Modeling Economy-wide impacts of water policies in pakistan
-
Upload
international-water-management-institute-iwmi -
Category
Technology
-
view
1.317 -
download
2
description
Transcript of Modeling Economy-wide impacts of water policies in pakistan
Modeling Economywide Impacts of Water Policies in Pakistan
Sherman Robinson and Arthur Gueneau International Food Policy Research Institute (IFPRI)
May 23, 2013 – GWSP Conference,Bonn, Germany
2
Plan of the Presentation
• Motivation of the work• Presentation of the CGE-W model
– CGE model: IFPRI standard model– Water model: RWSM– Links: CGE-W
• Results– Impact of climate change– Impact of Diamer-Basha dam
• Future work and conclusion
3
Motivation• Pakistan is subject to increasing water stress
– Expanding agriculture relies heavily on irrigation– Hydropower important for increased energy demand– Groundwater mining is pervasive – Climate change is likely to disrupt flow patterns
• Large water infrastructure projects are needed and benefits have to be assessed:– Impacts are transmitted to the rest of the economy
through markets and changes in prices– Potential use of simulation models to analyze
water/economy/policy links
4
Modeling Paradigm
• CGE-W is a water/economic simulation model– Water policies influence distribution of water– Repercussion on crop yields– Yield changes shock agricultural supply– Economy reacts by reallocating production factors
through market mechanisms and price changes– Changes in prices affect farmers’ decisions for the
following year• Economic policies also have indirect impacts on
the water sector
Why a coupled model?
• There are economic models with water factors– Do not capture the complexity of the Indus basin
• There are water models with economic variables– Do not capture economywide links between
agriculture and the rest of the economy• Our paradigm: Let each model do what it is best
at and make them talk to each other
IFPRI Dynamic CGE-W Model
6
Economic policy options and trends, with land variablePrevious (or base) year water stress
Industrial and Domestic Water DemandAgricultural demand for water by crops
Optimizes water distribution over months in the yearCalculates water shortages per water region by month
Allocates supply of available water to cropsCalculates the impact of water stress on yields
Yield shocks affect agricultural production; land fixed by cropCGE model solves for final equilibrium for current year
CGE Model
Water Demand
RWSM
Water Stress
CGE Model
19
Computable General EquilibriumEconomic policy options and trends, with land variablePrevious (or base) year water stress
Industrial and Domestic Water DemandAgricultural demand for water by crops
Optimizes water distribution over months in the yearCalculates water shortages per water region by month
Allocates supply of available water to cropsCalculates the impact of water stress on yields
Yield shocks affect agricultural production; land fixed by cropCGE model solves for final equilibrium for current year
CGE Model
Water Demand
RWSM
Water Stress
CGE Model
20
Computable General Equilibrium (CGE) Models
• A standard tool of economic and policy analysis for the past 40 years
• Simulates operation of a market economy with supply/demand equilibrium determining prices
• IFPRI Standard CGE model (Lofgren and Robinson)
21
Stylized CGE Model Structure
Activities
Commodity Markets
Factor Markets
Rest of the World
Households Government Sav./Inv.
FactorCosts
Wages& Rents
IntermediateInput Cost
Sales
PrivateConsumption
Taxes
Domestic Private Savings
GovernmentConsumption
Gov. Savings
Investment Demand
ImportsExports
Foreign Savings
Transfers
Foreign Transfers
27
IFPRI Pakistan CGE Model
• Based on the 2007-2008 SAM of Pakistan (Dorosh et al., 2012).– 63 activities and 48 commodities – Special focus on agriculture (15 agric commodities) – Large, medium, and small farms
• Distinguishes 19 types of households and 10 types of labor
• Distinguishes Punjab, Sindh, and other provinces for agricultural sector
Water Demand Module
28
Economic policy options and trends, with land variablePrevious (or base) year water stress
Industrial and Domestic Water DemandAgricultural demand for water by crops
Optimizes water distribution over months in the yearCalculates water shortages per water region by month
Allocates supply of available water to cropsCalculates the impact of water stress on yields
Yield shocks affect agricultural production; land fixed by cropCGE model solves for final equilibrium for current year
CGE Model
Water Demand
RWSM
Water Stress
CGE Model
Water Demand Module• Computes agricultural cropped area based on the
CGE model results• The water demand is then computed using FAO
guidelines• Industrial and Livestock water demand are
proportional to the amount of activity in the sector
• Domestic water demand is proportional to household revenues
29
RWSM-Pak Water Model
31
Economic policy options and trends, with land variablePrevious (or base) year water stress
Industrial and Domestic Water DemandAgricultural demand for water by crops
Optimizes water distribution over months in the yearCalculates water shortages per water region by month
Allocates supply of available water to cropsCalculates the impact of water stress on yields
Yield shocks affect agricultural production; land fixed by cropCGE model solves for final equilibrium for current year
CGE Model
Water Demand
RWSM
Water Stress
CGE Model
The Indus Basin
Source: NASA Earth Observatory Source: IWMI
32
CGE-W version of IBMR: RWSM
• Standalone water model: Regional Water System Model (RWSM).
• RWSM-Pak: Pakistan version– Hydrology similar to IBMR.
• RWSM does not have any internal representation of the economy– Links to CGE model for economic variables
• Objective is to minimize agricultural water shortages across all Pakistan
35
Regional Water Simulation Model – Pakistan (RWSM-Pak)
36
RWSM-Pak Overview
• Represents the 45 main canals, as well as the link canals between rivers
• Takes into account fresh and saline groundwater, as well as public and private tubewell pumping
• Can represent droughts and floods• Includes 16 representative crops• Takes into account industrial, domestic and
livestock water demand (assumed to be drawn from groundwater mostly)
37
Water Allocation Module
39
Economic policy options and trends, with land variablePrevious (or base) year water stress
Industrial and Domestic Water DemandAgricultural demand for water by crops
Optimizes water distribution over months in the yearCalculates water shortages per water region by month
Allocates supply of available water to cropsCalculates the impact of water stress on yields
Yield shocks affect agricultural production; land fixed by cropCGE model solves for final equilibrium for current year
CGE Model
Water Demand
RWSM
Water Allocation
CGE Model
Water Allocation Module
• In case of water stress, the yield of crops is reduced using the FAO Ky approach (Doorenbos and Kassam, “Yield Response to Water”,1979)
• We separate the stress during the four main growing stages of the crops and use a multiplicative approach to get the final value
• The allocation objective is to maximize the value of production in each of the water model areas, while minimizing risks for the farmers
40
44
Computable General EquilibriumEconomic policy options and trends, with land variablePrevious (or base) year water stress
Industrial and Domestic Water DemandAgricultural demand for water by crops
Optimizes water distribution over months in the yearCalculates water shortages per water region by month
Allocates supply of available water to cropsCalculates the impact of water stress on yields
Yield shocks affect agricultural production; land fixed by cropCGE model solves for final equilibrium for current year
CGE Model
Water Demand
RWSM
Water Stress
CGE Model
The Two-Step Procedure
• The productions from the different areas are aggregated to the provincial level and to economically representative cropping activities
• The ratio of the current year yield to the base year yield is used to shock the production of crops in a second run of the CGE model
49
Illustrative ResultsEconomic policy options and trends, with land variablePrevious (or base) year water stress
Industrial and Domestic Water DemandAgricultural demand for water by crops
Optimizes water distribution over months in the yearCalculates water shortages per water region by month
Allocates supply of available water to cropsCalculates the impact of water stress on yields
Yield shocks affect agricultural production; land fixed by cropCGE model solves for final equilibrium for current year
CGE Model
Water Demand
RWSM
Water Stress
CGE Model
50
Illustrative Results
• We run the dynamic model for 45 years (2005 to 2050) using “guesstimated” growth coefficients
• Capital growth is endogenous in the CGE model
20082012
20162020
20242028
20322036
20402044
20480
50
100
150
200
250
300
350
Baseline Projections - Historic Average Water Stress
GDP of PakistanPunjab Ag ProductionSindh Ag ProductionOthPak Ag Production
GDP change adding variability and/or Basha dam
20082012
20162020
20242028
20322036
20402044
2048
-2
-1.5
-1
-0.5
0
0.5
1
1.5
Average with BashaHistoric InflowsHistoric with Basha
Decadal GDP change under climate change with or without Basha dam
Scenario 2010s 2020s 2030s 2040s
MIROC A1B -0.18 -0.44 -0.56 -0.77
MIROC A1B with Diamer-Basha Dam 0.24 0.06 -0.01 -0.19
MIROC B1 -0.16 -0.40 -0.53 -0.72
MIROC B1 with Diamer-Basha Dam 0.26 0.11 0.01 -0.11
CSIRO A1B -0.12 -0.30 -0.47 -0.73
CSIRO A1B with Diamer-Basha Dam 0.30 0.19 0.07 -0.15
CSIRO B1 -0.05 -0.16 -0.25 -0.42
CSIRO B1 with Diamer-Basha Dam 0.36 0.32 0.26 0.16
Decadal agricultural production change under climate change
Scenario 2010s 2020s 2030s 2040s
MIROC A1B -2.00 -4.21 -3.74 -3.42
MIROC A1B with Diamer-Basha Dam 2.36 -0.38 -0.76 -1.60
MIROC B1 -1.79 -3.80 -3.64 -3.02
MIROC B1 with Diamer-Basha Dam 2.58 0.10 -0.68 -1.04
CSIRO A1B -1.33 -2.88 -3.41 -3.45
CSIRO A1B with Diamer-Basha Dam 3.05 0.93 -0.49 -1.63
CSIRO B1 -0.58 -1.58 -1.86 -1.95
CSIRO B1 with Diamer-Basha Dam 3.75 2.23 0.95 -0.03
Conclusion
• Climate variability (and water availability change) leads to wide GDP dips for Pakistan
• Climate change represents a serious threat to the economy of Pakistan due to its reliance on irrigated agriculture
• The Diamer-Basha dam can mitigate some of these effects until the 2030s in most climate change scenarios