| Аннотация | For many decades, Uzbekistan has been one of the largest cotton producers in the world.
The irrigation water needed for these high production levels has been delivered by the massive
diversion of the Amu Darya and Syr Darya rivers, which naturally flowed into the Aral Sea. This
diversion for agriculture was the main cause of the rapid decline of the Aral Sea, which is at only
10% of its original size today. The traditional method of irrigation, which relies on simple open
canal systems, is highly inefficient for managing the region’s critical and limited water resource.
It has been qualitatively estimated, for example, that irrigation water lost to evaporation and system
inefficiencies is quite large. With the future availability of water at risk for agriculture in Central Asia,
primarily due to the loss of glacial volume from global warming, along with declines in seasonal
snowpack, it is clear that new approaches to water management are needed. Any serious efforts
to restore the Aral Sea and its ecological services would also reduce supplies of irrigation water for
Uzbekistan. While regional conflict over water is unlikely, it must be considered since Uzbekistan
is a downstream country among several that rely on the Amu Darya and Syr Darya rivers for most
of their water supplies. To insure against these risks to cotton production and the underlying
economy, better irrigation technologies are needed across Uzbekistan. However, these technologies
can be quite expensive, especially given that water is still nearly free. In this case study we explore
the use of real options analysis (ROA) to look for optimal investment strategies in efficient irrigation
technologies in light of variable climate and policy uncertainties. |
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