An integrated hydrologic-economic model can jointly represent river basin hydrology and economic systems. The model structure includes sub-models for hydrology, agriculture, industry, municipalities, and institutions. It uses an optimization approach to maximize total net water benefits across sectors. The model can help with strategic decision making by evaluating tradeoffs between off-stream and instream water uses under different policy and investment scenarios. However, it has limitations such as not being suitable for day-to-day river operations and not fully representing rainfed agriculture and poverty impacts.
UGC NET Paper 1 Mathematical Reasoning & Aptitude.pdf
Integrated Hydrologic - Economic modelling of river basins
1. Integrated Hydrologic - Economic
Modeling of River Basins
ode g o e as s
Claudia Ringler
IFPRI
UCD/Embrapa
2. An Example of a Typical River Basin…
Precipitation
Fishing
g
Hydropower Forest
Reservoir
Runoff River Basin Boundary
Industry
dust y
Rura Urba
Ub
Rainfed Agr l n
Return FlowWSS WSS
Irrigation
Recreation
Groundwater Inflow
Community
Use
Navigation
Infiltration / Recharge
Base Flow / Pumping
Wetlands / Environ
Groundwater Livestock
…there is a need to understand how one Irrigation
use/r affects other uses and users… Groundwater Outflow
Figure based on Rao 2005 Ocean
UCD/Embrapa
3. Growing Intersectoral Competition
CHANGE
GROWTH
-T h l i
Technologies
- Economy
- Environment
- Population Agr
- Urbanization
Ind Quantity Dom
Quality
Env
ENVIRONMENT
- social ENVIRONMENT
- legal - physical
- political - technical
- institutional - economic
UCD/Embrapa
4. Economics versus Engineering in Basin
Models
• Hydrologic simulation models are important for
real-time operation of dams & river systems
• Economic optimization models are important for
investment calculations
• Optimization in simulation models is generally
of limited use for water allocation based on
f li i d f ll i b d
economic efficiency purposes
• Economic models without sufficient hydrologic
representation is also of limited use
• Joint hydrologic-economic models can be used
for strategic decision-making in river UCD/Embrapa
7. Physical Social
Geography Environment Politics
Geology
gy Economics
Climatology Water
W t Water
W t Sociology
S i l
Meteorology Resources Demand Law
Ecology Institutions
……. …..
Hydrology
Water Resources Management
g
Control (Hard) Technology Adaptive (Soft) Technology
Water
Supply
Flood
Control
Hydro
Power
... Fees
Taxes
Subsi- Water
dies Rights
...
Solutions
Feedbacks
UCD/Embrapa
8. Model Structure
Institutional Norms / Economic Incentives
River Basin Maximization of net benefits
Hydrologic
H d l i system operation
t ti
Crop production/
Off-stream Instream uses
Irrigation profits
uses •Power generation
•Salinity control
Ground- Hydrop. Domestic
water Profits Benefits
D&I Irrigation
g
On-Farm water Industrial
distribution Profits
Hydrology / Supply Side Economics / Demand Side
UCD/Embrapa
9. Compartment Modeling vs. Holistic Modeling
Hydrologic sub-model
i Hydrologic b
H d l i sub-model
d l
Inter-relationships
p
Data exchanges
Economic sub-model
Economic sub-model
E i b d l
• Production function with water as an input
• Environmental value (benefit) function
• Investment/cost function: investment/cost
infrastructure water yields
UCD/Embrapa
10. Precipitation Runoff Other sources
inflow Downstream economic
outflow
River reaches & reservoirs and environmental
instream uses : hydropower, recreation, and requirements
aquifer-river
dilution return flow
inter-flow
diversion offstreamuses
evapotranspiration
& other comsumptiveuse
Consumptive Distribution
use system
surface drainage
surface precipitation water
i it ti reuse
industry water
Industrial & drainage
Agricultural
municipal Treatment disposal/
demand sites
demand sites treatment
spillage loss
groundwater
groundwater percolation
Groundwater tail water
seepage pumping
return flow Drainage
seepage drainage collection
system
precipitation deep percolation
river
depletion
Groundwater system
UCD/Embrapa
12. Economics – Benefit Functions Relating
Water to Off-stream or Instream use
M&I Water Uses -
p(w) = p0(w0) (w/w0)α (i
inverse demand function)
d d f ti )
w
∫p ( w0 ) ⋅ (w / w0 ) − w ⋅ wp
α
VM ( w) = 0
w0
VM benefit from M&I water use (US$),
w0 normal water withdrawal (m3)
p0 willingness at w0 (US$) 500
Benefit (million US$)
price elasticity, α=1/e 300
400
e 1/e
n
wp water price 200
100
B
0
0 200 400 600 800 1000 1200 1400 1600
Water withdrawal (million m3)
UCD/Embrapa
13. Economics – Benefit Functions Relating Water to Off-stream
or Instream use
Crop Yield Function
ya
y= = a1 + a2 ⋅ w+ a3 ln w Yield as function of water, salinity, and
ym irrigation t h l
i i ti technology, a regression i
a1 = b1 + b2 u + b3 c based on model experiments.
a 2 = b4 + b5 u + b6 c
a3 = b7 + b8 u + b9 c
w s=0.3
s 03
water application relative to crop ET CUC=0.8 CUC=0.9
s=0.7
s 07
pp 2
s=1.2
s 1
p
CUC=0.7
c salt concentration in water application (dS/m)
Yield relative to max. crop yield
1
Yield relative to max. crop yield
1
u Christiensen Uniformity Coefficient (CUC).
0.8 0.8
0.6
06
m
0.6
06
0.4 0.4
0.2 0.2
0 0
0 1 2 3 4 0 1 2 3 4
Water relative to max. crop ET Water relative max. crop ET
UCD/Embrapa
15. Economics – Benefit Functions Relating Water to Off-stream
or Instream use
Benefits from wetland uses
VW wd = ∑ wa wd , pd ⋅ wy wd ⋅ β − ∑ ( fd wd , pd ) 2 ⋅ dfw wd , pd
pd pd
− ∑ (l wd , pd ) 2 ⋅ dl wd , pd
lw dlw
pd
Where
wa = area of wetland (ha)
wy = wetland yield, estimated (US$/ha)
fd = deviation of flows from ‘normal’ flows,
lw = deviation of lake storage from ‘normal’ storage (only for
normal
Cambodia)
dfw= damage coefficient for flows at wetland sites
dlw = damage coefficient for lake storage at wetland site (only
g g ( y
for Cambodia)
β = the adjustment factor (here: 1.1).
UCD/Embrapa
16. Economics – Benefit Functions Relating Water to Off-stream
or Instream Net Benefit Function, Example Lao PDR
Wetland use
UCD/Embrapa
17. Institutions: Organizations and Policies
National or National or regional policies on water
and economic development
Regional agencies
Basin policies on multiple
purposes of water use water supply
use, supply,
hydropower, environmental
Basin (sub-basin) authority and ecological requirements,
water quality, flooding control,
capacity expansion and O&M
it i d
Administrative units
(states or provinces, Inter-regional agreements on
water allocation and water trade
counties or cities)
ti iti )
Inter-sector water allocation,
water right and markets,
markets
Irrigation Urban areas water prices and O&M cost,
districts water use agreements,
On-farm water management
Farms
UCD/Embrapa
18. Model Description – Holistic Approach
Type:
T Optimization Si l ti
O ti i ti + Simulation
Structure: Holistic, spatially distributed sources & demand
Process: Deterministic & extended stochastic
Spatial Domain: Basin + Groundwater
Time Domain/Step: Multi-year planning horizon / month
Governing Eq’ns: Algebraic hydro/agro/econ/inst.
Objective Function: Maximize net water benefits: Irri./M&I/hydro
State variables: River flows / reservoir storage / groundwater
table / soil moisture / soil salinity
Decision Variables: Crop acreage / water withdrawal & alloc./
reservoir release / groundwater pumping /
capacity expansion / economic incentives
UCD/Embrapa
19. Limitations
Cannot be used for day-to-day river system
operation
Can be linked to poverty if water users are
disaggregated by income levels, f ex
levels f.ex.
Focus on productive water uses manipulated by
humans, and less on rainfed water management
h dl i f d
[where a lot of poverty persists], but the latter
can be represented if it rainfed agriculture
results in changes in inflows
UCD/Embrapa
21. Estimating Impacts, Behavioral
Changes, or Both
• Ignore One or Both
• Guess at One of Both
• Generate Empirical Estimates
– Very simply – e.g., general notions based on PRA exercises
y py g,g
– More complex – e.g., farm budgets, NR inventories, land use
systems analysis
– Very complex – e g bioeconomic models that simulate
e.g.,
human behavior and biophysical processes
• Which Is the Proper Tool for You?
p
– What is the policy question (type of policy, target, time
frame)?
– How much time do you have?
– How much money do you have?
UCD/Embrapa
22. Key Objectives of Hydro-Economic
Models
• Understand Farmer Behavior and Outcomes
– Cropping patterns, input mix, water use
– Income
– Surface water and groundwater availability
• Predict the Effects of Proposed Policy and other
Changes on Farmer Behavior/Outcomes
• Inform Policy
• Modeling at Three Spatial Extents
– Plot-Level LUS Model
– Buriti Vermelho Model
– Basin-Wide Model
UCD/Embrapa
23. One Tool -- LUS Analysis
y
• Focus on Land Use Systems (LUS)
– Multi-year duration
– Different intermediate and end uses
• Estimate Economic Performance
– Discounted streams of input costs and product revenues
• Technical coefficients and input/output prices
– Calculate economic returns to key factors of production
• Land, labor
,
• Estimate the Environmental Effects
– E.g., carbon stocks
• Estimate the Sociocultural Effects
– E.g., food security, labor requirements
• Highlight Institutional Impediments to LUS Adoption
• Compare Across LUS – Trade-Offs/Synergies
UCD/Embrapa
24. Land Use System Analysis
• Spatial Resolution, Time Steps, and Temporal Extent
– Single parcel of land, specific series of cropping activities,
specific production and water use technologies, specific end
technologies
date
– Annual time steps
– Multi year duration
Multi-year
– Different intermediate and end uses
Field #1
Year 1
Field #1
Year 2 Field #1
Year 3
Y Field #1
Year 4 Field #1
Year 10 Field #1
Year 15
UCD/Embrapa
25. Above-Ground Carbon vs.
Returns t L b
R t to Labor
wage rate
Managed Forest
160
(t/ha--tim averag ed)
bon
140 F
round carb
Forestt
120
100
me
80 Coffee/Bandarra
Abovegr
60 Coffee/Rubber
40 Improved
Annual/ Traditional Improved Fallow
20 Pasture
Fallow Pasture
0
0 2 4 6 8 10 12 14 16 18 20 22
$R per person-day
UCD/Embrapa
29. AF
Farm-Level Economic Model for BV
L lE i M d lf
• Objective:
– Maximize farm profits
• Subject to:
– Agronomic constraints
• e.g., yields on given soils
g,y g
– Household resource constraints
• Cash and family labor
– Availability and costs of surface water and
groundwater
–IInput and product prices
t d d t i
UCD/Embrapa
30. BV M d l ’ T
Models’ Temporal and S ti l
l d Spatial
Resolutions and Extents
Spatial Resolution Temporal Resolution
Hydro model 30m x 30m x Hydro model minutes
depth-of-water-table grids Econ model agricultural seasons
Econ model farm
boundaries x depth-of-tube-
well
Spatial Extent Temporal Extent
Buriti Vermelho sub-catchment A decade, both models
area, both models
UCD/Embrapa
31. Objective Function
j
max ∑ psi qsi (x nirrs , ewsi (xirrs )) − ∑ wsj xsij − ∑ cewsi (pirr , xirrs , z)
i,s i,s i ,s
Effective Water
ect e ate
Agricultural Production Function
A i lt l P d ti F ti
Cost
•Vector of Non-Irrigation Inputs (xnirr): • Irrigation Input
Crop •Fertilizers, seeds, land, Non-Irrigation
Prices – pirr
Prices p
pesticides, machinery etc
, y Input Cost
• Irrigation Input
•Effective Water – ew • Price - wsj Quantities - xirr
•Function of Irrigation Inputs (xirr): • Quantity - xsij • z – Vector of
•Applied water Factors that
•Groundwater
Groundwater may affect
•Surface water groundwater
extraction costs
•Irrigation Capital
(e.g. water table
•Irrigation Labor
g depth)
•Irrigation Energy
UCD/Embrapa
32. Constraints
⎧Land: ∑ landsi ≤ Bls ,
⎪ i
⎪Surface Water: sw ≤ B ,
Resource ⎪
⎪
∑ si sws
i
Constraints ⎨
⎪Family labor: ∑ flsi ≤ Bfl s ,
⎪ i
⎪Credit: ∑ csi ≤ Bc ,
⎪
⎩ i
s
Applied Water
Constraint ∑ swi ,s
si + gwsi ≤ ∑ awsi
i ,s
Surface Applied
pp
Groundwater Water
Water
UCD/Embrapa
33. Hydrologic & Economic Model Links
y g
• Crop-specific Algorithm to translate
g HYDROLOGIC
• poduction cropping decisions into MODEL
• water use water demand
• irrigation efficiency
Cropping Decisions Hydrologic Consequences
Algorithm to translate
ECONOMIC • Water available for ag
hydrologic
O
MODEL consequences • surface water
into farm-level water • groundwater
availability
UCD/Embrapa
34. Econ Data Requirements
For BV Model
• Input Quantity and Price
per season, per crop, per
farm: • Output Q
p Quantities and Prices
– land – per crop
– fertilizers – per season
– pesticides – per farm
– seeds • Costs of groundwater
– labor and family labor
y pumping
– machinery – Fixed costs of groundwater
– irrigation inputs: wells
• applied water from – Depth from surface to water
p
surface and table
groundwater sources
• irrigation labor • C dit C t i t
Credit Constraints
• irrigation capital
• energy (kwh/ha) UCD/Embrapa
37. Basin-Wide Models’ Temporal and
B i Wid M d l ’ T l d
Spatial Resolutions and Extents
Spatial Resolution
Hydro model 14 large polygons
Econ model Município
Temporal Resolution
Hydro model month
Econ model agricultural season
Spatial Extent
SFRB, both models
Temporal Extent
Decades, both models
UCD/Embrapa
38. Econ Data Requirements For
Basin-Wide
Basin Wide Model
• Input Quantity and Price • Output Q
p Quantities and Prices
per season, per crop, per
season crop
município: – per crop
– land – per season
– f tili
fertilizers – per município
– pesticides • Credit Constraints
– seeds
– labor and family labor
– machinery
– irrigation inputs:
• applied water
• irrigation labor
• i i ti capital
irrigation it l
• energy (kwh/ha)
UCD/Embrapa
39. Hydrologic & Economic Model Links
y g
• Crop-specific Algorithm to translate
g HYDROLOGIC
• poduction cropping decisions into MODEL
• water use water demand
• irrigation efficiency
Cropping Decisions Hydrologic Consequences
Algorithm to translate
ECONOMIC • Water available for ag
hydrologic
O
MODEL consequences • surface water
into farm-level water • groundwater
availability
UCD/Embrapa
40. Resolution vs Extent of Economic
and Hydrology Modeling
Resolution (space and time
Extent (total space and time)
step)
t )
Decades
Decades
Extent
D
D
Time
e
coupling
economic
econds
econds
hydrologic resolution
resolution
Se
Se
Millimeters Kilometers Millimeters Kilometers
Space Space
UCD/Embrapa