Browsing by Author "Garrido, Alberto"

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    Comparison of different water supply risk management tools for irrigators: option contracts and insurance
    (Springer, 2015-04-11) Rey, Dolores; Garrido, Alberto; Calatrava, Javier
    Irrigators must cope with the risk of not having enough water to meet crop demands. There are different tools for managing this risk, including water market mechanisms and insurance. Given the choice, farmers will opt for the tool that offers the greatest positive change in expected utility. This paper presents a theoretical assessment of farmers’ expected utility for two different water option contracts and a drought insurance policy. We analyze the conditions that determine farmers’ preferences for these instruments and perform a numerical application to a water-stressed Spanish region. Results show that farmers’ willingness to pay for the considered risk management tools are greater than the preliminary estimates of these instruments costs. This suggests that option contracts and insurance may help farmers manage water supply availability risks.
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    ItemOpen Access
    An innovative option contract for allocating water in Inter-Basin Transfers: the case of the Tagus-Segura Transfer in Spain
    (Springer, 2015-12-31) Rey, Dolores; Garrido, Alberto; Shafiee, Mahmood
    The Tagus-Segura Transfer (TST), the largest water infrastructure in Spain, connects the Tagus basin’s headwaters and the Segura basin, one of the most water-stressed areas in Europe. The need to increase the minimum environmental flows in the Tagus River and to meet new urban demands has lead to the redefinition of the TST’s management rules, what will cause a reduction of transferable volumes to the Segura basin. After evaluating the effects of this change in the whole Tagus-Segura system, focusing on the availability of irrigation water in the Segura, the environmental flows in the Tagus and the economic impacts on both basins; we propose an innovative two-tranche option contract that could reduce the negative impacts of the modification of the Transfer’s management rule, and represents an institutional innovation with respect to previous inter-basin water trading. We evaluate this contract with respect to spot and non-market scenarios. Results show that the proposed contract would reduce the impact of a change in the transfer’s management rule on water availability in the recipient area.