Integrated economic models to support decisions on water pricing in biofuel production river basins: three case studies from Brazil

Abstract

Energy securities, increases in fossil fuel prices, and concern about climate change have been major causes of increased bioenergy production. Because biomass production is rural‐based and generally labor‐intensive, bioenergy development happens mainly in less developed countries. Comprehensive analysis is needed to develop appropriate policies to ensure the sustainability of resource use while promoting economic development. Given this, public policies must promote more efficient inter‐ and intra‐sector water allocation schemes. Economic instruments, such as water pricing and water markets, can be used to avoid transferring negative environmental and economic impacts of meeting global renewable energy targets to production regions. In Brazil, water markets are not allowed, but the law has established raw water charges as a management instrument at the river basin level. However, the majority of bulk water charge systems have been defined exclusively for raising revenue. Integrated economic modeling can be a useful tool to support the design of effective economic instruments. This paper describes the main features of two economic modeling approaches that can support effective water pricing decisions. Three case studies illustrate sugarcane ethanol production river basins in Brazil where water prices have already been established but fail to reflect the real scarcity value of water in the region. In addition, preliminary results of a national‐level economic model being built for Brazil show that increasing water charges for the agricultural sector can have significant effects on water demand and agriculture production. The potential benefits of water pricing policy decisions based on economic modeling results are assessed. © 2015 Society of Chemical Industry and John Wiley & Sons, Ltd

The impact of global change on economic values of water for Public Irrigation Schemes at the São Francisco River Basin in Brazil

“…The allocation of sugarcane and fruit crops projected with climate change by the global model showed an impact on the average crop yields and on the water costs in the main PIS resulting in changes in the water values. The weighted average economic values of water for all regions and municipalities in the baseline year are much higher than the water prices established for agricultural use in the SFRB at R$10/1000m 3 since 2006 (Alcoforado de Moraes et al 2016). Additionally, they are still higher than the average water unit costs associated with the same region (Table 2).…”

“…Therefore, the SFRB has been considered the last frontier of cheap land and "abundant" water for the production of irrigated sugarcane in Brazil. This apparent abundance is due to low water prices for agricultural users as well as infrastructure investments with high public contributions (Alcoforado de Moraes et al 2016). It is therefore essential to obtain economic values of water, which take future scenarios of local and global market and climate conditions into account, as has been done in this study.…”

“…This aggregation of PIS, known as Pólo Petrolina-Juazeiro (see Figure 1 in Online Resource 1), has increased irrigated agricultural production significantly since its implementation in the 1990s and has become both a major center of fruit production in Brazil and an economic success story (Graziano da Silva 1989;Lima and Miranda 2000;Oliveira et al 1991;Sampaio and Sampaio 2004). More recently, sugarcane production has also increased in areas with particularly fertile soil; using intensive irrigation and doubling productivity (Alcoforado de Moraes et al 2016;Amaral et al 2012).…”

“…For electricity generation, six reservoirs were built which also generate problems. The two largest have high rates of evaporation and during periods of low inflow to reservoirs only a minimum amount of water can be released, resulting in conflicts with downstream users, who in turn have difficulties to satisfy their own demands (Alcoforado de Moraes et al 2016).…”

Proposição de melhorias para o Sistema de Cobrança pelo Uso da Água Bruta da Bacia Hidrográfica do Rio São Francisco

“…Modelos econômicos integrados são capazes de suportar a concepção de instrumentos de gestão eficazes para promover uma alocação mais eficiente da água, a fim de induzir alocações economicamente ótimas e equitativas. Um instrumento econômico (como a cobrança pelo uso da água bruta da Política Nacional de Recursos Hídricos -PNRH) pode maximizar o bem-estar econômico e social, auxiliar na resolução de conflitos de uso da água e corrigir as externalidades (HEERDEN;BLIGNAUT;HORRIDGE, 2008;QIN et al, 2012;MORAES et al, 2015). No entanto, na maioria dos países, esses instrumentos são desenvolvidos para a recuperação dos custos de gestão dos recursos hídricos, com valores baixos que não são capazes de impactar os usuários de forma significativa para reduzir a demanda (KNÜPPE, 2011;TEEB, 2011;SILVESTRE;GOMES, 2016).…”