Paying farmers for voluntary conservation can help solve the groundwater crisis
This brief provides guidance for policymakers on designing incentive programmes for voluntary groundwater conservation. Study results from Gujarat, India, suggest substantial conservation can be achieved at a relatively low cost, making conservation payments a cost-effective tool for managing the electric grid and reducing groundwater depletion.
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Hagerty and Zucker Policy Brief March 2024.pdf
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Groundwater is a vital source of irrigation and drinking water worldwide, but a widespread lack of monitoring and regulation is leading to over-extraction and depletion. The problem is even worse in the many places that do not charge a per-unit fee for the electricity used to pump groundwater.
We tested a programme of financial incentives for voluntary groundwater conservation. Smallholder farmers in Gujarat, India, were offered cash in return for reducing the amount of time they operated their groundwater pumps. Participants were selected by random lottery. We found that:
- Price incentives work: On average, farmers eligible for the price incentives pumped groundwater for 24% less time than comparison farmers.
- Substantial conservation can be achieved without a high price: The greatest conservation came from a relatively low price, and doubling the price had little additional effect.
- Conservation payments can be a cost-effective tool for managing the electric grid: The cost of reducing demand through this programme was similar to the cost of procuring additional supply for the local electricity distribution company.