Journal of Environmental Management 258 (2020) 110040 Available online 7 January 2020 0301-4797/© 2019 Published by Elsevier Ltd. Research article Economics of irrigation water conservation: Dynamic optimization for consumption and investment Befekadu Goraw Habteyes a , Frank A. Ward b, * a Arizona State University, Tempe, AZ, 85287, USA b Department of Agricultural Economics and Agricultural Business, New Mexico State University, Las Cruces, NM, 88003, USA A R T I C L E INFO Keywords: Water productivity Irrigation Food security Optimal control Economics Conservation Policy ABSTRACT Measures to protect irrigation water supplies for food security continue to receive international attention to address growing water scarcity when faced by increased food demands combined with reduced water supply reliability. Yet, a common problem where water is delivered with earthen canals is delivery ineffciency com- bined with low economic values per unit of water. In many of the world’s arid regions, climate stressed water shortages have raised the importance of discovering measures to improve irrigation delivery effciency. However, little research grade work to date has presented an integrated analysis of the economic performance of irrigation delivery improvements faced by drought and climate stressed regions. This paper’s unique contribution is to investigate the economic performance of water conservation infrastructure combined with dynamically opti- mized use of saved water. We develop a state-of-the arts empirical dynamic optimization model to discover land and water use patterns that optimize sustained farm income. Results from the upper watershed irrigation region of the Canadian Basin in the southwestern US show that canal and delivery system lining can raise the sustained economic value of water for crop irrigation. The saved water can see immediate use in dry years. It can also be stored in wet years to mitigate the most adverse impacts of future climate water stress. This double dividend is especially important in rain-fed watersheds for which surface water supplies for irrigation are diffcult to forecast accurately. Findings light a path for water managers and other stakeholders who bear responsibility of fnding economically responsible measures to improve irrigation water productivity in the world’s dry regions. 1. Background 1.1. Introduction Irrigated agriculture supports more than half of food and fber pro- duction internationally, strengthening food security everywhere (Intergovernmental Panel on Climate Change, 2019). Despite being a pillar for protecting food security, irrigation is also the largest water user in most arid regions, often being a signifcant contributor to environ- mental stress, including aquifer depletion, land subsidence, seasonal streamfow reduction, salinization, and water pollution (Dinar and Xepapadeas, 1998). So irrigated agriculture is a major contributor to increased water scarcity while contributing to food security interna- tionally. Added to this dilemma, many of the world’s communities in dry regions face some dimension of climate-water stress (Hamdy et al., 2003b; Ward et al., 2019). Ongoing interest by the scientifc and policy community to establish measures to protect food and water security to support a United Nations’ forecast population of 9.6 billion by 2050 elevates the importance of protecting water supplies for irrigation through various policy measures. Improving irrigation water productivity through better delivery ef- fciency supports rural development, farm income, and food security worldwide (Faisal and Parveen, 2004; Jagermeyr et al. 2015, 2016; Kang et al., 2017). Still, a common experience internationally where water is conveyed with earthen canals is water delivery ineffciencies and low economic values per unit of source water available for delivery (Askri et al., 2010; Chen et al., 2009; Prathapar et al., 2018; Yussuff et al., 1994). In much of the western U.S., climate stressed water shortages have elevated the importance and economic value of in- vestigations to improve irrigation system effciency. In many snowmelt-dominated watersheds of the northern hemi- sphere, climate stress since 2000 has brought earlier spring snowmelt, followed by lower surface supplies in the late summer when water carries its highest economic value for crop irrigation. For example, * Corresponding author. E-mail addresses: habteyesbg@gmail.com (B.G. Habteyes), fward@nmsu.edu (F.A. Ward). Contents lists available at ScienceDirect Journal of Environmental Management journal homepage: http://www.elsevier.com/locate/jenvman https://doi.org/10.1016/j.jenvman.2019.110040 Received 29 May 2019; Received in revised form 24 December 2019; Accepted 24 December 2019