# 3. Investment needs for irrigation and impacts on irrigation systems

## 3.1.Irrigation investment costs

We estimate the investment costs required to expand irrigated areas, to upgrade irrigation systems from less efficient to more efficient systems, and to improve the overall efficiency of irrigation systems. Expansion of irrigated areas involves a transformation of rainfed cropland area or the conversion from forested or other natural lands. Upgrade improvements are achieved by converting existing irrigated areas from low efficiency systems (such as flood/gravity systems) to more efficient systems (such as drip and sprinkler systems). Efficiency improvements can be achieved through improvements made to existing flood/gravity irrigation systems through land leveling, better irrigation scheduling, or improved water distribution (Miao et al., 2018). As we described in Section 1.1, the investment support scenarios are implemented as different levels of subsidy on the large‐scale capital costs and on‐farm capital costs. Farmers are responsible for the operations and maintenance of the irrigation systems, which have been included in the model as production costs.

The unit costs of surface irrigation expansion are based on new irrigation construction costs taken directly from the unit costs estimates from Inocencio et al. (2005) which are based on a review of 314 irrigation projects spanning 50 countries in Sub‐Saharan Africa, Asia, and Latin America and funded (or assisted) by the World Bank, Sub‐Saharan African Development Bank and the International Fund for Agriculture Development that were implemented from 1967 to 2003. This source distinguishes between costs of new construction and costs of irrigation rehabilitation, which are both used in the investment module depending on the situation. We also estimate the cost of upgrading existing irrigation systems from less efficient to more efficient systems based on rehabilitation unit costs. The cost of depreciation and capital replacement is the final component of the irrigation investment cost and must be borne in order to keep the existing and newly built irrigation infrastructure in good working order in the long run.

The results presented in the following section of this working paper have been aggregated and presented at World Bank regions (see Abbreviations and Acronyms). Figures in this section primarily focus on the irrigation investments in constant year 2000 US dollars from 2010 to 2050 divided into irrigated area expansion costs, system upgrade costs, system efficiency costs, and depreciation costs. Supplementary figures of investment needs are available in the supplementary information. Section 1.3 of the supplementary information provides a detailed description of the irrigation cost module.

For the _Invest_ scenario, investment costs for all developing countries for the entire period from 2010 to 2050 total $1.1 trillion, with annual costs at about $26 billion per year (Figure 1). The total costs are split almost half and half between irrigation expansion and depreciation, with only a small portion of the cost coming from irrigation upgrades and efficiency improvement. Upgrade and efficiency improvement costs are most relevant in the East Asia and the Pacific region, totaling almost $7 billion. Of note is the fact that the type of investment required changes over time; whereas most of the expansion investments occur toward the beginning of the time period, depreciation becomes the major expense toward the end of the time period. It is worth noting, that as irrigated area increases, depreciation costs also increase over time. In terms of regional composition of the investment, the largest share of the required investment (over 40% or $444 billion) takes place in East Asia and the Pacific, followed by South Asia ($211 billion) and Sub‐Saharan Africa ($173 billion).

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