Assessing the economic effects of drought using Positive Mathematical Planning model under climate change scenarios

In recent decades, regions all around the world have experienced severe droughts adversely affecting their agricultural production. Climate change, along with limited access to water will alter future production and agricultural development. The purpose of this study is to provide a perspective for the future cultivation regime in the Divandarre region in the Sepidrood catchment in Iran, using historical climatic, agricultural, and economic information. Future precipitation values are determined for three climate scenarios, then downscaled and converted to pixel-based precipitation maps using the Moving Least Squares method. Future droughts are identified using the Standardized Precipitation Index at 3, 6, and 9-month intervals based on precipitation values and the relationship between different types of droughts (meteorological, agricultural and hydrological). We introduce a new coefficient, the water cost coefficient, derived from drought characteristics that captures the added irrigation cost in drought years because of increased water price. Using the Positive Mathematical Planning method and considering limited land and water, predicted future prices and costs based on a linear regression of supply-demand, and the annual water cost coefficient values, an agroeconomic model is built. After prediction of future price and cost based on historical data from 2005 to 2018, we run future scenarios based on various price and cost values to determine the optimal annual cultivation area for each crop from 2020 to 2040. All scenarios indicate a decline in cultivation area for all crops making agriculture less beneficial in the future. The cultivation regime moves away from more water-consuming products with less economic value (e.g. watermelon) toward less water-consuming, more expensive products (e.g. lentils). The findings of this model along with expert economic judgments help determine the economic effects of climate change on irrigation, farmers' decisions, and water policies, including water markets, and improving irrigation efficiency. Authorities and farmers could adapt to drought shocks and changes in the market while experiencing less revenue loss.