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