Integrating complex economic and hydrologic planning models: An application for drought under climate change analysis

Abstract Climate change can affect a region's environment and economy through changes in water resource flows and allocations. The hydrologic and economic components of these impacts require complex models to reflect both the environment's physical and individuals' behavioral responses to climate change. This paper describes a model that combines the strengths of the State Wide Economic Agricultural Production Model (SWAP), an agricultural economic optimization model, and Water Evaluation and Planning (WEAP), a climate-driven hydrological model. A step function approximation of water demand curves from SWAP is used in an iterative search process to estimate crop land allocation based on annual regional water availability and economic value. SWAP value functions serve as input for an optimal discretization of water demand functions. The methodological integration of the SWAP and WEAP models creates the EconWEAP model. This paper shows the improved analytic ability of this integration by comparing agricultural revenues from WEAP vs. EconWEAP. Results for EconWEAP runs in the California's Central Valley show a significant increase in revenues for the Central Valley, maintaining the same hydrology, through the economically optimal allocation of water. This integration approach can be applied to other types of economic and hydrologic models.