The subsidy standard for agricultural water saving in yellow river basin: a shadow price-based approach

Subsidy standards play a pivotal role in sustainable agricultural water management by incentivizing farmers to adopt water-saving technologies and improve irrigation efficiency. Existing studies generally determine subsidy standards based on either the additional costs of adopting water-saving technologies or the environmental benefits generated, but few consider both dimensions within an integrated framework. To address this gap, this study develops a novel analytical framework that estimates optimal subsidy standards from a shadow price perspective, thereby internalizing both economic and environmental externalities. Using panel data from 86 cities across the Yellow River Basin between 2010 and 2020, we uncover pronounced spatial and temporal disparities in agricultural water-saving subsidy standards. More than 55% of the cities exhibited shadow-price-based subsidy levels exceeding 5 CNY/m3, with the highest reaching 12.57 CNY/m3, while provincial-level subsidies during the same period remained within the range of 0.1–3.93 CNY/m3. Taking Zhangye City as an example, its estimated subsidy standard averaged 1.97 CNY/m3-approximately 1.5 times that of downstream regions-and displayed a fluctuating yet upward trend. Results further indicate that incorporating both additional costs and environmental benefits yields consistently higher subsidy estimates than approaches relying solely on one dimension. These findings reveal the heterogeneity and complexity of agricultural water-saving subsidies, reflecting variations in local economic structures, environmental constraints, and water resource endowments across the Yellow River Basin.