Kurt A. Schwabe

Impacts of climate change on lower Murray irrigation

This article evaluates irrigated agriculture sector response and resultant economic impacts of climate change for a part of the Murray Darling Basin in Australia. A water balance model is used to predict reduced basin inflows for mild, moderate and severe climate change scenarios involving 1, 2 and 4°C warming, and predict 13, 38 and 63% reduced inflows. Impact on irrigated agricultural production and profitability are estimated with a mathematical programming model using a two-stage approach that simultaneously estimates short and long-run adjustments. The model accounts for a range of adaptive responses including: deficit irrigation, temporarily following of some areas, permanently reducing the irrigated area and changing the mix of crops. The results suggest that relatively low cost adaptation strategies are available for a moderate reduction in water availability and thus costs of such a reduction are likely to be relatively small. In more severe climate change scenarios greater costs are estimated. Adaptations predicted include a reduction in total area irrigated and investments in efficient irrigation. A shift away from perennial to annual crops is also predicted as the latter can be managed more profitably when water allocations in some years are very low.

Drainwater Management for Salinity Mitigation in Irrigated Agriculture

Salinity and drainage management options include source control, reuse, and evaporation ponds. This article identifies efficient strategies to maintain hydrologic balance in closed drainage basins and evaluates their impact on regional agricultural profits. Theoretical analysis suggests that economic efficiency requires acknowledgment of the nonseparability between water use and land value. Empirically, our solution involves a modest amount of source control, a substantial amount of reuse, and the elimination of evaporation ponds often associated with large environmental damages, while maintaining grower income. Various policy instruments and options are introduced and discussed, including a system of drainwater charges, marketable permits, and land retirement.

Spatial Dynamics of Water and Nitrogen Management in Irrigated Agriculture

The material contained herein is supplementary to the Article named in the title and published in the American Journal of Agricultural Economics, forthcoming.

Tropical countries may be willing to pay more to protect their forests

Significance Tropical forests, especially the primary tropical forests that are globally important for biodiversity conservation and carbon storage, are increasingly concentrated in relatively wealthier developing countries. This creates an opportunity for domestic funding by these countries to play a larger role in (i) closing the funding gap for tropical forest conservation, and (ii) paying for supplementary conservation actions linked to international payments for reduced greenhouse gas emissions from deforestation and forest degradation. Inadequate funding from developed countries has hampered international efforts to conserve biodiversity in tropical forests. We present two complementary research approaches that reveal a significant increase in public demand for conservation within tropical developing countries as those countries reach upper-middle-income (UMI) status. We highlight UMI tropical countries because they contain nearly four-fifths of tropical primary forests, which are rich in biodiversity and stored carbon. The first approach is a set of statistical analyses of various cross-country conservation indicators, which suggests that protective government policies have lagged behind the increase in public demand in these countries. The second approach is a case study from Malaysia, which reveals in a more integrated fashion the linkages from rising household income to increased household willingness to pay for conservation, nongovernmental organization activity, and delayed government action. Our findings suggest that domestic funding in UMI tropical countries can play a larger role in (i) closing the funding gap for tropical forest conservation, and (ii) paying for supplementary conservation actions linked to international payments for reduced greenhouse gas emissions from deforestation and forest degradation in tropical countries.

The Value of Changes in Deer Season Length: An Application of the Nested Multinomial Logit Model

Increasing deer populations can be controlled through manipulatingharvest limits or season length. While such actions often result in benefitsto hunters, both motorists and the agricultural sector also benefit as alower deer population leads to fewer incidences of harmful human-deerencounters. Traditional recreation demand models are often employed toexamine the welfare implications of changes in daily hunting bag limits.Studies measuring the effects of changes in season length, however, arenoticeably absent from the literature. This study uses a nested randomutility model to examine hunter choice over site and season selection toderive the values of changes in season length.

The Residential Water Demand Effect of Increasing Block Rate Water Budgets

We investigate the effect of introducing a fiscally neutral increasing block rate water budget price structure on residential water demand. We estimate that demand was reduced by around 17%, although the reduction was achieved gradually over more than three years. As intermediate steps we derive estimates of price and income elasticities that rely only on longitudinal variability. We investigate how different subpopulations responded to the pricing change and find evidence that marginal, rather than average, prices may be driving consumption. We also derive alternative rate structures that might have been implemented, and assess their estimated demand effects. (JEL Q25)

Nonpoint Source Pollution, Uniform Control Strategies, and the Neuse River Basin

This research investigates various policy options considered by the state of North Carolina for reducing nonpoint source pollution. Focusing on nitrogen runoff from cropping activities, we estimate and compare the control costs and estuarine nutrient loadings under both the initial proposed rules, which were quite uniform, and the more flexible final proposed rules. We then illustrate the magnitude to which the outcomes from models and policies can diverge depending upon the treatment of the application-specific environmental heterogeneity. Such an analysis illustrates the relative importance of certain types of heterogeneity associated with the environment on policy design and real-world outcomes.

Modeling state-level water quality management: the case of the Neuse River Basin

This research considers how the perceived costs of achieving water quality objectives are sensitive to three issues surrounding model structure and policy design. These issues include: (i) the extent of the regulated market, (ii) the responsibility of the regulated market for background pollution, and (iii) the use of alternative policy instruments. A large-scale process model is used to evaluate and compare the costs of nutrient reduction in the Neuse River Basin in North Carolina under various instruments, including a plan currently being considered by state regulators. The results emphasize the importance of flexibility in both model structure and policy design.

Irrigated Agricultural Adaptation to Water and Climate Variability: The Economic Value of a Water Portfolio

Increasing aridity, more frequent and intense drought, and greater degrees of water scarcity create unique challenges for agriculture. In response to these challenges, which often manifest themselves as lower and more variable surface water supplies, as well as depleted and degraded ground water supplies, growers tend to seek opportunities to adapt. One option for growers to reduce their exposure to water scarcity and heightened uncertainty is to diversify. Indeed, access to a portfolio of supplies is one way in which water and irrigation districts, as well as individual growers, are responding to the changing landscape of water resource availability. This article evaluates the benefits to irrigated agriculture from having access to multiple sources of water. With farm-level information on 1,900 agricultural parcels across California, we use the hedonic property value method to investigate the extent that growers benefit from having access to multiple sources of water (i.e., a water portfolio). Our results suggest that while lower quality waters, less reliable water, and less water all negatively impact agricultural land values, holding a water portfolio has a positive impact on land values through its role in mitigating the negative aspects of these factors and reducing the sensitivity of agriculture to climate-related factors. From a policy perspective, such results identify a valuable adaptation tool that irrigation districts may consider to help offset the negative impacts of climate change, drought, and population increases on water supply availability and reliability.

Cross-Country Analyses Don't Estimate Health-Health Responses

Health-Health analysis has attracted considerable attention as one way to evaluate the costs of regulatory policy to people. When a regulation is adopted to reduce the “risk” experienced by a particular group, health-health analysis seeks to evaluate when the indirect effects of an increase in prices or reduction in income offsets the direct effects intended by the regulation. If these indirect effects are large enough, then the general population can experience an increase in their overall risk. The article considers health-health analysis as it relates to policy decisions from conceptual and empirical perspectives. A comparative static analysis was a simple model is used to illustrate the factors influencing the relative effects of income and policy variables on risk. The empirical analysis also suggests that results with aggregate cross-country data and simple reduced-form models for the relationship of mortality to income are sensitive to model specifications and the sample composition.