Efficient water management policies for irrigation adaptation to climate change in Southern Europe

•A stochastic irrigation model is developed for climate change policy analysis.•Climate change will likely have negative impacts on irrigation in Southern Europe.•The effects of water markets and irrigation subsidies are evaluated.•Markets are more efficient than subsidies to address climate change.

This paper evaluates economic and environmental effects of two incentive-based water management policies to address climate change impacts on irrigated agriculture: water markets and irrigation subsidies. A Southern European case study assesses farmers' long and short-run adaptation responses under climate change and policy interventions with a discrete stochastic programming model. Results indicate that climate change will likely have negative impacts on irrigation activities and water-dependent ecosystems in Southern Europe. However, the severity of impacts depends on government policy settings and farmers' adaptation responses. The comparison between water market and irrigation subsidy policies shows the advantages of water markets over irrigation subsidies in terms of both private and social benefits. These findings could guide policymakers on the design of efficient water institutions and policies to address climate change in the irrigated agriculture of Southern Europe.