Assessing climate change impacts on water resources and Colorado agriculture using an equilibrium Displacement Mathematical Programming Model

This research models selected impacts of climate change on Colorado agriculture several decades in the future, using an Economic Displacement Mathematical Programming model. The agricultural economy in Colorado is dominated by livestock, which accounts for 67% of total receipts. Crops, including feed grains and forages, account for the remainder. Most agriculture is based on irrigated production, which depends on both groundwater, especially from the Ogallala aquifer, and surface water that comes from runoff derived from snowpack in the Rocky Mountains. The analysis is composed of a Base simulation, designed to represent selected features of the agricultural economy several decades in the future, and then three alternative climatic scenarios are run. The Base starts with a reduction in agricultural water by 10.3% from increased municipal and industrial water demand, and assumes a 75% increase in corn extracted-ethanol production. From this, the first simulation (S1) reduces agricultural water availability by a further 14.0%, for a combined decrease of 24.3%, due to climatic factors and related groundwater depletion. The second simulation (S2-WET) describes wet year conditions, which negatively affect yields of irrigated corn and milking cows, but improves yields for important crops such as non-irrigated wheat and forages. In contrast, the third simulation (S3-DRY) describes a drought year, which leads to reduced dairy output and reduced corn and wheat. Consumer and producer surplus losses are approximately $10 million in this simulation. The simulation results also demonstrate the importance of the modeling trade when studying climate change in a small open economy, and of linking crop and livestock activities to quantify overall sector effects. This model has not taken into account farmers’ adaptation strategies, which would reduce the climate impact on yields, nor has it reflected climate-induced shifts in planting decisions and production practices that have environmental impacts or higher costs. It also focuses on a comparative statics approach to the analysis in order to identify several key effects of changes in water availability and yields, without having a large number of perhaps confounding assumptions.