A Hydro-Economic Model To Analysis Energy Subsidies Adjustment of Agriculture Sector on Groundwater Exploitation

Groundwater resource, which represent about one quarter of freshwater on the earth, is the only main source of irrigation and drinking water in some arid and semi‐arid regions such as the Hamadan‐Bahar Plain situated in west of Iran (as case study). Input and output pricing policies related to agriculture sector, as the biggest consumer of water resources in the world, can play efficient roles in controlling groundwater resource exploitation. The objective of this study is to analyze the effects of energy price adjustment, as an economic instrument, on groundwater balance behaviour and consumption in agriculture sector. For this purpose a Hydro‐Economic model is considered in a dynamic framework to investigate relationship between aquifer groundwater balance and farmers economic behaviour.