Use of Regional Agricultural
Economic Models for Policy Analysis
Stephen Hatchett
CH2MHILL
Why Use a Model at All?
• Who is the client or consumer of the analysis?
• What kind of analysis/estimate/projection is
the client looking for?
• Why do they want the analysis?
Examples of Reasons for Economic
Analysis of Agricultural Water Use
• Policy analysis to inform public debate or decision
• Impact of a new law or regulation
• Evaluation of a specific proposed project (prepare
EIR/EIS, estimate benefits, allocate costs)
• Evidence for a judicial process (courts, SWRCB,
watermaster)
• Impact of a major event or trend (e.g., climate
change or drought)
Why Choose a Regional Optimization
Model as the Approach?
• Evaluate changes outside the range of observed data
• Evaluate more than one simultaneous change in
policy or condition
• Explicitly recognize resource constraints
• Assess a mix of behavioral responses to a policy
change
• Often need to show direct relationship and linkage to
physical processes
• Complex system with many parameters relative to
data -- need to impose structure for tractability
Characteristics of Regional Economic
Models in Integrated Policy Analysis
• Data needs are high and data is scrutinized by
stakeholders
• Policy changes often affect large, diverse
regions
• Economic analysis is backward linked (e.g., to
physical and biological models)
• Analysis is forward linked (e.g., to regional
economic impacts, land use analysis, perhaps
physical models)
Economics Models Link Backward to
Physical Models
Climate Change
Modified Hydrology
Sea Level Rise
VIC, ANN
Reservoir/River Temp
SRWQM,
Reclamation Temperature
Reservoir, River temperatures
Fisheries
Reclamation Mortality,
SALMOD
Survival, Potential Production,
Population
Groundwater Modeling
CVHM
Hydrology &
System Operations
CALSIM II
Water supply impacts, river
flows, exports, storage
Delta Hydrodynamics
DSM2-HYDRO
Delta channel flows, stages,
velocities
Delta Water Quality
DSM2-QUAL
Salinity (EC, Cl, TDS, Br) and
fingerprinting (EC, volume)
Power
LTGEN,
SWP Power
Net Generation and
Use
Economics
SWAP,
LCPSIM/OMWEM,
LCRBWQM/SBWQM
Quantification of
Economic Benefits
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Economics Models Link Forward to
Other Analyses
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Importance of Good, Consistent Data
• Use best data set when possible, but “best”
should consider:
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–
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–
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Timeliness
Detail and accuracy
Ease of updating
Consistency across regions
Consistency with other data in the economic model
Consistency with data used in linked analyses
• Rarely does one data set satisfy all of these
A Good, Reconciled Data Set is
Valuable
• Stands up to scrutiny by experts and
challenges by skeptical parties
• Can be used by other analyses
– Other, large-scale models, e.g. CVPM database
used as basis of SWAP, DRMS model
– Smaller scale or more focused analysis
– Especially true if maintained in GIS
SWAP Overview
• Regional model of California agriculture
• 27 regions in Central Valley (up to 33 statewide)
• Calibrated to 2005 observed land and input use
• Crops by aggregate crop groups (20)
• Variable crop production that allows substitution
among inputs:
• Land, Labor, Water, and Other
• Water sources include project supply, non-project surface
water, groundwater
• Data
• CA Department of Water Resources and USBR data, UC
Cooperative Extension Budgets, County Agricultural
Commissioners reports, water district reports
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Map of SWAP
Subregions
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Crop Groups
SWAP Definition
Almonds and Pistachios
Alfalfa
Corn
Cotton
Cucurbits
Dry Beans
Fresh Tomatoes
Grain
Onions and Garlic
Other Deciduous
Other Field
Other Truck
Pasture
Potatoes
Processing Tomatoes
Rice
Safflower
Sugar Beets
Subtropical
Vines
Proxy Crop
Almonds
Alfalfa Hay
Grain Corn
Cotton
Summer Squash
Dry Beans
Fresh Tomatoes
Wheat
Dry Onions
Walnuts
Sudan Grass Hay
Broccoli
Irrigated Pasture
White Potatoes
Processing Tomatoes
Rice
Safflower
Sugarbeets
Oranges
Wine Grapes
Corresponding Proxy Crops in County Data
ALMONDS ALL
HAY ALFALFA
CORN GRAIN
COTTON LINT PIMA
SQUASH
BEANS DRY EDIBLE UNSPECIFIED
TOMATOES FRESH MARKET
WHEAT ALL
ONIONS
WALNUTS BLACK, WALNUTS ENGLISH
HAY SUDAN
BROCCOLI FRESH MARKET, BROCCOLI UNSPECIFIED
PASTURE IRRIGATED
POTATOES ALL
TOMATOES PROCESSING
RICE MILLING
SAFFLOWER
SUGAR BEETS
ORANGES NAVEL
GRAPES WINE
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Example 1: Central Valley Project
Improvement Act (CVPIA)
• Passed and signed in 1992, implemented a
number of changes to CVP water mgmt
– Reallocation of water available for contractors
– Tiered water pricing
– Land retirement in drainage-affected area
– Agricultural water conservation
– Eased restrictions on water transfers
– Water acquisition for F&W uses
Example 1: CVPIA (cont.)
• CVPM (precursor to SWAP) selected through a
model screening process
• Revised to allow analysis needed for CVPIA
– Subregions and crop categories made consistent
with DWR data
– New code, e.g., for tiered water prices, irrigation
efficiency, GW substitution, water transfers
• Complete data update
Example 1: CVPIA (cont.)
COMPONENTS OF NET REVENUE LOSS, ALTERNATIVE 1 VS. NO-ACTION
(IN MILLION $ PER YEAR)
$1.8
$17.4
$28.7
Acreage Reduction
$4.8
GW Pumping
Irrig. System Cost
CVP Water Cost
Example 2: CALFED Program
• Multi-agency, multi-objective plan for
management and use of water from the Delta
• CVPM/SWAP used in several projects:
– EIR/EIS impact analysis
– Estimated water transfer costs (quantity and price)
for EWA program
– Derived agricultural water demand functions
– Used database to assess costs and AW reduction
for Water Use Efficiency scenarios
Other Examples
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Trinity River reoperation EIS
Bay-Delta Conservation Plan benefits analysis
DWR surface storage investigations
CVRWQB Irrigated Lands Regulatory Program