Introduction
1
•The European Union Water Framework Directive (WFD) requires member states to balance ecological and economic water management objectives in water resources planning. •Member states are required to achieve “good surface water and groundwater status” in all water bodies. •Member states are required to implement water pricing policies that provide incentives for efficient use and contribute to the environmental objectives of the Directive. •This study interprets WFD water pricing objectives as a call for the use of volumetric water pricing at the river basin scale and then investigates the impact of applying such a policy. Introduction Using hydro-economic modeling to investigate trade-offs between ecological and economic water management objectives Niels Riegels*, Valerie Sturm, Roar Jensen, Charalampos Doulgeris, Flemming Møller, and Peter Bauer-Gottwein *[email protected] • We assume that a river basin planning authority could implement a volumetric water pricing policy that would be applied equally to all wholesale water users in the basin. • Hydro-economic modelling approach is used to identify appropriate prices and estimate welfare impacts of implementing volumetric prices. • Approach is tested on Aggitis River basin in northern Greece (~2300 km 2 ). • Two water pricing policies are investigated. • In the first, a single volumetric price is applied to all users, irrespective of time, space, water use type, or water source. • In the second, surface water and groundwater are priced differently, with energy cost used as a surrogate for water price. Ecological and sustainability indicators Main results Approach Distribution of opportunity costs Impact of higher prices on crop areas Impact of higher prices on flow regime Conclusions Optimization approach •Optimization approach used to identify appropriate prices. •Appropriate prices assumed to be those that achieve WFD environmental objectives while minimizing costs to other users. •Environmental quality and sustainability indicators developed to estimate whether WFD objectives are met. •River basin model and an economic valuation tool 0 2 4 6 8 x 10 6 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 A M onthly Flow V olum e (m 3 ) C um ulative Probability 0 2 4 6 8 x 10 6 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 B M onthlyFlow Volum e (m 3 ) C um ulative Probability Modified Unmodified Modified Unmodified WFD ecological status requirements are imposed only with respect to hydrological regime. Status is estimated by comparing cumulative distributions of important flow variables to unmodified distributions. Average monthly flows used to assess ecological status. Groundwater pumping constrained so that pumping does not exceed capture of river base flows. Top: Daily flow histories for two reaches in study area. Bottom: CDFs comparing distributions of August flow volumes. Maximum difference between CDFs is used to define ecological status. •Both pricing policies result in a flow regime that is closer to the unmodified regime. •Flow regime is altered because of surface water abstraction and also because of groundwater pumping impacts on river base flows. Simulated flows at basin outlet: A: Unmodified B: Baseline C: Pricing policy 1 D: Pricing policy 2 •Volumetric pricing of wholesale water use at basin scale could be used to achieve some of the environmental objectives of the WFD. •Opportunity costs of achieving WFD environmental objectives implemented in this study estimated to be ~€12-13 million/year. •Opportunity costs concentrated in the agriculture sector (about 75% of total). •Impacts on agriculture are greatest for growers of low value crops like maize and cotton. •Production of high value crops like vegetable and orchard crops would probably continue under higher prices because these crops can be grown profitably using deficit irrigation. •Pricing surface water and groundwater differently could reduce economic impacts on growers of low value crops. B aseline P ricing policy 1 P ricing policy 2 V ineyards 393 309 296 C otton 168 0 6 Trees (pear,apple, cherry,w alnut) 166 152 160 Trees (peach,alm ond, chestnut,plum ) 240 207 210 O lives 100 0 6 Sugar beet 588 102 94 M aize 1347 0 32 Tobacco V irginia,B urley 93 80 87 V egetables 604 585 571 Fodder 46 0 2 P ulses 5 5 6 P otatoes 61 55 63 C ereals 300 667 657 Tomatoes 47 25 32 C lover 177 20 19 Total 4336 2207 2242 P rofit(1000 €) C rop •Changes in irrigation profits for one representative water use location shown at left. •Impacts are concentrated on low value crops such as maize and cotton, although impact is reduced under policy 2 •Because energy cost is used as a surrogate for groundwater price under policy 2, and marginal water costs are low at low flow rates, it is profitable to irrigate low value crops if reduced amounts of water are used. 0 0.5 1 0 50 100 150 200 250 300 350 Vineyards W aterprice (€/m 3 ) Area (hectares) 0 0.5 1 0 200 400 600 800 1000 Cotton W aterprice (€/m 3 ) 0 0.5 1 0 5 10 15 20 25 30 35 Trees (pear,apple,cherry,w alnut) W aterprice (€/m 3 ) 0 0.5 1 0 20 40 60 80 Trees (peach,alm ond,chestnut,plum) W aterprice (€/m 3 ) 0 0.5 1 0 100 200 300 400 Olives W aterprice (€/m 3 ) Area (hectares) 0 0.5 1 0 500 1000 1500 Sugarbeet W aterprice (€/m 3 ) 0 0.5 1 0 2000 4000 6000 8000 10000 Maize W aterprice (€/m 3 ) 0 0.5 1 0 0.5 1 1.5 2 x10 4 Cereals W aterprice (€/m 3 ) 0 0.5 1 0 50 100 150 200 250 Vegetables W aterprice (€/m 3 ) Area (hectares) 0 0.5 1 0 50 100 150 Fodder W aterprice (€/m 3 ) 0 0.5 1 0 10 20 30 40 Potatoes W aterprice (€/m 3 ) 0 0.5 1 0 20 40 60 80 100 Tom atoes W aterprice (€/m 3 ) •Positive Mathematical Programming (Howitt, 1995) used to predict farmer responses to water price changes. •High-value crops such as vegetable and orchard crops would remain profitable under higher water prices because these crops can be grown profitably using a deficit irrigation strategy. •Average annual benefits of water use for entire basin shown at left. •Impacts concentrated in the irrigation and domestic sectors. •Surface water price is higher under policy 2 because groundwater use increases; surface water price must be raised to compensate for reduced base flows. P aram eter B aseline P ricing policy 1 P ricing policy 2 O ptim alw ater price (€/m 3 ) notapplied 0.10 0.12 O ptim alenergy price (€/kWh) notapplied notapplied 1.13 B asin-w ide netbenefit: irrigation (1000 €) 2.35E +04 1.41E +04 1.53E +04 B asin-w ide netbenefit: urban/dom estic (1000 €) 5.26E +03 2.79E +03 2.30E +03 B asin-w ide netbenefit: industry (1000 €) 4.73E +04 4.65E +04 4.62E +04 B asin-w ide netbenefit: livestock (1000 €) 5.11E +03 4.92E +03 5.14E +03 B asin-w ide netbenefit: tourism (1000 €) 1.13E +02 1.13E +02 1.13E +02 Selectw ater price(s) Estim ate average annual w ateruse Estim ate average annual netbenefits C onvertannual estim ates ofw ateruse to daily estim ates for20-yearsim ulation period W rite estim ates to river basin sim ulation m odel R un riverbasin sim ulation m odel (M IKE BAS IN )for20-yearperiod R ead flow and groundw aterlevel outputs C heck ifflow and groundw atertargets m et Selectnew w aterprice(s) No C heck ifnet benefits m aximized Yes Selectnew w aterprice(s) No Stop Yes
description
Using hydro-economic modeling to investigate trade-offs between ecological and economic water management objectives. Niels Riegels * , Valerie Sturm, Roar Jensen, Charalampos Doulgeris, Flemming M øller, and Peter Bauer-Gottwein * [email protected]. Introduction. - PowerPoint PPT Presentation
Transcript of Introduction
•The European Union Water Framework Directive (WFD) requires member states to balance ecological and economic water management objectives in water resources planning.
•Member states are required to achieve “good surface water and groundwater status” in all water bodies.
•Member states are required to implement water pricing policies that provide incentives for efficient use and contribute to the environmental objectives of the Directive.
•This study interprets WFD water pricing objectives as a call for the use of volumetric water pricing at the river basin scale and then investigates the impact of applying such a policy.
Introduction
Using hydro-economic modeling to investigate trade-offs between ecological and economic water management objectives
Niels Riegels*, Valerie Sturm, Roar Jensen, Charalampos Doulgeris, Flemming Møller, and Peter Bauer-Gottwein
• We assume that a river basin planning authority could implement a volumetric water pricing policy that would be applied equally to all wholesale water users in the basin.
• Hydro-economic modelling approach is used to identify appropriate prices and estimate welfare impacts of implementing volumetric prices.
• Approach is tested on Aggitis River basin in northern Greece (~2300 km2).
• Two water pricing policies are investigated.
• In the first, a single volumetric price is applied to all users, irrespective of time, space, water use type, or water source.
• In the second, surface water and groundwater are priced differently, with energy cost used as a surrogate for water price.
Ecological and sustainability indicators Main results
Approach Distribution of opportunity costsImpact of higher prices on crop areas
Impact of higher prices on flow regime ConclusionsOptimization approach
•Optimization approach used to identify appropriate prices.
•Appropriate prices assumed to be those that achieve WFD environmental objectives while minimizing costs to other users.
•Environmental quality and sustainability indicators developed to estimate whether WFD objectives are met.
•River basin model and an economic valuation tool are run iteratively using water price as a decision variable.
0 2 4 6 8
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Monthly Flow Volume (m3)
Cum
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ive
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Monthly Flow Volume (m3)
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ive
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lity
ModifiedUnmodified
ModifiedUnmodified
WFD ecological status requirements are imposed only with respect to hydrological regime. Status is estimated by comparing cumulative distributions of important flow variables to unmodified distributions.
Average monthly flows used to assess ecological status.
Groundwater pumping constrained so that pumping does not exceed capture of river base flows. Top: Daily flow histories for two reaches in study area.
Bottom: CDFs comparing distributions of August flow volumes. Maximum difference between CDFs is used to define ecological status.
•Both pricing policies result in a flow regime that is closer to the unmodified regime.
•Flow regime is altered because of surface water abstraction and also because of groundwater pumping impacts on river base flows.
Simulated flows at basin outlet:
A: Unmodified B: Baseline
C: Pricing policy 1 D: Pricing policy 2
•Volumetric pricing of wholesale water use at basin scale could be used to achieve some of the environmental objectives of the WFD.
•Opportunity costs of achieving WFD environmental objectives implemented in this study estimated to be ~€12-13 million/year.
•Opportunity costs concentrated in the agriculture sector (about 75% of total).
•Impacts on agriculture are greatest for growers of low value crops like maize and cotton.
•Production of high value crops like vegetable and orchard crops would probably continue under higher prices because these crops can be grown profitably using deficit irrigation.
•Pricing surface water and groundwater differently could reduce economic impacts on growers of low value crops.
Baseline Pricing policy 1 Pricing policy 2
Vineyards 393 309 296
Cotton 168 0 6
Trees (pear, apple, cherry, walnut) 166 152 160
Trees (peach, almond, chestnut, plum) 240 207 210
Olives 100 0 6
Sugar beet 588 102 94
Maize 1347 0 32
Tobacco Virginia, Burley 93 80 87
Vegetables 604 585 571
Fodder 46 0 2
Pulses 5 5 6
Potatoes 61 55 63
Cereals 300 667 657
Tomatoes 47 25 32
Clover 177 20 19
Total 4336 2207 2242
Profit (1000 €)
Crop•Changes in irrigation profits for one representative water use location shown at left.
•Impacts are concentrated on low value crops such as maize and cotton, although impact is reduced under policy 2
•Because energy cost is used as a surrogate for groundwater price under policy 2, and marginal water costs are low at low flow rates, it is profitable to irrigate low value crops if reduced amounts of water are used.
0 0.5 10
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Vineyards
Water price (€/m3)
Are
a (h
ecta
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Cotton
Water price (€/m3)
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35Trees (pear, apple, cherry, walnut)
Water price (€/m3)
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Trees (peach, almond, chestnut, plum)
Water price (€/m3)
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Olives
Water price (€/m3)
Are
a (h
ecta
res)
0 0.5 10
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Sugar beet
Water price (€/m3)
0 0.5 10
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Maize
Water price (€/m3)
0 0.5 10
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x 104 Cereals
Water price (€/m3)
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Vegetables
Water price (€/m3)
Are
a (h
ecta
res)
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Fodder
Water price (€/m3)
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Potatoes
Water price (€/m3)
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Tomatoes
Water price (€/m3)
•Positive Mathematical Programming (Howitt, 1995) used to predict farmer responses to water price changes.
•High-value crops such as vegetable and orchard crops would remain profitable under higher water prices because these crops can be grown profitably using a deficit irrigation strategy.
•Average annual benefits of water use for entire basin shown at left.
•Impacts concentrated in the irrigation and domestic sectors.
•Surface water price is higher under policy 2 because groundwater use increases; surface water price must be raised to compensate for reduced base flows.
Parameter Baseline Pricing policy 1 Pricing policy 2
Optimal water price
(€/m3) not applied 0.10 0.12
Optimal energy price (€/kWh) not applied not applied 1.13
Basin-wide net benefit: irrigation (1000 €) 2.35E+04 1.41E+04 1.53E+04
Basin-wide net benefit: urban/domestic (1000 €) 5.26E+03 2.79E+03 2.30E+03
Basin-wide net benefit: industry (1000 €) 4.73E+04 4.65E+04 4.62E+04
Basin-wide net benefit: livestock (1000 €) 5.11E+03 4.92E+03 5.14E+03
Basin-wide net benefit: tourism (1000 €) 1.13E+02 1.13E+02 1.13E+02
Select water price(s)
Estimate average annual water use
Estimate average annual net benefits
Convert annual estimates of water use to daily estimates for 20-year simulation period
Write estimates to river basin simulation model
Run river basin simulation model (MIKE BASIN) for 20-year period
Read flow and groundwater level outputs
Check if flow and groundwater targets met
Select new water price(s)
No Check if net benefits maximized
Yes
Select new water price(s)
No
StopYes
