TOWARDS A COUPLED HYDROLOGIC/ECONOMIC MODEL TO SUPPORT GROUNDWATER IRRIGATION DECISIONS

Groundwater supports ecosystems and plays an important role in agricultural water supply. However, groundwater depletion from inadequately regulated water use has reached critical levels in many regions of the world, forcing reductions in irrigation and subsequently crop growth. Current research in water resources management uses various tools to incorporate risk assessments, but often do not accurately integrate low-probability high-damage events. This research aims to use economic methods to estimate uncertainties to support optimal groundwater irrigation decisions.

This research will develop a coupled hydrologic-economic risk model to predict the implications of groundwater extraction. The hydrologic model includes simulating precipitation scenarios using a Markov chain and tested using Monte Carlo simulations. Evapotranspiration is calculated using Penman-Monteith method, and the impact of groundwater extraction on future water availability is assessed using the Cooper and Jacob’s approach. Assuming a constant target for crop productivity, irrigation demand is simulated based on above components. Resulting crop yields are estimated using Stewart’s model.

The economic model will seek to maximize the present value of crop production over a set time interval through the choice of irrigation volume, given uncertain precipitation and constraints on maximum groundwater usage. The decision problem for the optimal groundwater use is specified as a Hamilton-Jacobi-Bellman equation. Solutions will be explored through Monte Carlo analysis. To assess the economic risk, the probability distribution of economic outcomes is examined, with a focus on expected present value of crop production as well as on Conditional Value at Risk (CVAR). CVAR is a statistical measure that quantifies the expected tail risk, representing the average loss beyond a given confidence level. CVAR holds considerable promise for improving policy design for agricultural water management, as it is better articulating the risk-reward trade-off for groundwater extraction.

The outcomes of this model development have the potential to inform stakeholders and policymakers, fostering a better understanding of the implications of groundwater extraction and facilitating informed decision-making regarding water use regulations.