Trading Water for Carbon? Groundwater Management in the Presence of GHG Mitigation Incentives for Agriculture Justin Baker Research Analyst Center on Global.

Trading Water for Carbon? Groundwater Management in the Presence of GHG

Mitigation Incentives for AgricultureJustin Baker

Research AnalystCenter on Global Change, Duke University

Doctoral Candidate

Agricultural Economics, Texas A&M University

Background. . .

• Policy efforts could make GHG mitigation in forestry and agriculture a reality

– Decreased management intensity

– Terrestrial sequestration

– Biofuels as low-carbon alternatives for transportation (debatable)

– Use of agricultural residues for bioenergy

Meanwhile. . . • Groundwater accounts for 41% of all irrigation supplies

• Effective groundwater management increasingly difficult – Increased Competition– Emerging agricultural markets (biofuels)– Higher energy prices– Threats of Climate Change– Degraded Quality – Threatened ecosystem services

• How will climate mitigation incentives and groundwater management interact?

Managing Water AND GHGs

• There are trade-offs to consider

– Why the ambiguity?• Regional considerations, input substitutability, and leakage impacts are

important

Water Implications GHG Potential

Land-based Mitigation Activity

Consumption Quality Net Emissions

Biofuels + - + or -

Bioelectricity + or - + or - -

Soil Sequestration

+ or - + or - -

Afforestation + or - + or - -

Non-CO2 Emissions

+ or - + -

Example: Renewable Fuels Standard

• Mandating biofuels can have adverse consequences – Simulation Results using FASOMGHG model confirm this:

Environmental Measures (National)

0

2

4

6

8

10

2005 2010 2015 2020 2025

Year

Perc

ent C

hang

e fro

m

2005

Bas

elin

e

Water Use Nitrogen Phosphorous

• By 2015, bioenergy offsets account for 86.5 Million Tonnes CO2 Eq.

•Additional water use 13.8 MAF/year

•6.26 T CO2/AF

•Worthy trade-off?

Research Objectives

• Two part project~1) Theoretical modeling

• Is it possible to manage groundwater extraction, water quality, and GHG emissions conjunctively?

– Small spatial scale– Are welfare gains possible? – Simple illustration, limitations, future development

2) Empirical Case Study• Ogallala Aquifer- Assessment of groundwater

resources under exogenous climate policy shocks– Co-benefit, or co-costs?

Theoretical Model

Conjunctive GHG Mitigation and Groundwater Management

Simple Groundwater Management System

Groundwater Extracted, Wt

Applied Nitrogen, nt

Production: y=f(Wt,nt)

Nitrate concentration of rechargeNR=h(Wt,nt,Rt)

Natural Recharge Rt

Groundwater Stock, St Nitrate Stock, NS

GHG Emissions, G=g(Wt,nt)

Local environmental damagesD=d(Wt,nt,St,NS)

*Both St and NS are state variables, and depend on the choice of Wt and nt.

*also depends on land use

decisions

Basic Model- Aquifer and Pollution

Dynamics • Groundwater dynamics

• Pollution Dynamics (using nitrate concentration)

.t tS R W

:

( , )

S R St t

Rt t t

N N N

where

N h W n

Social Planner’s Problem

• Maximizing returns to production and benefits of GHG mitigation

• The choice of Wt, nt will dictate extraction rate and pollution concentration dynamics

• Subject to equations of motion

,max ( ( , ) ( , ) ( ) )t t

ty t t c t t n t t t

W no

p f W n p g W n c n c S W e dt

Model Features

• Incorporates some social costs of water use and fertilizer application

• If GHG emissions are targeted, stock depletion and nitrate accumulation are slowed (Wt, nt ).

– Proposition: Managing GHG emissions in isolation could provide a “second-best” policy option for improving groundwater management

Numerical Illustration (parameters)

• Production function parameters f() (Larson, et al 1996)

• Leaching parameters NR (Larson, et al 1996)

• Decay in Nitrates (Yadav, 1997)

• IPCC default values for GHG emissions (IPCC 2007)

• Price and biophysical data (various sources)

• GAMS used for optimal control simulation

Graphical Results Nitrate Concentration

1 25 49

Time

Nit

rate

Co

ncen

trati

on

Common Property . GHG Policy .

•Very Preliminary

•Water quantity gains are minimal

•Quality gains more substantial

•GHG benefits:

•At $35/T CO2 Only 3.2 T CO2 saved over 50 years

•~0.064 T CO2ha-1 yr-1

Optimal Extraction

-30

-25

-20

-15

-10

-5

0

1 25 49

Time

Wat

er T

able

Baseline GHG Pricing

Extensions of the Model

1) Managing GHG emissions from production intensity will yield minimal benefits– Alternative GHG mitigation/offset activities to be

included

2) Climate Policy to be determined exogenously to the agricultural system– Policy decisions and systematic shock

uncertainty matter – Pertinent case study needed

Ogallala (High Plains) Aquifer Case Study

Ogallala (High Plains) Aquifer• Area- Approximately 170,000 miles2

– Roughly ¼ of US agricultural land base

– Spans eight states (Colorado, Kansas, Nebraska, New Mexico, Oklahoma, South Dakota, Texas, Wyoming)

– Varying management institutions

Empirical Modeling Approach• Exploration of groundwater dynamics in

prominent agricultural region under exogenous climate policy shocks – Addition of consistent hydrologic features of the

Ogallala Aquifer to a national agricultural/forestry sector partial equilibrium model (FASOMGHG)

• FASOMGHG is an ideal model to expand for this study– Land use competition,– Comprehensive GHG accounting– Full suite of mitigation/offset activities

• (bioenergy, biological sequestration, etc.)

Why should this region be concerned?

Grain Ethanol Production (Million Gallons)

CROP_ETHAN

0

40

3970

4840

6360

36 BGY scenario (Total = 15 BGY)

Cellulosic Ethanol Production (Million Gallons)

CELL_ETHAN

Current FASOMGHG Spatial Scope

Currently:11 major regions67 subregions

After Additions:12 additional Ogallala sub-regions79 Final Regions

Dealing with Heterogeneity• Aquifer levels subject to

variability

• FASOMGHG too large to attempt geographic mapping at fine spatial scale

• Ogallala sub-regions to be empirically distributed under initial saturated thickness condition

– Approach is superior to taking regional averages

Other Operational Procedures

• Improved GHG accounting for alternative irrigation systems

• Improved life-cycle water accounting (especially for biofuels)

• Yield potential for deficit irrigation practices

Data Collection• Literature search

– Determination of ideal geographical boundaries• Differences in Geophysics,• Management institutions

• Saturated thickness levels for initial stock/lift – (TTU, NU, KSU, USGS, TWDB)

• MODFLOW data for recharge, heterogeneity

• Estimates of NO3, other concentrations

• Agricultural statistics for sub-regional differences in management– (USDA-NASS, KSU and TX Extension Services, etc.)

Expected Results

• Depletion effects and optimal extraction over time– Long-term sustainability concerns

• Comparison of varying institutions under exogenous systematic pressures

• Carbon-for-Water trade-offs– (or carbon-and-water co-benefits)– Social Implications

Conclusion

• Theory of conjunctive GHG and groundwater management warrants further attention

• Interactions of exogenous climate policy and regional water resource management are important

• Extensive, national scale modeling effort needed to assess various social trade-offs in agricultural GHG mitigation opportunities

Questions?

Appendix