Despite substantial reductions in production and farm income, the compensation levels exceed those required to compensate farmers for the losses in net farm revenue, and do so by substantial margins. These results were communicated directly to the Agriculture Engineering Research Center in Taiwan and to the members of Taiwan's Council of Agriculture.
impact statement issue
Increased competition by non-agricultural users for water around the world has placed priority on understanding the economic consequences for farm and non-farm interests in policies designed to reallocate scarce water resources from agricultural to industrial and other urban uses. These issues are particularly critical in the rice-growing areas in and around expanding urban areas.
impact statement response
The full policy implications of such water transfers and the associated compensation must not only account for the value of lost agricultural production and income, but also any loss in the value of social multifunctional benefits from agricultural production that have gained increased importance in recent agricultural policy debates.
impact statement summary
Increased demand for water for municipal and industrial uses throughout Taiwan has intensified the pressure to reallocate water from agricultural to non-agricultural uses. The full policy implications of such water transfers must not only account for the value of lost agricultural production and income, but also for any loss in the social value of multifunctional benefits from agricultural production. Focusing on two northern irrigation associations in Taiwan, we empirically assess the changes in rice production and multifunctional values under the scenario of transferring water from agricultural to non-agricultural uses. We also compare these combined multifunctional values of land in agricultural production with the per hectare compensations for water transfer in 2002 to evaluate the current water transfer mechanism. The empirical results have significant policy implications. Despite substantial reductions in production and farm income, the compensation levels in both irrigation regions exceed those required to compensate farmers for the losses in net farm revenue, and do so by substantial margins.