1. Concepts and Methods for Assessing and Evaluating Water System Response to Climate Change Capacity Building Programme on the Economics of Climate Change Adaptation (ECCA) Supporting National/Sub-national Adaptation Planning and Action Siem Reap, Cambodia 17-20 Sept. 2014 Brian H. Hurd Professor of Agricultural Economics & Agricultural Business New Mexico State University bhurd @ nmsu.edu http://agecon.nmsu.edu/bhurd

2. Overview Overview of adaptation concepts Current water issues and problems along America’s Rio Grande Conjunctive-use externalities Basic concepts and strategies in Hydro- Economic Modeling Case Study: Rio Grande Break Systems modeling basic structure, concepts and application Case Study: Systems modeling of small community irrigation systems in New Mexico Ideas and strategies for modeling adaptation in watershed assessments

3. Changing Hydrographs Water storage and distribution systems? Urban and rural water users? Water quality? Hydropower? Recreational and cultural functions? Riparian ecosystems and migratory patterns? What does it mean for? Model assumptions temperature ↑ 4°C Precipitation ↑ 10%

4. Droughts and Floods Rio Grande Drought: Elephant Butte Reservoir (1) 89% June 2, 1994 (2) 3% July 8, 2013 Sept 2014, Pakistan

5. Climate Adaptation Related Terms and Concepts Climatic Vulnerability - Measures a system’s susceptibility to climate change as a function of exposure to climate, sensitivity to climatic changes, and adaptive capacity Adaptive Capacity - The ability of systems, organizations, and individuals to: –Adjust to realized and potential changes and disturbance events –Take advantage of existing and emerging opportunities –Successfully cope with adverse consequences, mitigate damages, and/or recover from system failures Adaptation - A deliberate change in system design, function or behavior in response to or anticipation of external events or changing conditions. –Reactive (autonomous) adaptation – disturbance occurs and systems absorb impacts and attempt restoration to pre-disturbed conditions –Proactive (anticipatory) adaptation – nature and timing of disturbance is anticipated and systems are appropriately reorganized to improve their capacity to avert adverse damages and to leverage resulting opportunities Adaptation is successful if, following a change or disturbance, the level of services and functionality (i.e., social value) is approximately maintained or restored.

6. Timing Adaptations: the Relative Cost and Success of Reactive versus Proactive Adaptation Benefits of delayed action –Increased accuracy based on evolving knowledge and information –Postponed expenditures and possibly better technologies and lower unit costs Risks of delayed action –Less successful adaptation More welfare losses and service disruptions Greater likelihood of irreversible losses –Reduced adjustment time Time Net Social Value + - Reactive Proactive

7. Elephant Butte Irrigation District (EBID) El Paso County Water Improvement District #1 (EP No. 1) Rio Grande Compact (Colorado, New Mexico, Texas, 1939) 1906 Treaty with Mexico (for “Equitable Distribution of the Waters of the Rio Grande” delivers 60 (kaf/yr) to Ciudad Juárez) Rio Grande Project (U.S. Bureau of Reclamation project; initiated 1905; Elephant Butte Dam, 1916; Caballo Dam, 1938) Water in the Southwest United States: Rio Grande

8. Water Use Along the Rio Grande, 2005 Longworth, John W., Julie M. Valdez, Molly L. Magnuson, Elisa Sims Albury, Jerry Keller. 2008, New Mexico Water Use by Categories, 2005. NM Office of the State Engineer, TR 52. Surface Water 1.2 maf Groundwater 0.7 maf

11. Timing and Mixture of Surface and Groundwater in El Paso

12. Rio Grande Drought: Elephant Butte Reservoir (1) 89% June 2, 1994 (2) 3% July 8, 2013 source: http://climate.nasa.gov/state_of_flux#Elephant_Butte_930x607.jpg Climate Change or Climate Variability

13. Watershed Assessment Goals and Objectives Describe the important hydrological, bio-physical, economic, and institutional characteristics at appropriate spatial and temporal scales Identify and characterize plausible alternative environmental and management scenarios and/or system changes Assess, analyze and describe the bio-physical and economic consequences of modeled scenarios and changes in environment, management, technology, infrastructure etc. Models are tools that help planners examine data integrate concerns analyze alternatives evaluate outcomes

14. Objectives of Hydro-Economic Watershed Models Represent major spatial, physical, and economic characteristics of water supply and use Evaluate welfare, allocation, and implicit price changes associated with alternative hydrologic, management, and institutional conditions Identify opportunities to improve water management systems from a watershed perspective

15. Hydro-Economic Modeling Basics Develop a schematic diagram of the watershed system –Describes physical structure (tributaries, inflows, and reservoirs –Identifies and locates watershed services –Show diversion points and instream uses Derive estimates for the model’s objective function –Develop demand and supply curves for each service based on water diversion or instream flow Describe model constraints –Mass balance (upstream to downstream flow) –Intertemporal storage in reservoirs –Institutional flow restrictions

16. Rio Grande Hydro- Economic Model Schematic Diagram

17. Model Objective Function Given water supply, expected streamflows, and water demands in the watershed, the model objective is to choose (manage) all water diversions (allocations), reservoir storage and releases in order to: Maximize present value of total long-run net economic welfare ($) defined as the sum of all net benefits less the sum of all costs and damages where B int and C nit define benefits and costs as a function of diverted water W nit, Q nt and H nt generate value from water stored S nt and released R nt, E nt environmental services and flood damages D nt are functions of flow F nt.

18. Model Constraints: River Flow Mass Balance Instream Flow Balance at each node (n) models the contemporaneous flow, storage and distribution of water. where streamflow F nt equals previous streamflow F n-1,t plus additional rainfall and tributary inflow I nt, net reservoir-release R nt, upstream return-flow r ni, and less diversions W nit.

19. Model Constraints: Reservoir Storage Mass Balance Reservoir (aquifer) Storage Balance for each time period (t): where storage S nt equals previous period storage S n,t-1 plus net additions from inflow I nt and net-seepage from upstream diversions n ni W n-1,it, less net amounts pumped or released R nt and evaporation losses L nt.

20. Drought Damages W B1 W A1 P1P1 W 1 (drought) W B0 W A0 P0P0 W 0 (normal) NB T NB B NB A $ ($/m3) Water A Two-Sector Model of Efficient Water Distribution, Use and Drought Damages Note: NB1 and NB2 are marginal net benefit curves that illustrate marginal benefits for water (water demand) after all associated marginal costs (e.g., conveyance, treatment, distribution) have been subtracted.

21. Water Demand Estimation A basic inverse linear water demand function: P w = b 0 + b1 Q w + b 2 Z P w = unit price of water ($/m 3 ) Q w = quantity of water consumed (volumetric units e.g., m 3 ) Z = other important factor(s) – could be several. E.g., land quality, seasons, irrigation technology. b 0, b 1 and b 2 = parameters to be estimated Estimating water demand functions

22. Simple Water Demand Model With minimal data – i.e., a single data point and an estimate of the price-elasticity of water demand – a water demand function can still be approximated. Example: Total annual sector water use = 250 MCM Estimated water value or price (marginal value of water) = $20 / MCM Estimate of price elasticity of demand in sector = 1.5

23. Elasticity: In Mathematical Notation Where: E is the elasticity of Q with respect to P Q 1 is the new level of Q Q 0 is the old level of Q ditto for P

24. Estimate Linear Demand Parameters: b 0 and b 1 Linear demand function: P w = b 0 + b 1 Q w Recall definitions: –ε = (Δ Q / Δ P) * (P0 / Q0) –b 1 = (P 1 – P 0 ) / (Q 1 – Q 0 ) Data: P0, Q0, and ε Therefore, parameter are estimated as: –b 1 = 1/ε * P 0 / Q 0 question: what should be the sign of b 1 ?) –b 0 = P 0 * (1 – 1 / ε)

25. Merci’ Beaucoup! Grazie Thank You Gracias Brian H. Hurd, PhD Department of Agricultural Economics & Agricultural Business Gerald Thomas Hall Rm. 350 New Mexico State University Tel : (575) 646-2674 Email: bhurd@nmsu.edu Web: http://agecon.nmsu.edu/bhurd