Agricultural water rights trading and virtual water export compensation coupling model: A case study of an irrigation district in China

•Water Rights trading and Virtual Water Export Compensation Model was established.•The model was applied in Hetao irrigation district in China using enumeration method.•Agricultural benefit increased with the increase of compensation for virtual water.•Industrial and domestic benefits decreased with water right transfer cost increased.•Agricultural water right trading promotes water savings in Hetao irrigation district. Water rights trading is an effective way to promote efficient water allocation. The implementation of agricultural water rights trading can promote water saving, but may reduce the agricultural production scale in irrigation districts. Compensation for crop virtual water export can increase the benefits of agricultural water use, so as to enhance the competitiveness of economic benefit for agricultural production. This paper analyzed the relationship between agricultural water rights trading and virtual water export compensation, then a bi-level programming model was established with multiple objectives. The model was applied in Hetao irrigation district by using enumeration method. The changes of new water use of different users, benefits of irrigation district and water users with different water prices were analyzed and the optimization schemes were selected. Results show that the model through adjusting price variables including both water rights trading price and virtual water compensation price to optimize the allocation of agricultural water quantity saved among different water users, which at the same time makes both the irrigation management administration and water users get more benefit. The optimized scheme can raise the willingness of water saving in irrigation district, and enhance the competitiveness of agricultural water user against non-agricultural water user. This study provides a new method and scientific basis for the water resource management agency in their policy making.