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Climate Change: Evaluating Water Management Responses to Global Climate Change Using Coupled Hydrologic and Economic Models

Project ID: 507
Principal Investigator: Jennifer Johnson
Research Topic: Water Marketing
Priority Area Assignments: 2010 (Climate Change and Variability Research), 2011 (Climate Change and Variability Research), 2012 (Climate Change and Variability Research)
Funded Fiscal Years: 2009, 2010, 2011 and 2012
Keywords: None

Research Question

* What Bureau of Reclamation (Reclamation) water management strategies are most appropriate for addressing changes in water supply and demand likely to result from global climate change?

Concerns for the effects of climate change on water supply and demand have put pressure on Reclamation to increase reservoir storage. However conservation, regulation, and market-based water trading are also seen as viable strategies for responding to these changes. Increasing reservoir storage is an example of the supply management approach to water management (i.e., water demand is fixed, so supply must be increased). Conservation, regulation, and water trading are examples of demand management approaches (i.e., water supply is fixed, so demand must be reduced). Coupled hydrologic and economic models are essential tools for addressing questions of where and when supply management and/or demand management approaches are most appropriate for meeting the challenges of global climate change.

Need and Benefit

While surface water and ground water hydrologic models have long been used by Reclamation managers as tools for water management decisionmaking, economic modeling is relatively new to Reclamation. Economic models that maximize the utility of a single commodity by maximizing the utility of a social welfare function or net social payoff function are known as partial equilibrium models. Partial equilibrium economic models can be used to maximize the utility of water by determining equilibrium positions between water supply and demand for different water using entities, including agricultural irrigation entities, municipal and industrial (M&I) supply entities, hydropower entities, and environmental and recreational entities. At equilibrium, the quantities of water supplied to, and demanded by, these entities differ because of differences in (exogenously determined) supply costs, transportation costs, and demand prices. As such, partial equilibrium models are a means by which the relative economic valuation of water to different economic sectors can be incorporated into Reclamation's decisionmaking process.

In addition, they are a means by which the unpriced economic impacts of Reclamation projects (referred to by economists as "externalities") can also be incorporated into the decision process. Economic externalities are a common result of Reclamation projects; examples include raised ground water levels, increased drain returns, new recreational features, and improved wildlife and aquatic habitat, all of which are generally unpriced.

As part of Reclamation's fiscal year 2007 and 2008 Science and Technology (S&T) Program (in collaboration with the University of Idaho), a coupled ground water hydrologic model and partial equilibrium economic model was developed to address issues of water conservation and market-based water trading between surface water and ground water users in the Boise Valley (Proposal No. 5330, Development of a coupled hydrologic and economic-trading model to evaluate water trading and water markets in the Boise Valley). The model coupling took place through the conversion of hydrologic response functions (output from the hydrologic model) into price-quantity supply functions (exogenous input to the economic model). The conjunctive model dealt with ground water and surface water interactions but not with river and reservoir water rights distribution in the Boise basin.

A river and reservoir distribution model is essential for addressing broader water management issues that arise in connection with climate change impacts on water storage, storage releases, water rights, and minimum streamflows. Under this project, a Boise River and Reservoir distribution model will be linked to the previously developed Boise Valley conjunctive ground water model and partial equilibrium economic model. The fully coupled model (referred to as a spatial water allocation model) will then be used to evaluate various Reclamation strategies for dealing with the impacts of climate change, including construction of new reservoir storage, new water conservation measures, water rights redistribution, and market-based water management. A common (Boise basin) water supply and demand database will facilitate model coupling and identification of water management strategies that are best suited to address changes in water supply and demand that arise from climate change. The Boise basin model will also serve as a prototype for the development of spatial water allocation models in other Reclamation regions.

Contributing Partners

None

Research Products

Not Reviewed

The following documents were not reviewed. Statements made in these documents are those of the authors. The findings have not been verified.

Hydro-Economic Modeling of Boise Basin Water mangement Responses to Climate Change (final, PDF, 1.4MB)
By Bryce Contor, Robert Schmidt, Garth Taylor and Leroy Stodick
Report completed on March 04, 2014

This report presents a hydro-economic modeling methodology for conducting benefit-cost analysis of water management responses to climate change. Three hydro-economic modeling scenarios are developed.
Keywords: hydro-economic, economic, modeling, hydrosense, climate change

This information was last updated on November 24, 2014
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