Biofuel Crops Expansion: Evaluating the Impact on the Agricultural Water Scarcity Costs and Hydropower Production with Hydro Economic Modeling

Abstract:

Biofuels such as ethanol from sugar cane remain an important element to help mitigate the impacts of fossil fuels on the atmosphere. However, meeting fuel demands with biofuels requires technological advancement for water productivity and scale of production. This may translate into increased water demands for biofuel crops and potential for conflicts with incumbent crops and other water uses including domestic, hydropower generation and environmental. It is therefore important to evaluate the effects of increased biofuel production on the verge of water scarcity costs and hydropower production. The present research applies a hydro-economic optimization model to compare different scenarios of irrigated biofuel and hydropower production, and estimates the potential tradeoffs. A case study from the Araguari watershed in Brazil is provided. These results should be useful to (i) identify improved water allocation among competing economic demands, (ii) support water management and operations decisions in watersheds where biofuels are expected to increase, and (iii) identify the impact of bio fuel production in the water availability and economic value. Under optimized conditions, adoption of sugar cane for biofuel production heavily relies on the opportunity costs of other crops and hydropower generation. Areas with a lower value crop groups seem more suitable to adopt sugar cane for biofuel when the price of ethanol is sufficiently high and the opportunity costs of hydropower productions are not conflicting. The approach also highlights the potential for insights in water management from studying regional versus larger scales bundled systems involving water use, food production and power generation.