Three essays on the water-food-climate nexus

Jing Liu, Purdue University

Abstract

This dissertation is comprised of three chapters studying the economic implications of the water-food-climate nexus. Each chapter stands alone as an independent essay, except for Chapter 1 which gives an introduction to the dissertation and Chapter 5 which summarizes the dissertation. Because of the differences in methodologies, data and research objectives across chapters, this dissertation does not attempt to draw a unifying conclusion summarizing the research. Rather, it is the aim to examine the interconnection of water, food and climate from different angles. Chapter 2 surveys studies investigating water use in agriculture. The purpose is to understand the role of water volumes, especially as supplied via irrigation, in agricultural production, as well as its interaction with the economy. Articles are selected to reflect scientific views on the current status and future challenges of water for food. The review starts by outlining recent points of view on the supply and demand for water used for crop and livestock production, followed by a summary of the pathways by which water availability affects agricultural output, trade and development. Key questions are synthesized to be further explored in future research. The review also provides an update of the recent progress made in incorporating water into CGE models. In particular, among the large number of potential model developments, it seeks to prioritize those which are likely to yield a valuable payoff and can be feasibly incorporated into a CGE model with water. Chapter 3 employs one such CGE model to analyze the impacts of global irrigation shortfalls on agricultural production, consumption and trade. There is increasing interest in the water-food-land use nexus, especially in areas where the availability of water for irrigation is likely to become a binding constraint. However, little is known about the larger-scale implications of future irrigation shortfalls for global trade and economic welfare, as well as of the potential buffering impacts of international trade on the local impacts of irrigation shortage. This paper studies the economic effects of changes in irrigation outlook for 126 river basins, globally by 2030. Results show that the regional production impacts of future irrigation water shortage are quite heterogeneous, depending on the size of the shortfall, the irrigation intensity of crop production, the possibility of expanding rainfed areas, as well as of the cultivated crop mix. These changes in regional output significantly alter the geography of international trade. In spite of the strong reduction of irrigation in some basins, the resulting welfare impact is relatively modest as a result of the buffering capacity of global markets. The global welfare loss amounts to $3.7 billion (2001 prices) and results from a combination of the reduction in irrigation availability as well as the interplay with agricultural support policies. Whereas Chapter 3 focuses on irrigation water scarcity, Chapter 4 focuses on the impacts of having too much water - resulting in flood-induced property damage. Using a unique dataset for Indiana counties during the period 1995-2012, we estimate the effects of flood hazard, asset exposure, and social vulnerability on property damage. These empirical relationships are combined with the expected level of future flood risks to project future property damage from flooding in 2030 under various scenarios. We compare these scenario projections to identify which risk management strategy offers the greatest potential to mitigate flood losses. Results show that by 2030, county level flooding hazard measured by extreme flow volume and frequency will increase by an average of 16% and 7%, respectively. The total increase in property damages projected under different model specifications range from 13% to 18%. Across models, future damages consistently exhibit the highest sensitivity to future increases in asset exposure, reinforcing the importance of non-structural measures in managing floodplain development.

Degree

Ph.D.

Advisors

Hertel, Purdue University.

Subject Area

Environmental economics|Agricultural economics

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