Irrigated agricultural production is the backbone of the Chinese agricultural sector, but the increasing demand for irrigation water, its inefficient utilization and overuse of chemical inputs, accompanied by the short supply of water resources have endangered the nation's agricultural and environmental sustainability. The Chinese government has proposed a water pricing policy with the expectation of improving the efficiency of utilizing irrigation water and fertilizer, to mitigate these problems. With the main objective of this paper being to assess the impact of this policy on water demand and environmental sustainability, a positive mathematical programming model was adopted to simulate different irrigation water pricing scenarios based on farm-level primary data from three irrigation districts along the Weihe River basin. The main parameter for assessing water demand was the change in total water consumption relative to the base year, while change in fertilizer consumption and water demand was determined to evaluate the impact of pricing policy on environment sustainability. According to the results, irrigation water demand and fertilizer consumption were mostly price inelastic to water pricing. This implies that water pricing policy can have only a minor role in regulating the water demand and environment in the region even when the base-year water price is doubled.

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