The Heterogeneous Impacts of Groundwater Management Policies in the Republican River Basin of Colorado

Abstract Groundwater is a critical input to agricultural production across the globe. Current groundwater pumping rates frequently exceed recharge, often by a substantial amount, leading to groundwater depletion and potential declines in agricultural profits over time. As a result, many regions reliant on irrigated agriculture have proposed policies to manage groundwater use. Even when gains from aquifer management exist, there is little information about how policies affect individual producers sharing the resource. In this paper, we investigate the variability of groundwater management policy impacts across heterogeneous agricultural producers. To measure these impacts, we develop a hydroeconomic model that captures the important role of well capacity, productivity of water, and weather uncertainty. We use the model to simulate the impacts of groundwater management policies on producers in the High Plains aquifer of eastern Colorado and compare outcomes to a no‐policy baseline. The management policies considered include a pumping fee, a quantity restriction, and an irrigated acreage fee. We find that well capacity and soil type affect policy impacts but in ways that can qualitatively differ across policy type. Model results have important implications for the distributional impacts and political acceptability of groundwater management policies.