A Detailed Hydro-Economic Model for Assessing the Effects of Surface Water and Groundwater Policies: A Demonstration Model from Brazil

Policymakers, managers of water use associations, and many others in developing countries are considering policy actions that will directly or indirectly change the costs and availability of groundwater and surface water for agricultural users. While in many cases such actions may bring about welcomed increases in water use efficiency, little is known about the likely effects of changes in irrigation costs or water access on farmer behavior, or on farmer incomes in the short or long runs, and virtually nothing is known about the detailed immediate or knock-on effects on water resources that such policy actions might cause. This paper reports the preliminary results of research aiming to fill these large scientific gaps by developing a detailed hydrologic model and a detailed economic model of agriculture in the context of the Buriti Vermelho (BV) subcatchment area of the Sao Francisco River Basin in Brazil. A spatially explicit, farm-level, positive mathematical programming model capable of accommodating a broad array of farm sizes and farm/farmer characteristics is being developed to predict the effects of alternative water policies and neighbors' water use patterns on agricultural production. Special attention is given to precisely defining and estimating the distinct variable costs (including labor and electrical energy costs) and capital costs of surface water and groundwater, which are considered perfect substitutes for irrigation. Shadow values for non-marketed inputs (land, family labor, and water) are estimated in the first step of the modeling process. A high-resolution, spatially distributed hydrologic model (MOD-HMS) is being developed to simulate three-dimensional, variablysaturated subsurface flow and solute transport. Subsurface flow is simulated using the threedimensional Richards equation while accounting for a) application of water at the surface, b) precipitation, c) soil evaporation and crop transpiration, and d) agricultural pumping. Demonstration versions of both models are presented and tested: the economic model assesses the effects of increasing water scarcity on cultivated area, crop mix, input mix and farm profits; the hydrologic model uses two irrigation water use scenarios to demonstrate the effects of each on surface water flows and storage, and on groundwater storage and well depth. The models are not currently linked, but a detailed plan to do so is presented and discussed. The paper concludes by discussing next steps in research and policy simulations