Evaluating the Impacts of an Agricultural Water Market in the Guadalupe River Basin, Texas: An Agent-based Modeling Approach

Agriculture comprises about 80 percent of the total water consumption in the US. Under conditions of water shortage and fully committed water rights, market-based water allocations could be promising instruments for agricultural water redistribution from marginally profitable areas to more profitable ones. Previous studies on water market have mainly focused on theoretical or statistical analysis. However, how water users' heterogeneous physical attributes and decision rules about water use and water right trading will affect water market efficiency has been less addressed. In this study, we developed an agent-based model to evaluate the benefits of an agricultural water market in the Guadalupe River Basin during drought events. Agricultural agents with different attributes (i.e., soil type for crops, annual water diversion permit and precipitation) are defined to simulate the dynamic feedback between water availability, irrigation demand and water trading activity. Diversified crop irrigation rules and water bidding rules are tested in terms of crop yield, agricultural profit, and water-use efficiency. The model was coupled with a real-time hydrologic model and run under different water scarcity scenarios. Preliminary results indicate that an agricultural water market is capable of increasing crop yield, agricultural profit, and water-use efficiency. This capability is more significant under moderate drought scenarios than in mild and severe drought scenarios. The water market mechanism also increases agricultural resilience to climate uncertainty by reducing crop yield variance in drought events. The challenges of implementing an agricultural water market under climate uncertainty are also discussed.