IWRA World Water Congress 2025 Marrakech Morocco
Water-Energy-Food-Ecosystems Nexus - WEFE NEXUS
Author(s): Isabel Parras - Agricultural Economist
Isabel Parras - Agricultural Economist
Strategic Foresight Pillar, Agrifood Economics and Policy Division Food and Agriculture Organization of the UN
3 December 2025
Oral: PDFAbstractWhy irrigation water price elasticities matter?
The own-price elasticity of irrigation water demand it’s crucial for:
- Designing pricing and cost-recovery policies
- Predicting water savings
- Anticipating impacts on farm income and production
- Improving water use efficiency (SDG 6)
What the literature says:
- Empirically, irrigation water demand is usually inelastic (around −0.1 to −0.6), but there is large heterogeneity in prices and elasticities.
- The latest meta-analysis:1996, 24 studies, one country, found an average elasticity around −0.48, but with wide variation.
Conclusions for the WEFE Nexus
- Irrigation water demand is typically inelastic on average, but varies widely by context, method and crop. Mean own-price elasticities are consistently around −0.3 to −0.5, but with large dispersion.
- Lack of data is the main limitation: Even in econometric studies with real data, information on prices, crops, energy prices and quantities was often incomplete or absent. Many areas still lack volumetric pricing/metering, limiting both efficiency and identification of elasticities.
- Prices and elasticities shape WEFE flows. Moving from area fees to marginal volumetric pricing or water markets, where possible, impacts not just water use but also on-farm energy demand (pumping), environmental pressures (aquifer drawdown, return flows), and food outputs (crop choice, intensity).
- Elasticity heterogeneity is a feature, so harmonization is essential before transferring elasticities across regions. Differences in |ε| by crop value, irrigation technology, source (surface vs groundwater), and water availability mean water-price reforms ripple unevenly across energy use, ecosystem stress and food production.
- Income and price levels dampen responsiveness. In higher-income regions and where prevailing water prices are already high, |ε| tends to be smaller, implying that price reforms alone may under-deliver on energy savings and environmental relief without complementary measures.
- Environment–food trade-offs. Less water used for irrigation can protect in-stream flows and groundwater, but abrupt price hikes in low-|ε| settings can contract irrigated area or push shifts to high-value, high-input crops.
- The effect of water or energy subsidies on water prices remains opaque as well as the impact of energy prices in water prices.