Trading Water for Carbon Groundwater Management in the

Trading Water for Carbon? Groundwater Management in the Presence of GHG Mitigation Incentives for Agriculture Justin Baker Research Analyst Center 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 Water Implications GHG Potential Land-based Consumption Mitigation Activity Quality Net Emissions Biofuels + - + or - Bioelectricity + or - - Soil Sequestration + or - - Afforestation + or - - Non-CO 2 Emissions + or - + - – Why the ambiguity? • Regional considerations, input substitutability, and leakage impacts are important

Example: Renewable Fuels Standard • Mandating biofuels can have adverse consequences – Simulation Results using FASOMGHG model confirm this: • By 2015, bioenergy offsets account for 86. 5 Million Tonnes CO 2 Eq. • Additional water use 13. 8 MAF/year • 6. 26 T CO 2/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 Production: y=f(Wt, nt) Applied Nitrogen, nt GHG Emissions, G=g(Wt, nt) Local environmental damages D=d(Wt, nt, St, NS) *also depends on land use decisions Nitrate concentration of recharge NR=h(Wt, nt, Rt) Groundwater Stock, St Natural Recharge Rt Nitrate Stock, NS *Both St and NS are state variables, and depend on the choice of Wt and nt.

Basic Model- Aquifer and Pollution Dynamics • Groundwater dynamics • Pollution Dynamics (using nitrate concentration)

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

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 • Very Preliminary • Water quantity gains are minimal • Quality gains more substantial • GHG benefits: • At $35/T CO 2 Only 3. 2 T CO 2 saved over 50 years • ~0. 064 T CO 2 ha-1 yr-1

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 miles 2 – 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? 36 BGY scenario (Total = 15 BGY)

Current FASOMGHG Spatial Scope Currently: 11 major regions 67 subregions After Additions: 12 additional Ogallala subregions 79 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 NO 3, 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