. Thepresent value of welfare (30-year planning period) is 860million Euros under free market, which increases to 1,350and 1,470 million Euros under partial and full coopera-tion, respectively. This result shows that the Gisser-

Sánchez effect also does not hold in the case of theEastern La Mancha aquifer.

These simulated regimes are compared with themanagement situation in the aquifer prior to 2000 andafter 2000. The situation before 2000, when formalcollective action among farmers started in Eastern LaMancha, shows that water extractions at 420 Mm3

were well above recharge. After the year 2000,however, the organization of collective action amongfarmers has driven the extractions down belowrecharge.

Clearly, the management of Eastern La Mancha ismoving away from free market and towards partialcooperation. Both management situations, prior to 2000and after 2000, indicate that cooperation among farmers istaking place. Extractions were quite unsustainable before2000, but after 2000 formal cooperation was implementedand extractions have been falling steadily from 400 to300 Mm3. The average overdraft was 100 Mm3 inprevious decades, and in recent years, it has beeneliminated. However, a further reduction of extractions isneeded to recover the aquifer.

Fig. 3 Water table and extractions under free market in the Western La Mancha aquifer

Fig. 4 Water table and extractions under partial cooperation in the Western La Mancha aquifer

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Policy implications

The institutional and policy developments in both aquiferscontribute to the understanding of the current managementsituation. The Western La Mancha aquifer has supported astrong increase in irrigated agriculture over the last30 years from 30,000 to 190,000 ha, of which 50,000 haare illegal. By 1987, the irrigated acreage was around110,000 ha, with an accumulated depletion of 1,500 Mm3.The response by the basin authority to this rapiddegradation was, in 1987, to declare the aquifer “officially”overdrafted, so that the construction of any new wells wasforbidden. However, it took 4 years for the basin authority todesign the management regime to curb extractions by theassignment of a water-quota system.

This management regime was completely ignored byfarmers, and the basin authority was unable to enforce it,both due to a lack of resources and lack of political will.The declaration of the Western La Mancha aquifer as“officially” overdrafted implied the obligation by users toform water-user associations. A lobby to support illegalpumping was created by farmers’ unions, municipalities,

water-user associations and members of the stategovernment.

The water-user associations in Western La Mancha werea top-down intervention, which was forced upon farmers.They were created by municipal districts following theorganizational pattern of farmers’ unions, instead of follow-ing hydrological features, which demonstrates that they werenot created with the purpose of managing water, but rather toexert political pressure. Furthermore, the associations do nothave water technicians on their staff to manage water, butrather water lawyers to defend farmers in court.

During the 1990s, the so-called “Wetlands Plan”distributed 250 million Euros to reduce extractions, butthe program failed to stop further drawdown in the watertable (CES 2006). In 2005, the basin authority brought5,000 illegal wells to court, but then the federal Ministryof Environment fired the president and the water commis-sioner of the basin authority, yielding to pressure fromfarmers and the state government. The latest policyinitiative is the Plan of the Upper Guadiana (CHGN2008), which aims at curbing overdraft by pouring 5.5billion Euros into buying water rights, afforestation, rural

Fig. 5 Water table and extractions under full cooperation in the Western La Mancha aquifer

Fig. 6 Water table and extractions under free market in the Eastern La Mancha aquifer

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development, urban supply, and wastewater treatment.These huge investments may not be effective withoutcarefully designed incentives to gain farmers’ cooperation.Indeed, the plan is unfortunately based solely on economicinstruments and not on stakeholders’ cooperation, and thewisdom of these public expenditures remains to be seen.

The Eastern La Mancha aquifer experienced a similarincrease of irrigation from 20,000 to 100,000 ha over thelast 30 years, fostering a substantial decline in theaquifer’s water table. The institutional developments inthe Eastern La Mancha aquifer started when farmersbecame aware of the problems caused by aquiferdepletion, and responded by creating the water-userassociation in 1995, aimed at jointly managing the aquifer.The process began because the town of Albacete sought aconcession of Jucar water for urban use from the basinauthority, and the basin authority with the support of thedownstream stakeholders in Valencia called for the controlof extractions, threatening farmers by not issuing waterrights. Other reasons that give rise to active support fromfarmers were the increase in pumping costs, because of thefall of the aquifer water table, and the relatively smallnumber of farmers involved (1,000 vs. 15,000 in WesternLa Mancha).

The support of the Albacete community and farmerslead to an agreement between the aquifer irrigationassociation, the state government, and the Júcar basinauthority to implement sustainable management. Theagreement is based on the inscription of water uses priorto 1985 (when groundwater was not public domain), theregularization of uses that started between 1986 and 1997,and a process of characterization of uses and control ofextractions. This process is based on monitoring byremote sensing and individual cultivation plans providedby each farmer. The key for this system to work is that thefarmers themselves are involved in the enforcement andcontrol process. The efforts of the water-user association,together with the support of the basins authority and thestate government, have resulted in a reduction in extrac-tions during the 2000s.

These institutional developments show that verydifferent policy instruments have been used in the Westernand Eastern La Mancha aquifers. In Western La Mancha,the first type of policy instrument used during the 1980swas command and control by forbidding new wells andestablishing extraction quotas. Because of the oppositionof farmers’ organizations, local municipalities, and thestate government, this policy instrument failed. The

Fig. 7 Water table and extractions under partial cooperation in the Eastern La Mancha aquifer

Fig. 8 Water table and extractions under full cooperation in the Eastern La Mancha aquifer

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second type of policy used has been economic instru-ments: subsidies to farmers to reduce pumping, and thecurrent proposal of large investments, mostly to buy waterfrom farmers. The large payments of 250 million Euros tofarmers during the 1990s did not reduce extractions, butrather, led to an increase in aquifer depletion from 1,800to 3,100 Mm3. The huge investments of the UpperGuadiana Plan do not seem to be the best option toaddress the current mismanagement of the aquifer.

In the Eastern La Mancha aquifer, the approach hasbeen to use institutional instruments, which seems to be areasonable type of policy to induce cooperation and dealwith common pool resources such as aquifers. The reasonis that stakeholder cooperation requires serious commit-ments to manage and care for the resource, and cannot beexclusively bribed for by side payments.

However, cooperation results in opportunity costs forfarmers that are diminishing extractions in order torecover the aquifers. These opportunity costs are theincome losses sustained by cooperating farmers that arereducing crop acreage, mostly the acreage of cerealsbecause they are the less profitable crops. The results fromLa Mancha show that cooperation, either full or partial,involves a very large acreage reduction by farmers in bothaquifers.

The acreage-reduction efforts occur during the first10 years when aquifers are replenishing, before returningto an expanded acreage compatible with the sustainablerecharge. In the Western La Mancha aquifer, full cooper-ation reduces acreage from 193,000 to 80,000 ha withannual income losses amounting to 90 million Euros, andpartial cooperation reduces acreage from 193,000 to100,000 ha with 60 million Euros in annual incomelosses. In the Eastern La Mancha aquifer, full cooperationreduces acreage from 77,000 to 28,000 ha with 50 millionEuros in annual income losses, and partial cooperationreduces acreage from 77,000 to 40,000 ha with 30 millionEuros in annual income losses.

These large opportunity costs explain the difficulties inachieving cooperation in large aquifers. Indeed, it is betterfor aquifers if farmers cooperate than if they do not, andthe empirical results in the La Mancha aquifers show asubstantial enhancement of social welfare between freemarket and cooperation regimes—either partial or full.The present value of welfare under each regime for a 30-year planning period shows the size of the welfare gains.In the Western La Mancha aquifer, welfare gains are 350and 440 million Euros for partial and full cooperation,respectively. In the Eastern La Mancha aquifer, welfaregains are 490 and 610 million Euros for partial and fullcooperation, respectively. These results indicate that in thecase of La Mancha, the Gisser-Sánchez effect does nothold, even without taking into account the environmentalexternality, because of the sizable welfare gains betweenfree market and partial cooperation.

The question, then, is: How exactly can cooperation bebrought about? However, to find a general answer forlarge aquifer systems characterized by very differentcircumstances is a difficult endeavor. There are no simple

policy prescriptions, as demonstrated by the pervasivemismanagement of aquifer systems in arid and semi-aridregions around the world.

The purpose of the paper here is not to give suchsimple and wide-ranging policy recommendations. Thepurpose is rather to compare the policy processes in theWestern and Eastern La Mancha aquifers, and to assesshow policies for each aquifer have contributed tomismanagement of Western La Mancha and towards moresustainable management of Eastern La Mancha. The keyfinding from the empirical evidence in the La Manchaaquifers is that policies, mostly based on command andcontrol instruments, and economic instruments, havefailed in Western La Mancha, while policies, mostly basedon institutional instruments, have improved managementof the Eastern La Mancha aquifer.

This finding could be specific to the La Mancha case,or else it could be a more general result that would bevalid for other large aquifer systems. It is the authors’opinion that adequate management can only be broughtabout by stakeholder cooperation through the appropriateinstitutional setting, rather than by using pure economic orcommand and control instruments that are more difficultto implement in the case of public goods (Albiac 2009).

Farmers in the Eastern La Mancha aquifer are movingtowards internalizing the extraction cost externality butnot the environmental externality. Therefore, furtheradvances in cooperation or other alternative policy instru-ments are needed to curb extractions and recover theaquifer. A steep decline in initial extractions to accommo-date environmental damages would be met by oppositionfrom farmers, because their collective benefits would bereduced and not increased, as in the case of the extractioncost externality.

Environmental externalities will either be internalizedthrough the involvement of other stakeholders—eventhose farther away from the aquifers—or will requireadditional policy interventions by the basin authority.Interventions could include extraction restrictions oreconomic instruments, but the failure of these policies inWestern La Mancha show that they have to be imple-mented under the institutional setting suitable to makethem legitimate.

Conclusions

This study undertakes an empirical modeling of groundwatermanagement to review and extend the Gisser and Sánchez(1980) findings on groundwater management. Gisser andSánchez assert that policy intervention in groundwatermanagement cannot improve social welfare over freemarkets. The implication is that the “laissez faire” approachto groundwater management that is occurring worldwide isthe best management option, and any policy effort for a moresustainable approach is meaningless.

The Gisser and Sánchez model is adapted andexpanded in order to include the damage to ecosystemsfrom aquifer depletion. The empirical results indicate that

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when environmental damage is taken into account,regulation policies correct the market failure and achieveconsiderable welfare gains. This evidence supports theidea that policies for more sustainable groundwatermanagement are needed. This conclusion has been alreadyclaimed in the literature, but without formally questioningthe Gisser-Sánchez effect.

The empirical analysis focuses on two large aquifers,the Western and Eastern La Mancha aquifers, undergoingsubstantial pressure from the development of irrigation.Over time, the growing water extractions have led tosevere aquifer depletion, threatening ecosystems andhuman activities. Three management regimes are simulated:free market, partial cooperation, and full cooperation. Underfree market, the depletion process of recent decadescontinues in both aquifers. Under partial cooperation, farm-ers reduce water extractions in both aquifers without thewater table recovering its natural level. Under full cooper-ation, farmers make a major reduction of water extractionsand the water table recovers its natural level.

These results are used to evaluate the past and presentgroundwater management in the La Mancha aquifers. Bothaquifers followed a free market regime from the 1970s to the1990s, with a large drawdown of the water table. However,since then, there has been an important achievement inEastern La Mancha—farmers started to worry about collec-tive management in the mid-1990s and, by the year 2000,formal cooperation among farmers was up and running.Since then, extractions have fallen significantly and they havebeen below recharge in recent years. Several factors havecontributed to the emergence of cooperation in Eastern LaMancha. One factor was the considerable increase inpumping costs due to the alarming fall in the water table.Another factor was the credible threat of forbiddingextractions coming from the Jucar basin authority, with thefull support of downstream Jucar users.

The Eastern La Mancha aquifer is an exceptionalexample of collective action by farmers and, to the bestof our knowledge, is the only case in the world ofcooperation in a large aquifer. Even if the current effortsof farmers are not enough for a rapid recovery of the watertable, the existing cooperation proves that sustainablegroundwater management is a real and feasible alternativefor protecting aquifer systems worldwide. On the otherhand, farmers in Western La Mancha are not cooperatingat all. The intention of the institutional developments inthis aquifer was to avoid the control of extractions by thebasin authority, and at the same time to receive subsidypayments or large investments. The problem in WesternLa Mancha is quite serious because past policy mistakespreclude the emergence of cooperation among farmers.

The institutional and policy developments explain thecontrasting management outcomes in the Western andEastern LaMancha aquifers, which are related to the differentpolicy instruments implemented in each aquifer. An impor-tant finding is that policies mostly based on command andcontrol and economic instruments have failed in Western LaMancha, while policies mostly based on institutional instru-ments have succeeded in Eastern La Mancha.

However, cooperation requires farmers to endure largeopportunity costs, and these costs explain the difficultiesin achieving cooperation in large aquifers. How to inducecooperation under very different conditions characterizinglarge aquifers is a tough question, and there cannot besimple and wide-ranging policy recommendations. Theevidence from La Mancha suggests that policy effortsshould be focused on nurturing stakeholders’ collectiveaction and on providing the necessary institutional setting.

Acknowledgements This study was made possible by the financialsupport of the projects AGL2007-65548-C02-02/AGR and INIARTA2010-00109-C04 from the Spanish Ministry of Science andInnovation. IGME provided information about geophysical data,and JCRMO provided crop data and water-management informa-tion. We have received support from the planning offices of theConfederación Hidrográfica del Júcar where the Eastern La Manchaaquifer is located, and the Confederación Hidrográfica del Guadianawhere the Western La Mancha aquifer is located. Among theindividuals involved, special assistance has been provided byAlfonso Calera (IDR), Francisco Belmonte and Herminio Molina(JCRMO), Miguel Mejías (IGME), Javier Ferrer (CHJ), José AngelRodríguez (CHGN), Llorenç Avellà (UPV), and Ana Aldanondo(UPN).

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