Estimating the Potential Impacts of Irrigation Water Pricing Using Multicriteria Decision Making Modelling. An Application to Northern Greece

A great challenge of the current European water policy is the implementation of volumetric water pricing in the agricultural sector, especially of Mediterranean countries, where irrigation is a necessary precondition of agricultural production and farmers' income, but also the major consumer of water. The overall aim of the present work is to develop a methodology that will be suitable for the estimation of the potential environmental, economic and social impacts of irrigation water pricing. For this purpose, Multi–Attribute Utility Theory is implemented in order to simulate agricultural decision making at various water pricing scenarios. Water demand functions are then elicited, by means of the best crop and water allocation (farmers' decisions) in each scenario. The European Water Framework Directive recommends that any issue concerning water resources management (including water pricing policies) should be developed at the river basin level. In this framework, a cluster analysis is performed to partition the river basin area (namely, Loudias River Basin, located in Northern Greece) into a small number of homogeneous sub–regions. The differential impact of water pricing in each region is then analyzed, and finally, an average water demand function is formulated for the whole river basin.