Source: IOWA STATE UNIVERSITY submitted to
THE VALUE OF WATER QUANTITY VERSUS QUALITY: ASSESSING THE TRADEOFFS BETWEEN AGRICULTURAL YIELDS AND DOWNSTREAM USES OF WATER RESOURCES
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
TERMINATED
Funding Source
Reporting Frequency
Annual
Accession No.
1004543
Grant No.
2014-51130-22494
Project No.
IOW05403
Proposal No.
2014-08252
Multistate No.
(N/A)
Program Code
110.J
Project Start Date
Sep 1, 2014
Project End Date
Aug 31, 2018
Grant Year
2014
Project Director
Keiser, D. A.
Recipient Organization
IOWA STATE UNIVERSITY
2229 Lincoln Way
AMES,IA 50011
Performing Department
Economics
Non Technical Summary
Land use decisions and land management practices play a critical role in highly productive cropland. For example, decisions regarding agricultural drainage systems, tillage types, fertilizer use, and crop choices boost yields by responding to changes in economic, climatic, and other environmental conditions. However, due to the interconnectedness of hydrologic systems, these farm-level choices have important consequences for competing uses of water resources. In particular, important downstream uses such as drinking water, recreation, and aquatic life uses may be affected by changes in water quality due to these land management practices. In this project, we explore this important tradeoff between water quantity for agriculture and water quality for downstream uses. Our setting is the Upper Mississippi River basin and Ohio Tennessee River basin. These Midwestern watersheds encompass much of the economically valuable Corn Belt region of the U.S. However, due to nutrient and sediment loading from agriculture, many high value downstream uses currently experience significant strains. We propose to develop a spatially-explicit integrated hydrologic-economic model that estimates the economic value of water across uses. Through novel field, classroom, and online extension and education programs, we will engage students, stakeholders, and the general public on the importance of the economic value of water. Obtaining estimates of the value of water across uses is important to inform efficient and effective water policies and conservation practices.
Animal Health Component
0%
Research Effort Categories
Basic
30%
Applied
65%
Developmental
5%
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
60502103010100%
Knowledge Area
605 - Natural Resource and Environmental Economics;

Subject Of Investigation
0210 - Water resources;

Field Of Science
3010 - Economics;
Goals / Objectives
The two major goals of this project are 1) develop an integrated hydrologic-economic model to measure spatially-explicit values of water across uses and 2) engage students, farmers, stakeholders, and the general public on the economic value of water and its role in efficient and effective water policies.The objectives of this project are listed by the research, extension, and educations components of this project:Research Objectives1) Estimate the value of water quantity to agriculture by crop choice and by location.2) Estimate the value of water quality by downstream use, by pollutant and by location.3) Develop a spatially-explicit integrated hydrologic-economic model of the Upper Mississippi River Basin (UMRB) and the Ohio Tennessee River Basin (OTRB) and determine how upstream land use decisions impact water use and water quality downstream.4) Identify spatially-explicit optimal water policies and conservation strategies.5) Identify how variation in weather and climate alter the value of water quantity to agriculture, water quality to downstream users, and optimal water policies and conservation strategies.Extension ObjectiveThe extension component of our work seeks to engage farmers and other stakeholders to increase the understanding of the economic value of water. To accomplish this objective, we will explicitly integrate extension efforts with research and education elements of the project through direct involvement of agricultural producers and undergraduate students.Education Objectives1) Improve the understanding of the economic value of water for K-12, undergraduate, and graduate students by integrating the research elements of the project with demonstration field sites, classroom learning modules, and online resources and educational games.2) Increase the understanding of methods, challenges, and cutting-edge research and extension efforts on integrated hydrologic-economic modeling with a two-day Integrated Water Science conference.
Project Methods
We outline our methods to address five research objectives below. We also detail our extension and education methods used to improve the understanding of the economic value of water. In addition, we detail our methods to monitor and evaluate the effectiveness of our project activities and outcomes.1. Estimate the Value of Water Quantity to AgricultureWe will identify the value of water to agriculture with two different, but complementary approaches: 1) crop simulations and 2) an econometric study. A key difference between crop simulations and econometric approaches is that the latter allows for adaptation to changes in climate. On the other hand, simulation approaches typically hold adaptation fixed and, thus, potentially overstate the effects of changes in climate on agricultural profits. However, the econometric approach may suffer from omitted variable bias. If key variables are missing from the specification, estimates of correlated variables on yields may be biased. Given advantages and disadvantages of both approaches, we take the middle ground and pursue both. The results from this component will improve policy makers' and researchers' understanding of the value of water quantity to agriculture.2. Estimate Value of Water Quality to Downstream UsersWe will identify the value of water quality to downstream users. Recreation and drinking water are two predominant uses affected by water quality. Using results from prior work, we will calibrate an economic value function for recreation across the UMRB and OTRB. Next, we will link changes in water quality to changes in water quality parameters important for drinking water. Through prior engineering studies, we will estimate how treatment costs change with changes in these parameters. In addition, to value the economic damages from changes in human health, we will rely on the concept of a value of statistical life.We will explore how water pollution affects aquatic life uses. We have just completed an analysis of aquatic life uses and their linkages to water quality for the State of Iowa. We will develop methods that allow us to scale these results up to the greater UMRB and OTRB. Finally, we will obtain estimates of the value of changes in water quality for other uses (i.e., amenity values, industrial use, and steam power generation). The results from this component of the project will improve policy makers' and researchers' understanding of the value of water quality.3. Development of an Integrated Hydrologic-Economic ModelA Soil and Water Assessment tool- (SWAT-) based hydrologic model will serve as the foundation for the hydrologic-economic mode. We will begin with a previously calibrated model of the study area. We will merge results from our economic analyses of the value of water quantity to agriculture and the value of water quality to downstream uses with this model. Next, we will examine how marginal shocks to key variables affect economic welfare of agricultural producers and downstream users. This model will improve policy makers' and researchers' understanding of the tradeoffs between the value of water quantity and the value of water quality.4. Optimal Conservation StrategiesUsing our hydrologic-economic model, we will assign cost estimates to various conservation strategies. Given our calibrated hydrologic-economic model, we will target optimal placement of conservation strategies. This evaluation will improve policy makers' and researchers' understanding of optimal conservation strategies.5. Accounting for Changes in Climate and WeatherWe will examine how predicted changes in weather and climate affect economic welfare to agricultural producers and downstream users. We will combine our hydrologic model with downscaled Global Climate Model projections of the study area. Using multiple climate scenarios, we will examine the sensitivity of our results to assumed changes in climate. Using our calibrated model, we will estimate changes in welfare to agricultural producers and downstream users under these different scenarios. This component of the project will improve policy makers' and researchers' understanding of how climate and weather affect optimal use of water resources.Extension Extension activities will integrate the research components into extension activities. These methods include: 1) Hold 3-5 listening sessions with Iowa Learning Farms (ILF) producers and other stakeholders, 2) Based on the listening sessions and project research we would develop a module on valuation of water for use with the Conservation Station, 3) Utilize the Bear Creek project as a learning lab for a farmer workshop on stream health, and 4) Develop at least 3-5 webinars for the Iowa Learning Farms conservation webinar series. These activities will engage producers and stakeholders in order to improve their understanding of the economic value of water.K-12, Undergraduate, and Graduate LearningEducational activities will include K-12 education, graduate and undergraduate student training and integration into existing courses at ISU. The K-12 education will consist of developing a value of water education module for the Water Rocks! program that reaches thousands of youth each year. At the undergraduate level we will have a cohert of interns each year that participate in the Extension and Education activities. After training, these students will participate in programming associated with ILF and Water Rocks! at events throughout Iowa. In addition, we will incorporate the findings of this work into their respective natural resources and agricultural and environmental economics classes. These efforts will improve students' understanding of the use and economic valuation of water.Integrated Water Science ConferenceWe will host a two-day Integrated Water Science conference with a focus on agricultural water use. This conference will highlight the central theme of this proposal examining the economic value of water to agricultural users, competing uses of water resources, and integrated efforts that play a critical role in water resource management. We will use a variety of methods to elicit speakers, targeting all levels -- undergraduates, graduate students, and research and extension faculty across a multitude of universities. This conference will enhance policy makers' and researchers' understanding of the current research and use of integrated water science models.Methods to Monitor and Evaluate the Progress of our Project and Project OutcomesWe will employ five main methods to monitor and evaluate the progress of our project and project outcomes. First, the co-PDs will meet annually to discuss the status of the project proposal to ensure that the core goals and objectives are being met. Our second method will incorporate farmers and other stakeholders in our monitoring and evaluation process. In particular, we will distribute surveys at extension listening sessions and field days to elicit feedback and allow stakeholders to evaluate the effectiveness of these activities. We will incorporate feedback to improve similar activities going forward. Our third methodology will allow for stakeholder, student, and general public feedback with our online education modules. We will incorporate and monitor open feedback forums into the modules. Fourth, our courses at Iowa State will include course evaluations. These evaluations will incorporate questions regarding the economic valuation component of the course to assess the effectiveness of our materials. Feedback will be incorporated in subsequent years. Finally, we will also design and distribute surveys at the Integrated Water Science Conference to obtain feedback regarding the effectiveness of the program.

Progress 09/01/14 to 08/31/18

Outputs
Target Audience:Our target audience included academic researchers working on issues of climate, water quality, and natural resource economics. Our target audience also included federal and state policy makers managing water resources. In addition, our target audience included K-12, undergraduate, and graduate students. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?The project has provided training for one PhD student in economics, two post-doctoral researchers in economics, and one post-doctoral researcher in limnology. For one PhD student in particular, the work for this project served as a key dissertation chapter. The project provided interdisciplinary training for one post-doctoral researcher in limnology and two post-doctoral researchers in economics. In addition to learning how to operate effectively within a large, interdisciplinary research team, these researchers have served as project leads for collection and management of water quality data from drinking water treatment intake locations. One postdoctoral researcher has also gained experience presenting his research to a general audience through an Iowa Learning Farms webinar and to public policy makers at a water resources meeting in Des Moines, IA for key participants in watershed management. How have the results been disseminated to communities of interest?Results have been presented at a number of academic conferences including the Association of Environmental and Resource Economics Summer Conference, the Agricultural and Applied Economics Annual Meeting, Northeast Agricultural and Resource Economics Association, and 3rd Graduate and Professional Student's Research Conference at Iowa State. In addition, a research seminar was presented at the US Department of Agriculture Economic Research Service. Results were also presented at the USDA-NIFA project directors' annual meeting. Further, results have been disseminated as a Center for Agricultural and Rural Development working paper and as two infographics made by the Iowa Learning Farms team. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? Overall impact statement: Knowledge of the economic value of water is vital to inform effective environmental, agricultural, and land use policies. This knowledge is particularly important when assessing land use decisions that can alter the supply of water for agriculture but at the potential expense of downstream uses such as drinking water. To better assess these tradeoffs, improved estimates are needed of the economic value of water quantity to agriculture and the value of water quality to downstream users. In this project, we have improved these estimates for both water quantity and water quality. Furthermore, we have carried out and continue to develop unique extension and outreach programs that educate the general public on the importance of measuring the value of water. Objective 1... Estimate the value of water quantity to agriculture by crop choice and by location. To improve the economic estimates of the value of water quantity, we have developed economic and econometric models to estimate how the value of water quantity differs on drained versus non-drained land. We then use these estimates to examine expected damages from climate change. We find important biases in prior studies of climate change. In particular, our improved estimates show prior studies have underestimated predicted damages in Midwestern states and overestimated damages in northern latitudes. These estimates play an important role in informing optimal land use and climate policy. Objective 2... Estimate the value of water quality by downstream use, by pollutant and by location. To estimate the value of water quality, we are developing an integrated assessment model of water pollution that estimates how spatially-explicit marginal changes in pollution affect specific downstream users of water resources such as drinking water and recreation. We have carried out several new analyses that examine how well different measures of water quality lead to different estimates of the value of water quality for recreational use. In addition, we continue to assemble a comprehensive database of surface water quality, drinking water treatment intensities, and associated treatment costs to understand the economic value of water quality. Objective 3... Develop a spatially-explicit integrated hydrologic-economic model of the Upper Mississippi River Basin (UMRB) and the Ohio Tennessee River Basin (OTRB) and determine how upstream land use decisions impact water use and water quality downstream. The hydrologic model we are developing in Objective (2) forms the basis for an integrated hydrologic-economic model of the UMRB and OTRB. We are calibrating this model with estimates of the value of water quality from Objective 2 and the value of water quantity in Objective 1. In addition, we have co-authored a paper that highlights key issues in designing and developing integrated assessment models for water pollution. Objective 4... Identify spatially-explicit optimal water policies and conservation strategies.We have continued work that examines optimal placement of conservation strategies using our hydrologic model. These modeling efforts quantify the trade-offs involved in achieving different levels of environmental quality with different conservation actions and associated costs. Objective 5... Identify how variation in weather and climate alter the value of water quantity to agriculture, water quality to downstream users, and optimal water policies and conservation strategies. We have combined the research results in Objective (1) with several global climate change projections to estimate future damages from climate change. The results in Objective (1) have also allowed us to predict how land use practices, such as drainage, will change with future climate. Extension Objectives ...We have presented two online Iowa Learning Farms seminars on the economic benefits of pollution control. These seminars helped educate farmers, stakeholders, and the general public on the importance of measuring and understanding the value of the environment for policy making. We also widely distributed infographics and a CARD working paper that describes the economic benefits of nutrient pollution control for a general audience. In addition, we have held farmer and stakeholder workshops at Bear Creek National Restoration Demonstration Watershed. Finally, we held a series of Rapid Needs Assessment and Response Workshops throughout Iowa to help the general public understand how nutrient pollution gets into water and what can be done about it. Education Objectives ...Dr. Keiser teaches a graduate course in Environmental Economics. This course has included over 45 Masters and PhD students at Iowa State in the fall semesters of 2014 to 2018. Dr. Keiser has used this project to discuss how integrated assessment models are critical to examining important tradeoffs that arise from agricultural and environmental policies that influence the use of water resources. Further, we held a Water Science conference in Ames, IA that was attended by over 30 individual researchers and graduate students from a number of research groups including Ohio State, Minnesota, Maryland, Wisconsin, and the USEPA. This workshop helped launch discussions about how to improve integrated assessment models to measure the costs and benefits of water pollution policies. We will continue this workshop in 2019

Publications

  • Type: Journal Articles Status: Accepted Year Published: 2018 Citation: Keiser, D.A., C.L. Kling, and J.S. Shapiro. The Low but Uncertain Measured Benefits of U.S. Water Quality Policy Forthcoming at Proceedings of the National Academy of Sciences.
  • Type: Journal Articles Status: Under Review Year Published: 2018 Citation: Meyer, K. and D.A. Keiser. 2018. Adapting to Climate Change Through Tile Drainage: Evidence from Micro Level Data. Mimeo, Iowa State University.
  • Type: Other Status: Published Year Published: 2018 Citation: Tang, C., G.E. Lade, D.A. Keiser, C.L. Kling, Y. Ji, and Y-H. Shr. 2018. Economic Benefits of Nitrogen Reductions in Iowa. Mimeo, Iowa State.


Progress 09/01/16 to 08/31/17

Outputs
Target Audience:Our target audience includes academic researchers working on issues of climate, water quality, and natural resource economics. We have engaged with this community to seek feedback on novel methods used to estimate the value of water quantity and quality. Our target audience also includes K-12, undergraduate, and graduate students. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?The project has provided training for two graduate students and four post-doctoral researchers. For these students and researchers, the work for this project provides both disciplinary (economics, agricultural engineering, limonly) interdisciplinary training. These researchers are gaining exposure to the economics, policy, and social implications of natural resource management. In addition, they are learning how to operate effectively within a large, interdisciplinary research team. They are also aquiring training in data collection and empirical analyses that estimate the value of water quality. How have the results been disseminated to communities of interest?Results were presented as a selected paper at the Association of Environmental and Resource Economics Summer Conference, the Agricultural and Applied Economics Annual Meeting, Northeast Agricultural and Resource Economics Association, and 3rd Graduate and Professional Student's Research Conference at Iowa State. In addition, a research seminar was presented at the US Department of Agriculture Economic Research Service, Saginaw Valley State, and the University of Pittsburgh at Greensburg. What do you plan to do during the next reporting period to accomplish the goals?We will make progress on each component of this project including our research, extension, and education objectives. For our research efforts, we will submit for publication a current working paper on the role of tile drainage in economic estimates of climate change. For the drinking water component to this work, we plan to continue compiling drinking water quality input and output data to estimate treatment costs as a function of raw water quality. These results will help inform the value of improving surface water quality. We will to continue to work on the development of an integrated assessment model that assigns a price to nutrient pollution depending on where it is emitted in the UMRB or OTRB. We will focus on current estimates of the damages to recreational use and work to include economic estimates of the damages to drinking water. We will then use this model to begin examining efficient policies that consider the economic costs and benefit of certain land use policies. In addition to the working paper on tile drainage, we will work to publish an additional paper. This paper measures the value of water quality to recreational users and examines key issues of how to define water quality within these models. We will begin to incorporate the findings of the estimates of the economic benefits of water quantity and water quality into our field days and Conservation Station display that is used for community outreach. In his graduate-level environmental economics course, Dr. Keiser will continue to teach about the economics of water quality and quantity, the methods used to estimate these values, and integrated assessment models as policy tools. In the spring of 2018, we will hold our integrated water science conference to help propel the development of these models forward for academic and policy audiences.

Impacts
What was accomplished under these goals? Overall impact statement: Knowledge of the economic value of water is vital to inform effective environmental, agricultural, and land use policies. This knowledge is particularly important when assessing land use decisions that can alter the supply of water for agriculture but at the potential expense of downstream uses such as drinking water. To better assess these tradeoffs, improved estimates are needed of the economic value of water quantity to agriculture and the value of water quality to downstream users. In this project, progress has been made over the last year to improve these benefit estimates for both water quantity and water quality. In particular, we have performed econometric analyses that examine how climate affects tile drainage adoption and how this adoption influences estimates of the economic damages from climate change. In addition, we are developing an integrated assessment model that is capable of examining tradeoffs that arise from land use policies that affect downstream users of water resources. Furthermore, we have carried out and continue to develop unique extension and outreach programs that educate the general public on the importance of measuring the value of water. Research Objective 1: Estimate the value of water quantity to agriculture by crop choice and by location. To improve the economic estimates of the value of water quantity, we continue to work on an economic model that predicts how the value of water quantity differs on drained versus non-drained land. We use this model to recover estimates of the implicit value of water on drained versus non-drained land. We then use these estimates to examine expected damages from climate change. We find important biases in prior studies of climate change. In particular, our improved estimates show prior studies have underestimated predicted damages in Midwestern states and overestimated damages in northern latitudes. These estimates play an important role in informing optimal land use and climate policy. Research Objective 2: Estimate the value of water quality by downstream use, by pollutant and by location. To estimate the value of water quality, we are developing an integrated assessment model of water pollution that estimates how spatially-explicit marginal changes in pollution affect specific downstream users of water resources such as drinking water and recreation. We have carried out several new analyses that examine how well different measures of water quality lead to different estimates of the value of water quality for recreational use. We are also spending considerable efforts to reprogram our hydrologic model to account for the routing of marginal changes in nutrient and sediment pollution. In addition, we are assembling a comprehensive database of surface water quality, drinking water treatment intensities, and associated treatment costs to understand the economic value of water quality. Because of the spatial scale of study, we have focused efforts on obtaining relevant water quality and drinking water treatment data from Midwestern states. Research Objective 3... Develop a spatially-explicit integrated hydrologic-economic model of the Upper Mississippi River Basin (UMRB) and the Ohio Tennessee River Basin (OTRB) and determine how upstream land use decisions impact water use and water quality downstream. The hydrologic model we are developing in Objective (2) will form the basis for an integrated hydrologic-economic model of the UMRB and OTRB. We will calibrate this model with estimates of the value of water quality from Objective 2 and the value of water quantity in Objective 1. Research Objective 4... Identify spatially-explicit optimal water policies and conservation strategies. We have continued work that examines optimal placement of conservation strategies using our hydrologic model. These modeling efforts quantify the trade-offs involved in achieving different levels of environmental quality with different conservation actions and associated costs. Research Objective 5... Identify how variation in weather and climate alter the value of water quantity to agriculture, water quality to downstream users, and optimal water policies and conservation strategies. We have combined the research results in Objective (1) with several global climate change projections to estimate future damages from climate change. The results in Objective (1) have also allowed us to predict how land use practices, such as drainage, will change with future climate. We will then explore how these actions impact downstream users of water quality with our integrated assessment model. This work will allow us to suggest economically efficient land use policies in the face of climate change. Extension Objective ... Engage farmers and other stakeholder to increase the understanding of the economic value of water. A series of Rapid Needs Assessment and Response Workshops were conducted by the Iowa Learning Farms throughout Iowa. As part of these workshops participants were asked to answer questions as part of a group and then the discussionwas framed around discussing these answers and providing learning opportunities for participants to better understand issues and solutions. One of the six questions posed to participants was on drinking water. The specific question(s) were: Where does your drinking water originate? What are the main threats that may impact your drinking water? The top 3 responses to main threat were Run off, Nitrates, and Sediment. The top responses for sources were Well, Rural water, City water, from river or reservoirs (4), and Aquifers (2). From these responses we tailored the discussion and learning opportunities around discussing how these pollutants get into water and what can be done about them. It also gave a better understanding for future programming on where people think their water comes from. Education Objective 1... Improve the understanding of the economic value of water for K-12, undergraduate, and graduate students by integrating the research elements of the project with demonstration field sites, classroom learning modules, and online resources and educational games. Dr. Keiser teaches a graduate course in Environmental Economics. This course has included over 40 Masters and PhD students at Iowa State in the fall semesters of 2014, 2015, 2016, and 2017. Dr. Keiser has used this project to discuss economic theory models that show the importance of estimating spatially-explicit values of the environment, including water. This course also discusses how integrated assessment models are critical to examining important tradeoffs that arise from agricultural and environmental policies that influence the use of water resources. Education Objective ... Increase the understanding of methods, challenges, and cutting-edge research and extension efforts on integrated hydrologic-economic modeling with a two-day Integrated Water Science conference. The Water Science conference will be held at the end of the project. We are working to finalize dates and participants for this conference to be held at Iowa State next spring. We have received commitments from a number of research groups at Ohio State, Minnesota, Maryland, and Wisconsin. We are currently reaching out to a number of additional participants and planning the details of the workshop.

Publications

  • Type: Journal Articles Status: Published Year Published: 2017 Citation: Keiser, David A., and Nicholas Z. Muller. 2017. Air and Water: Integrated Assessment Models for Multiple Media. Annual Review of Resource Economics, 9: 165-184.


Progress 09/01/15 to 08/31/16

Outputs
Target Audience:Our target audience includes academic researchers working on issues of climate, water quality, and natural resource economics. We have engaged with this community to seek feedback on novel methods used to estimate the value of water quantity and quality. Our target audience also includes K-12, undergraduate, and graduate students. To engage this audience, through out Water Rocks! program, we have incorporated issues concerning the economic value of water in our classroom modules. We have also engaged graduate students through an environmental economics class at Iowa State. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?The project has provided training for one PhD student in economics and one post-doctoral researcher in limnology. For one PhD student in particular, the work for this project serves as a key dissertation chapter and job market paper this fall. The project provides interdisciplinary training for one post-doctoral researcher in limnology. The post-doctoral researcher is gaining exposure to the economics, policy, and social implications of natural resource management. In addition to learning how to operate effectively within a large, interdisciplinary research team, the Postdoc serves as the project lead for collection and management of water quality data from drinking water treatment intake locations and will assist with incorporation of these data into econometric models that estimate treatment costs as a function of water quality. How have the results been disseminated to communities of interest?Preliminary results were presented as a selected paper at the Association of Environmental and Resource Economics Summer Conference, the Agricultural and Applied Economics Annual Meeting, Northeast Agricultural and Resource Economics Association, and 3rd Graduate and Professional Student's Research Conference at Iowa State. In addition, a research seminar was presented at the US Department of Agriculture Economic Research Service. Preliminary results were also presented as a poster at the USDA-NIFA project directors' annual meeting. What do you plan to do during the next reporting period to accomplish the goals?We will make progress on each component of this project including our research, extension, and education objectives. For our research efforts, we will finish a current working paper on the role of tile drainage in economic estimates of climate change and submit this paper for publication. We will also extend this work to examine how modeling tile drainage adoption influences econometric and statistical estimates of the effects of weather and climate on crop yields. For the drinking water component to this work, we plan to continue compiling water quality data from drinking water intakes and linking these to lake and river water quality. As we continue to compile these datasets, we will likely need to develop a standardized, yet flexible database that can handle heterogeneous data from disparate sources. Our initial dataset will be presented during a project meeting scheduled for early 2017. This initial dataset will be used to begin exploratory research on approaches to up-scale our results. We plan to have a working version of an integrated assessment model that assigns a price to nutrient pollution depending on where it is emitted in the UMRB or OTRB. We will focus on current estimates of the damages to recreational use and work to include economic estimates of the damages to drinking water. We will then use this model to begin examining efficient policies that consider the economic costs and benefit of certain land use policies. In addition to the working paper on tile drainage, we will work to publish two additional papers. The first paper highlights key aspects of integrated assessment models for water pollution. The second paper measures the value of water quality to recreational users and examines key issues of how to define water quality within these models. For extension and education efforts, we will hold an additional listening sessions and farmer information sessions at Bear Creek National Restoration Demonstration Watershed. We will begin to incorporate the findings of the estimates of the economic benefits of water quantity and water quality into our field days and Conservation Station display that is used for community outreach. In his graduate-level environmental economics course, Dr. Keiser will continue to teach about the economics of water quality and quantity, the methods used to estimate these values, and integrated assessment models as policy tools.

Impacts
What was accomplished under these goals? Knowledge of the economic value of water is vital to inform effective environmental, agricultural, and land use policies. This knowledge is particularly important when assessing land use decisions that can alter the supply of water for agriculture but at the potential expense of downstream uses such as drinking water. To better assess these tradeoffs, improved estimates are needed of the economic value of water quantity to agriculture and the value of water quality to downstream users. In this project, progress has been made over the last year to improve these benefit estimates for both water quantity and water quality. In particular, we have performed econometric analyses that examine how climate affects tile drainage adoption and how this adoption influences estimates of the economic damages from climate change. In addition, we are developing an integrated assessment model that is capable of examining tradeoffs that arise from land use policies that affect downstream users of water resources. Furthermore, we have carried out and continue to develop unique extension and outreach programs that educate the general public on the importance of measuring the value of water. Research Objective 1... Estimate the value of water quantity to agriculture by crop choice and by location. To improve the economic estimates of the value of water quantity, we have developed an economic model that predicts how the value of water quantity will differ on drained versus non-drained land. To test this theoretical model, we obtained access to confidential US Census data on agricultural land values and drainage and merged these data with data on local climate, soil, and other important determinants of land use values. We then used these data in an econometric model that allows us to examine the factors that influence drainage adoption. Furthermore, we use this model to recover estimates of the implicit value of water on drained versus non-drained land. We then use these estimates to examine expected damages from climate change. We find important biases in prior studies of climate change. In particular, our improved estimates show prior studies have underestimated predicted damages in Midwestern states and overestimated damages in northern latitudes. These estimates play an important role in informing optimal land use and climate policy. Research Objective 2... Estimate the value of water quality by downstream use, by pollutant and by location. To estimate the value of water quality, we are programming a hydrologic model that estimates how spatially-explicit incremental changes in pollution affect specific downstream users of water resources such as drinking water and recreation. This modeling effort will allow us to place a price on pollution depending upon where it is emitted. This price will allow us to compare the costs and benefits of upstream land use policies. We have carried out several new analyses that examine how well different measures of water quality lead to different estimates of the value of water quality for recreational use. In addition, we are continuing to collect data on drinking water quality and treatment costs to understand the economic value of water quality. In particular, we developed a protocol for linking locations of drinking water intakes to basin-scale lake and stream water quality data using available datasets. To maximize our efforts, we have decided to focus early data collection efforts in the state of Minnesota, which has widely variable water quality conditions along a latitudinal gradient. Water quality conditions within Minnesota are representative of the range in water quality conditions encountered throughout the entire spatial extent of this study; therefore, we anticipate that relationships developed within the state of Minnesota can be up-scaled to the entire UMRB and OTRB Basins. In support of these efforts, we have contacted local drinking water treatment plants and regional utilities agencies within Minnesota to identify water quality variables frequently monitored and the frequency with which they are monitored. We have also started to work with these agencies regarding the availability of their monitoring data, some of which may not be in an easily accessible electronic format. Research Objective 3... Develop a spatially-explicit integrated hydrologic-economic model of the Upper Mississippi River Basin (UMRB) and the Ohio Tennessee River Basin (OTRB) and determine how upstream land use decisions impact water use and water quality downstream. The hydrologic model we are developing in Objective (2) will form the basis for an integrated hydrologic-economic model of the UMRB and OTRB. We will calibrate this model with estimates of the value of water quality from Objective 2 and the value of water quantity in Objective 1. In addition, we have co-authored a new paper that highlights key issues in designing and developing integrated assessment models for water pollution. Research Objective 4... Identify spatially-explicit optimal water policies and conservation strategies. We have continued work that examines optimal placement of conservation strategies using our hydrologic model. These modeling efforts quantify the trade-offs involved in achieving different levels of environmental quality with different conservation actions and associated costs. Research Objective 5... Identify how variation in weather and climate alter the value of water quantity to agriculture, water quality to downstream users, and optimal water policies and conservation strategies. We have combined the research results in Objective (1) with several global climate change projections to estimate future damages from climate change. The results in Objective (1) have also allowed us to predict how land use practices, such as drainage, will change with future climate. We will then explore how these actions impact downstream users of water quality with our integrated assessment model. This work will allow us to suggest economically efficient land use policies in the face of climate change. Extension Objective ... Engage farmers and other stakeholder to increase the understanding of the economic value of water. We have presented an online Iowa Learning Farms seminar on how economist approach managing pollution. This seminar helps educate farmers, stakeholders, and the general public on the importance of measuring and understanding the value of the environment for policy making. We have also held farmer and stakeholder workshops at Bear Creek National Restoration Demonstration Watershed. Education Objective 1... Improve the understanding of the economic value of water for K-12, undergraduate, and graduate students by integrating the research elements of the project with demonstration field sites, classroom learning modules, and online resources and educational games. Dr. Keiser teaches a graduate course in Environmental Economics. This course has included over 30 Masters and PhD students at Iowa State in the fall semesters of 2014, 2015, and 2016. Dr. Keiser has used this project to discuss economic theory models that show the importance of estimating spatially-explicit values of the environment, including water. This course also discusses how integrated assessment models are critical to examining important tradeoffs that arise from agricultural and environmental policies that influence the use of water resources. Education Objective ... Increase the understanding of methods, challenges, and cutting-edge research and extension efforts on integrated hydrologic-economic modeling with a two-day Integrated Water Science conference. The Water Science conference will be held at the end of the project. Thus, there are currently no developments to report at this time.

Publications

  • Type: Conference Papers and Presentations Status: Other Year Published: 2016 Citation: Ji, Yongjie, and David A. Keiser. 2016. Water-based Recreation and Water Quality Indices: A Revealed Preference Approach. Mimeo, Iowa State (online at http://ageconsearch.umn.edu//handle/235886).
  • Type: Conference Papers and Presentations Status: Other Year Published: 2016 Citation: Meyer, Kevin, and David A. Keiser. 2016. Adapting to Climate Change Through Tile Drainage: A Structural Ricardian Analysis. Mimeo, Iowa State (online at http://ageconsearch.umn.edu/handle/235932).


Progress 09/01/14 to 08/31/15

Outputs
Target Audience:Our target audience includes academic researchers working on issues of climate, water quality, and natural resource economics. We have engaged with this community to seek feedback on novel methods used to estimate the value of water quantity and quality. Our target audience also includes K-12, undergraduate, and graduate students. To engage this audience, through out Water Rocks! program, we have incorporated issues concerning the economic value of water in two of our classroom modules: "We All Live in A Watershed" and "What's in Your (Storm)Water?". Modules are delivered to 4-12 classrooms. From April-September 2015, we have done 93 presentations of "We All Live in A Watershed" to 1,908 youth and 2 presentation of "What's in Your (Storm)Water?" to 21 people. We have also engaged graudate students through an environmental economics class at Iowa State. Changes/Problems:Due to funding notification occuring after the start of the fall 2014 semester, we did not add a full time PhD econ student until summer of 2015. This delayed some of the research components of the grant. Student is now devoted full time to the project. What opportunities for training and professional development has the project provided?The project is providing training for two PhD students and two post-doctoral researchers in economics. For one PhD student in particular, the work for this project serves as a key dissertation chapter and potential job market paper. The other PhD student and post-doctoral researchers have gained experience developing optimization routines for examining the optimal placement of conservation practices giving certain goals of nutrient reductions. In addition, the project provides interdisciplinary training for one Postdoc Research Associate in econometrics associated with water quantity and quality. The Postdoc (Dr. Downing advisor) is classically trained in limnology (i.e., aquatic ecology), but is gaining exposure to the economics, policy, and social implications of natural resource management. In addition to learning how to operate effectively within a large, interdisciplinary research team, the Postdoc serves as the project lead for collection and management of water quality data from drinking water treatment intake locations and will assist with incorporation of these data into econometric models that estimate treatment costs as a function of water quality. How have the results been disseminated to communities of interest?Preliminary results were presented as a poster at the USDA-NIFA project directors' annual meeting. What do you plan to do during the next reporting period to accomplish the goals?We plan to progress on the research, extension, and education components of this project. Specifically, our research efforts will focus on key components of the integrated assessment model that estimate the value of water quantity to agriculture and water quality to downstream users. We plan to develop and incorporate new drainage modules into our hydrologic model that allow us to simulate changes in corn and soybean yields with changes in tile drainage. We also hope to use these modules to model the flow and fate of nutrients with increased drainage. We will compare these simulated estimates versus our econometric estimates of the value of water quantity and the role of drainage. We will also continue model development that routes nutrient loads from their source to downstream watersheds and assigns marginal damages to their source. We will calibrate these marginal damage estimates by examining several uses of water resources such as recreation and drinking water. Examining damages to drinking water uses will be a key focus during the next reporting period. We will focus on collecting water quality data from drinking water intake locations, which are a necessary prerequisite for developing econometric models to estimate treatment costs as a function of water quality. Drinking water treatment intakes will be identified from and incorporated into existing federal databases established at the reach-scale. Requests for water quality data at intake locations will be submitted to each drinking water treatment plant identified during this process. Because of the large spatial extent of this study (i.e., Upper Mississippi and Ohio Tennessee River Basins), we will focus efforts on one region anticipated to have large gradients in water quality (e.g., Iowa - northern Minnesota) to develop preliminary econometric models at a regional-scale. Subsequently, this model can be used to determine if econometric models are scalable once we have completed data acquisition and modeling at the sub-continental spatial scale. For extension and education efforts, we will hold an additional listening session in January 2016. We will incorporate the findings as well as the modeling results in a presentation to be used at our field days in 2016. We will also incorporate findings in a Conservation Station display that is used for community outreach starting summer 2016. In his graduate-level environmental economics course, Dr. Keiser will continue to teach about the economics of water quality and quantity, the methods used to estimate these values, and integrated assessment models as policy tools.

Impacts
What was accomplished under these goals? Understanding the economic value of water quantity and quality is vital to informing efficient and effective environmental and land use policies. This knowledge is particularly important when assessing land use decisions that can alter the optimal supply of water for agriculture but at the potential expense of downstream uses such as drinking water. To better assess these tradeoffs, improved estimates are needed of the economic value of water quantity to agriculture and the value of water quality to downstream users. In this project, progress has been made over the last year to improve these benefit estimates for both water quantity and water quality. An integrated assessment model is under development that will serve as a key tool for policy evaluation. This tool can be used to improve the economic efficiency of national, regional, and state-level environmental and land use policies. Research Obj. 1) Estimate the value of water quantity to agriculture by crop choice and by location. To improve the economic estimates of the value of water quantity, we have undertaken significant efforts to obtain, clean, and even digitize several inventories of agricultural drainage in the U.S. These studies serve as key measures of agricultural drainage in an econometric model that links US county-level land values to measures of local climate, drainage, soil, and other important determinants of land use values. Preliminary results show the importance of drainage as capitalized into land values and provide new statistical estimates of the effects of long-run average temperature and precipitation on land values. This work serves as the first study to explicitly account for agricultural drainage in economic estimates of the damages from climate change. Importantly, these estimates provide new estimates of the value of water quantity to agriculture and also provide expectations of where drainage systems will be used as an adaptation strategy. These estimates play an important role in informing optimal land use and climate policy. Research Obj. 2) Estimate the value of water quality by downstream use, by pollutant and by location. To tackle the water quality component of our work, we have begun to adapt an existing hydrologic model of the Upper Mississippi and Ohio Tennessee River Basins. This work simulates an incremental load within each local watershed and tracks changes in nutrient and sediment concentrations downstream. This modeling effort plays an important role in determining the value of water pollution by assigning a price to pollution depending upon where it is emitted anywhere within our study area. Understanding this price is important for examining tradeoffs that arise from policies that influence upstream land use decisions and downstream use. In addition, our modeling efforts have begun to explore how sub-surface drainage in an upstream watershed affects downstream delivery of nutrients and sediments. Research Obj. 3) Develop a spatially-explicit integrated hydrologic-economic model of the Upper Mississippi River Basin (UMRB) and the Ohio Tennessee River Basin (OTRB) and determine how upstream land use decisions impact water use and water quality downstream. Work on objectives 2 and 3 are important steps towards the development of an integrated assessment model that will allow policy makers to explore tradeoffs between land use decisions upstream and downstream use of water resources. Once the economic value of water quality and quantity are determined, these values will be used to calibrate the spatially-explicit integrated hydrologic-economic model. Work that further develops the integrated model is planned for years 2 and 3. Research Obj. 4) Identify spatially-explicit optimal water policies and conservation strategies. We have begun work that examines optimal placement of conservation strategies using our hydrologic model. These modeling efforts quantify the trade-offs involved in achieving different levels of nutrient emissions with different simulated probabilities of attaining desired levels of nutrient emissions. We spatially optimize the selection of agricultural conservation practices which optimize not only the expected performance of the conservation actions but also for their cost and variance. We analyze the trade-offs for a single nutrient, and then expand our analysis to include multiple nutrients. Research Obj. 5) Identify how variation in weather and climate alter the value of water quantity to agriculture, water quality to downstream users, and optimal water policies and conservation strategies. We have begun preliminary analyses that examine how climate change projections coupled with our new estimates of the value of water quantity to agriculture influence the total damages expected under climate change. We will explore more detailed climate change scenarios in years 2 and 3 of the project. Extension Objective: The extension component of our work seeks to engage farmers and other stakeholders to increase the understanding of the economic value of water. In terms of our extension goal, in July 2015, Dr. Comito conducted two listening session with farmer groups. One was in north central Iowa and the other was in southwest Iowa. The purpose of these listening sessions is to learn farmer understanding of the economic value of water in order to better improve our outreach to farmers. We had 13 participants in the sessions. The results from those listening sessions will be analyzed along with the listening session that will be conducted in January 2016. The information will help us develop outreach materials for students, farmers and other stakeholders. Education Obj. 1) Improve the understanding of the economic value of water for K-12, undergraduate, and graduate students by integrating the research elements of the project with demonstration field sites, classroom learning modules, and online resources and educational games. In terms of our education goals, Dr. Keiser teaches a graduate course in Environmental Economics. In the Fall of 2014 and 2015, this course included 20 Masters and PhD students at Iowa State. Dr. Keiser has used this project in several aspects of his class. The integrated assessment efforts of this project provide a wonderful example of how the economic value of water quality and quantity play crucial roles in climate, land use, and water quality policies. In addition, econometric challenges of estimating the value of water quantity feature prominently in discussions related to the economic damages of climate change. Education Obj. 2) Increase the understanding of methods, challenges, and cutting-edge research and extension efforts on integrated hydrologic-economic modeling with a two-day Integrated Water Science conference. The Water Science conference will be held at the end of the project in year 3. Thus, there are currently no developments to report.

Publications