Irrigation improves food security and human wellbeing. Poorly managed irrigation can raise watertables inducing waterlogging and salinity. Excessive groundwater withdrawals can lower watertables, impacting drainage and interlinked hydroeconomic systems. Sustainable irrigation management thus remains a global water policy challenge. This study develops a framework for using market-based instruments for net groundwater recharge management to mitigate waterlogging and salinity, taking selected settings in the Murray–Darling Basin in Australia as a case study. The SWAGMAN® series of models are developed which enable farmers to meet their paddock-scale recharge targets while optimizing profits, and to link their onfarm land and water management actions to regional recharge goals. Spatial quantification of recharge effectively converts a diffuse source groundwater recharge issue to a point source problem, enabling assignment of private property rights to a common pool issue. Integrated hydrological, economic, and institutional models, as well as farm case studies, are used to evaluate the efficiency of various net recharge management options, specifically a cap-and-trade model. The results show that the net gains from the scheme would be small, about 1% of annual farm income, which do not support its outright adoption. Consideration of offsite/indirect impacts may, however, alter this calculus.

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