Does agricultural water conservation policy necessarily reduce agricultural water extraction? Evidence from China

Does the implementation of agricultural water conservation policy necessarily bring about a reduction in agricultural water extraction? Taking China's National Agricultural Water Conservation Outline proposed in 2012 as an example, this paper uses the data of 31 provinces from 2000 to 2019, and employs an empirical strategy of Difference-in-Differences (DID) to estimate the impact of the agricultural water conservation policy on agricultural water extraction. The results show that the agricultural water conservation policy does not achieve the decline of agricultural water extraction, but increases agricultural water extraction. When addressing contemporaneous water-related policies or estimating in subsample, these results are robust. The possible reason for this phenomenon is that the agricultural water conservation policy promotes agricultural production, especially by increasing the sown area and irrigated area, and the expansion of irrigated area is the main reason for the increase in agricultural water extraction. Moreover, land potentiality for crop production may affect the water-saving effect of the agricultural water conservation policy, in which provinces with higher land potentiality will have less increase in agricultural water extraction caused by the agricultural water conservation policy. Therefore, with the empirical evidence from China, agricultural water conservation policy may not necessarily reduce agricultural water extraction, and this phenomenon is always regarded as rebound effects. In order to avoid the adverse impacts of the rebound effect, agricultural water-saving technologies can be strengthened in areas with high land potentiality for agricultural production, and market-oriented policies, such as water rights reform, can be employed to avoid excessive use of water resources in areas with severe over-extraction.