Estimating the Value of Groundwater in Irrigation

In recent years there has been increasing regulation of agricultural water use in order to reduce transboundary and environmental water conflicts. Effective policy analysis needs to have tools to estimate correctly the value of irrigation water. Irrigating land increases crop yields and this higher profitability should be capitalized into the sales price of the land. For irrigation that depends on surface water rights, studies have found this to be the case (Xu et al. 1993, Faux and Perry 1999). However, studies that have analyzed the value of groundwater in irrigation have found mixed results. Hartman and Taylor (1989) and Sunderland, Libbin and Torell (1987) find that groundwater irrigation has no significant effect on land prices; Torrell et al. (1990) find a significant positive effect of groundwater in irrigation. One explanation is that in areas where groundwater use is not restricted there is the option to implement irrigation in the future and thus the presence of groundwater irrigation may not have a large effect on the sales price. Consistent with this idea of option value, Petrie and Taylor (2007) look at differences in land values before and after a moratorium on water-use permits and find that permits add value to agricultural land only after the restriction is in place. An additional econometric issue is that the decision to irrigate is not random but is based on the underlying characteristics of the land. Thus hedonic estimates of the value of irrigation rights may be biased. In this paper we analyze the value of groundwater in an area with pumping restrictions using both a standard hedonic model and a propensity score matching model. We use a geospatial database from Chase County, Nebraska that includes arms length sales, tax assessor’s data, hydrologic and climatic variables. We find that per acre values of groundwater irrigation are 15 percent higher using the propensity score method compared to the hedonic model. This result is driven in large part by the preferential adoption of irrigation on intermediate quality land. An important implication for policy is that hedonic estimates of the value of groundwater in irrigation may underestimate the cost, to both farmers and the government, of future water use reductions. Our study area is part of the Republican River Basin in Nebraska. The Basin has been the source of litigation between Colorado, Kansas and Nebraska. In 2002, the Supreme Court decided that groundwater pumping by Nebraska caused reduced instream flows in Kansas. As a result, groundwater management districts in Nebraska were forced to introduce a variety of restrictions: moratoria on new wells (introduced in 1999), metering of existing ones, and volumetric pumping restrictions. The data for this research include all agricultural parcels in Chase County, Nebraska that sold between 2000 and 2008, obtained from the Chase County tax assessor’s website. Each parcel contains sale prices along with the new ownership and sales date. In addition, the presence of outbuildings and the square footage and age of residences are included. Each observation also includes the distribution of agricultural land (irrigated, dryland or grassland) and four soil quality types in each type of land, resulting in a total of twelve soil classes. We also assembled georeferenced data on estimated depth to water, the rate at which a well can pump water, precipitation and growing degree days. After excluding the non arms-length sales transactions, outliers where the sale price per acre was greater than $6,000, and parcels of less than four acres, 330 observations were left. In the first estimation, we use physical, geophysical, sales, and structure data to characterize the sales price. We estimate an Ordinary Least Squares Regression model in which the dependent variable is the sales price per acre regressed on the other variables. Consistent with Petrie and Taylor (2007), our results show that irrigated land sells for a higher price than equivalent dryland or grassland (ceteris paribus). For the period between 2000 and 2008, during which the well drilling moratorium was in place, we find that the price of irrigated land was about$712 per acre greater than that of non irrigated land. Second, we estimate a propensity score model which involves two steps. First, we estimate the probability of a parcel of land being irrigated using a probit model. An interesting result from the probit regression is that farmers are more likely to irrigate on lands that are of intermediate quality (Soil 2 and Soil 3), suggesting that irrigation is a land-quality augmenting technology. This result is similar to Lichtenberg’s (1989) analysis in the region, but unlike that paper our results suggest that irrigation is less likely on the lowest quality land. In the second step we match pairs of non irrigated and irrigated parcels that have the same probability of being irrigated and analyze whether there is a difference in the sales price. Results show that once again there is a positive and significant value associated with groundwater irrigation rights, but the difference is larger than the hedonic analysis at $839. This suggests that if selection into irrigation is not accounted for, the price of the land is undervalued by over 15 percent. These results have important policy implications in areas such as Nebraska where there is debate on how to reduce water use effectively. The results of our paper suggest that future reduction may be costlier than previous research suggests and that the standard hedonic method may not be best in estimating the value of water. Also, the reductions will be more expensive to both the government and farmer. In Nebraska, the government has tried to reduce water use by buying permits from farmers. There has been a lot of resistance to this and one explanation for this may be that the government is not offering enough compensation for the permits.groundwater, hedonics, propensity score matching, Environmental Economics and Policy,

Multi-factor, multi-state, multi-model scenarios: Exploring food and climate futures for Southeast Asia

Decision-makers aiming to improve food security, livelihoods and resilience are faced with an uncertain future. To develop robust policies they need tools to explore the potential effects of uncertain climatic, socioeconomic, and environmental changes. Methods have been developed to use scenarios to present alternative futures to inform policy. Nevertheless, many of these can limit the possibility space with which decision-makers engage. This paper will present a participatory scenario process that maintains a large possibility space through the use of multiple factors and factor-states and a multi-model ensemble to create and quantify four regional scenarios for Southeast Asia. To do this we will explain 1) the process of multi-factor, multi-state building was done in a stakeholder workshop in Vietnam, 2) the scenario quantification and model results from GLOBIOM and IMPACT, two economic models, and 3) how the scenarios have already been applied to diverse policy processes in Cambodia, Laos, and Vietnam

Climate change impacts on agriculture in 2050 under a range of plausible socioeconomic and emissions scenarios

Previous studies have combined climate, crop and economic models to examine the impact of climate change on agricultural production and food security, but results have varied widely due to differences in models, scenarios and input data. Recent work has examined (and narrowed) these differences through systematic model intercomparison using a high-emissions pathway to highlight the differences. This paper extends that analysis to explore a range of plausible socioeconomic scenarios and emission pathways. Results from multiple climate and economic models are combined to examine the global and regional impacts of climate change on agricultural yields, area, production, consumption, prices and trade for coarse grains, rice, wheat, oilseeds and sugar crops to 2050. We find that climate impacts on global average yields, area, production and consumption are similar across shared socioeconomic pathways (SSP 1, 2 and 3, as we implement them based on population, income and productivity drivers), except when changes in trade policies are included. Impacts on trade and prices are higher for SSP 3 than SSP 2, and higher for SSP 2 than for SSP 1. Climate impacts for all variables are similar across low to moderate emissions pathways (RCP 4.5 and RCP 6.0), but increase for a higher emissions pathway (RCP 8.5). It is important to note that these global averages may hide regional variations. Projected reductions in agricultural yields due to climate change by 2050 are larger for some crops than those estimated for the past half century, but smaller than projected increases to 2050 due to rising demand and intrinsic productivity growth. Results illustrate the sensitivity of climate change impacts to differences in socioeconomic and emissions pathways. Yield impacts increase at high emissions levels and vary with changes in population, income and technology, but are reduced in all cases by endogenous changes in prices and other variables.University Corporation for Atmospheric Research 10.13039/100005626Peer Reviewe

Climate change impacts on agriculture in 2050 under a range of plausible socioeconomic and emissions scenarios

Previous studies have combined climate, crop and economic models to examine the impact of climate change on agricultural production and food security, but results have varied widely due to differences in models, scenarios and input data. Recent work has examined (and narrowed) these differences through systematic model intercomparison using a high-emissions pathway to highlight the differences. This paper extends that analysis to explore a range of plausible socioeconomic scenarios and emission pathways. Results from multiple climate and economic models are combined to examine the global and regional impacts of climate change on agricultural yields, area, production, consumption, prices and trade for coarse grains, rice, wheat, oilseeds and sugar crops to 2050. We find that climate impacts on global average yields, area, production and consumption are similar across shared socioeconomic pathways (SSP 1, 2 and 3, as we implement them based on population, income and productivity drivers), except when changes in trade policies are included. Impacts on trade and prices are higher for SSP 3 than SSP 2, and higher for SSP 2 than for SSP 1. Climate impacts for all variables are similar across low to moderate emissions pathways (RCP 4.5 and RCP 6.0), but increase for a higher emissions pathway (RCP 8.5). It is important to note that these global averages may hide regional variations. Projected reductions in agricultural yields due to climate change by 2050 are larger for some crops than those estimated for the past half century, but smaller than projected increases to 2050 due to rising demand and intrinsic productivity growth. Results illustrate the sensitivity of climate change impacts to differences in socioeconomic and emissions pathways. Yield impacts increase at high emissions levels and vary with changes in population, income and technology, but are reduced in all cases by endogenous changes in prices and other variables

The future of food security, environments and livelihoods in Western Africa: Four socio-economic scenarios

This working paper examines the development of regional socioeconomic scenarios for West Africa’s development, agriculture, food security and climate impacts. We present four globally consistent regional scenarios framed and outlined by regional experts who crafted narratives and determined key drivers of change. Stakeholders identified the type of actors driving change and the timeline of strategic planning as the most uncertain and most relevant factors of change affecting food security, livelihoods and environments in the region. The scenarios were linked to the IPCC community’s global Shared Socio-economic Pathways (SSPs) and quantified using two agricultural economic models, GLOBIOM and IMPACT, in interaction with drivers outlined by the SSPs and guided by semi-quantitative information from the stakeholders. The quantification of the scenarios has provided additional insights into the possible development of Western Africa in the context of a global economy as well as how the agricultural sector may be affected by climate change. The scenarios process highlights the need to combine socio-economic and climate scenarios, to base these scenarios in regional expertise, and ways to make scenarios useful for policy design. The objective of this working paper is to provide scenarios for future regional development for West Africa on the future of food security, environment, and rural livelihoods as well as offer details of the multi-stakeholder scenarios development process. Using both qualitative and quantitative scenarios we provide insights into the possible development of West Africa as well as a scalable framework for regional decision makers and the scientific community to use scenarios to build and test policies to make them more robust in the face of future uncertainty. In these scenarios, strong economic development increases food security and agricultural development. Increased crop and livestock productivity may lead to an expansion of agricultural areas within the region but productivity improvements may reduce the pressure on land elsewhere. In the context of a global economy, West Africa remains a large consumer and producer of a selection of commodities. However, the growth in population in combination with rising incomes may lead to increases in the region’s imports. For West Africa, climate change is likely to have negative effects on both crop yields and grassland productivity, and lack of investment in agriculture may exacerbate them. The aim of the regional scenarios is provide challenging contexts for policy makers to test and develop a range of national and regional policies. To date, the scenarios have been used in a number of policy design processes which include collaborations with ECOWAS priority setting, the National Plan for the Rural Sector for Burkina Faso (PNSR), and district and national level policy processes in Ghana

Agricultural Investments and Hunger in Africa Modelling Potential Contributions to SDG 2 - Zero Hunger

We use IFPRI’s IMPACT framework of linked biophysical and structural economic models to examine developments in global agricultural production systems, climate change, and food security. Building on related work on how increased investment in agricultural research, resource management, and infrastructure can address the challenges of meeting future food demand, we explore the costs and implications of these investments for reducing hunger in Africa by 2030. This analysis is coupled with a new investment estimation model, based on the perpetual inventory methodology (PIM), which allows for a better assessment of the costs of achieving projected agricultural improvements. We find that climate change will continue to slow projected reductions in hunger in the coming decades—increasing the number of people at risk of hunger in 2030 by 16 million in Africa compared to a scenario without climate change. Investments to increase agricultural productivity can offset the adverse impacts of climate change and help reduce the share of people at risk of hunger in 2030 to five percent or less in Northern, Western, and Southern Africa, but the share is projected to remain at ten percent or more in Eastern and Central Africa. Investments in Africa to achieve these results are estimated to cost about 15 billion USD per year between 2015 and 2030, as part of a larger package of investments costing around 52 billion USD in developing countries

Estimating the value of groundwater in irrigation

In recent years there has been increasing regulation of agricultural water use in order to reduce transboundary and environmental water conflicts. Effective policy analysis to support new regulations needs to have tools to estimate correctly the value of irrigation water. Irrigating land increases crop yields and this higher profitability should be capitalized into the sales price of the land. For irrigation that depends on surface water rights, studies have found this to be the case (Xu et al. 1993, Faux and Perry 1999). However, studies that have analyzed the value of groundwater in irrigation have found mixed results. Hartman and Taylor (1989) and Sunderland, Libbin and Torell (1987) find that groundwater irrigation has no significant effect on land prices; Torrell et al. (1990) find a significant positive effect of groundwater in irrigation. One explanation is that in areas where groundwater use is not restricted there is the option to implement irrigation in the future and thus the presence of groundwater irrigation may not have a large effect on the sales price. Consistent with this idea of option value, Petrie and Taylor (2007) look at differences in land values before and after a moratorium on water-use permits and find that permits add value to agricultural land only after the restriction is in place. An additional econometric issue is that the decision to irrigate is not random but is based on the underlying characteristics of the land. Thus hedonic estimates of the value of irrigation rights may be biased. In this thesis we analyze the value of groundwater in an area with pumping restrictions using both a standard hedonic model and a propensity score matching model. we use a geospatial database from Chase County, Nebraska that includes arms length sales, tax assessor???s data, hydrologic and climatic variables. We find that per acre values of groundwater irrigation are over 15 percent higher using the propensity score method compared to the hedonic model. This result is driven in large part by the preferential adoption of irrigation on intermediate quality land. An important implication for policy is that hedonic estimates of the value of groundwater in irrigation may underestimate the cost, to both farmers and the government, of future water use reductions

Structural approaches to modeling the impact of climate change and adaptation technologies on crop yields and food security

PRIFPRI3; CRP2; A Ensuring Sustainable food production; A.1 Global Futures and Strategic Foresight; ISIEPTD; PIMCGIAR Research Program on Policies, Institutions, and Markets (PIM

Estimating the Value of Groundwater in Irrigation

In recent years there has been increasing regulation of agricultural water use in order to reduce transboundary and environmental water conflicts. Effective policy analysis needs to have tools to estimate correctly the value of irrigation water. Irrigating land increases crop yields and this higher profitability should be capitalized into the sales price of the land. For irrigation that depends on surface water rights, studies have found this to be the case (Xu et al. 1993, Faux and Perry 1999). However, studies that have analyzed the value of groundwater in irrigation have found mixed results. Hartman and Taylor (1989) and Sunderland, Libbin and Torell (1987) find that groundwater irrigation has no significant effect on land prices; Torrell et al. (1990) find a significant positive effect of groundwater in irrigation. One explanation is that in areas where groundwater use is not restricted there is the option to implement irrigation in the future and thus the presence of groundwater irrigation may not have a large effect on the sales price. Consistent with this idea of option value, Petrie and Taylor (2007) look at differences in land values before and after a moratorium on water-use permits and find that permits add value to agricultural land only after the restriction is in place. An additional econometric issue is that the decision to irrigate is not random but is based on the underlying characteristics of the land. Thus hedonic estimates of the value of irrigation rights may be biased. In this paper we analyze the value of groundwater in an area with pumping restrictions using both a standard hedonic model and a propensity score matching model. We use a geospatial database from Chase County, Nebraska that includes arms length sales, tax assessor’s data, hydrologic and climatic variables. We find that per acre values of groundwater irrigation are 15 percent higher using the propensity score method compared to the hedonic model. This result is driven in large part by the preferential adoption of irrigation on intermediate quality land. An important implication for policy is that hedonic estimates of the value of groundwater in irrigation may underestimate the cost, to both farmers and the government, of future water use reductions. Our study area is part of the Republican River Basin in Nebraska. The Basin has been the source of litigation between Colorado, Kansas and Nebraska. In 2002, the Supreme Court decided that groundwater pumping by Nebraska caused reduced instream flows in Kansas. As a result, groundwater management districts in Nebraska were forced to introduce a variety of restrictions: moratoria on new wells (introduced in 1999), metering of existing ones, and volumetric pumping restrictions. The data for this research include all agricultural parcels in Chase County, Nebraska that sold between 2000 and 2008, obtained from the Chase County tax assessor’s website. Each parcel contains sale prices along with the new ownership and sales date. In addition, the presence of outbuildings and the square footage and age of residences are included. Each observation also includes the distribution of agricultural land (irrigated, dryland or grassland) and four soil quality types in each type of land, resulting in a total of twelve soil classes. We also assembled georeferenced data on estimated depth to water, the rate at which a well can pump water, precipitation and growing degree days. After excluding the non arms-length sales transactions, outliers where the sale price per acre was greater than $6,000, and parcels of less than four acres, 330 observations were left. In the first estimation, we use physical, geophysical, sales, and structure data to characterize the sales price. We estimate an Ordinary Least Squares Regression model in which the dependent variable is the sales price per acre regressed on the other variables. Consistent with Petrie and Taylor (2007), our results show that irrigated land sells for a higher price than equivalent dryland or grassland (ceteris paribus). For the period between 2000 and 2008, during which the well drilling moratorium was in place, we find that the price of irrigated land was about$712 per acre greater than that of non irrigated land. Second, we estimate a propensity score model which involves two steps. First, we estimate the probability of a parcel of land being irrigated using a probit model. An interesting result from the probit regression is that farmers are more likely to irrigate on lands that are of intermediate quality (Soil 2 and Soil 3), suggesting that irrigation is a land-quality augmenting technology. This result is similar to Lichtenberg’s (1989) analysis in the region, but unlike that paper our results suggest that irrigation is less likely on the lowest quality land. In the second step we match pairs of non irrigated and irrigated parcels that have the same probability of being irrigated and analyze whether there is a difference in the sales price. Results show that once again there is a positive and significant value associated with groundwater irrigation rights, but the difference is larger than the hedonic analysis at $839. This suggests that if selection into irrigation is not accounted for, the price of the land is undervalued by over 15 percent. These results have important policy implications in areas such as Nebraska where there is debate on how to reduce water use effectively. The results of our paper suggest that future reduction may be costlier than previous research suggests and that the standard hedonic method may not be best in estimating the value of water. Also, the reductions will be more expensive to both the government and farmer. In Nebraska, the government has tried to reduce water use by buying permits from farmers. There has been a lot of resistance to this and one explanation for this may be that the government is not offering enough compensation for the permits

The International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT): Model description for version 3

The International Food Policy Research Institute’s International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT) supports analysis of long-term challenges and opportunities for food, agriculture, and natural resources at global and regional scales. IMPACT is continually being updated and improved to better inform the choices that decisionmakers face today. This document describes the latest version of the model. IMPACT version 3 expands the geographic and commodity scope of the model in response to desires expressed by researchers and policymakers to address more complex questions involving climate change, food security, and economic development into the future. IMPACT 3 is an integrated modeling system that links information from climate models (Earth System Models), crop simulation models (for example, Decision Support System for Agrotechnology Transfer), and water models linked to a core global, partial equilibrium, multimarket model focused on the agriculture sector. This model system supports longer-term scenario analysis through the integration of these multidisciplinary modules to provide researchers and policymakers with a flexible tool to assess and compare the potential effects of changes in biophysical systems, socioeconomic trends, technologies, and policies.Non-PRIFPRI1; CRP2; A Ensuring Sustainable food production; A.1 Global Futures and Strategic Foresight; C Improving markets and trade; D Transforming AgricultureEPTD; DSGD; PIMCGIAR Research Program on Policies, Institutions, and Markets (PIM