An economic assessment of on-farm surface water retention systems

Abstract

Regions dependent on agricultural production are concerned about the uncertainty associated with climate change. Extreme drought and flooding events are predicted to occur with greater frequency, requiring mitigation strategies to reduce the associated negative impacts. Retention pond installation schemes designed to capture surface water may be a viable option to reduce water stress during drought periods by supporting irrigation. The retention systems would serve to capture excess spring runoff and extreme rainfall events, reducing flood potential downstream. Additionally, retention ponds may be used for biomass production and nutrient retention. The purpose of this research was to investigate the economic viability of adopting on-farm surface water retention systems as a strategic water management strategy. A retention pond was analysed using a dynamic simulation model to predict its storage capacity, installation and upkeep cost, and economic advantages. The average impact of irrigation application under present day conditions was an increase in crop revenue of $11.38/hectare. However, due to the cost of irrigation and reservoir installation this on average leaves the farmer to pay $148.50/hectare each year. Replacing existing low value crops within the study area with high value potato crops also resulted in a negative net revenue. Irrigated crops under future climate scenarios also experienced a net decrease in revenue due to the associated irrigation and reservoir infrastructure costs. However, gross crop revenue increases were more consistent throughout the future study time periods and required less irrigation water, making irrigation application more beneficial in the future. Farmers who harvest cattails from retention systems for biomass and available carbon offset credits can gain $642.70/hectare of harvestable cattail/year. Cattail harvest also removes phosphorus and nitrogen, providing a monetized impact of $7,014/hectare of harvestable cattail/year. The removal of phosphorus, nitrogen, carbon, and avoided flooding damages of the retention basin itself provide an additional $17,850 to $18,470/hectare of retention system/year depending on the valuations of avoided flooding damages. The recommended use of retention systems is for avoiding flood damages, nutrient retention, and biomass production. This is due to the economic gains these three functions of retention systems provide. The revenue gained from these functions can support farmers wanting to invest in irrigation while providing economic and environmental benefits to the region.