Energy, Groundwater, and Crop Choice
Louis Preonas, Assistant Professor, University of Maryland
Dr. Preonas is an energy and environmental economist with a focus on market distortions, inefficiencies, and impacts of energy markets and policies. His work spans across regions and energy types, from evaluating the costs of energy supply inefficiencies in India to estimating agricultural water demand in California. As energy policies become increasingly prevalent in the face of climate change, Dr. Preonas’ research plays an important role in the design of sustainable and functioning energy systems.
—Sandy Sum, Bren School PhD Student
AN H. WILLIAM KUNI BREN FELLOWSHIP PROGRAM SPEAKER
Dr. Preonas will be presenting remotely. Join online using this link and passcode water, or view the remote talk in Bren Hall 1414. *This talk will not be recorded.
Groundwater is a key resource for agricultural production globally. Increasingly rapid aquifer drawdowns—as well as the policies intended to increase their sustainability— increase costs to agricultural producers, with unknown consequences. This paper provides the first large-scale empirical estimates of how farmers respond to changes in groundwater costs in one of the world’s most valuable agricultural areas: California. Using rich administrative data and exogenous variation in the price of electricity, a key input into groundwater extraction, we find that farmers are very price responsive: we estimate large price elasticities of demand for electricity (−1.17) and groundwater (−1.12). We demonstrate that crop switching and fallowing are the main channel through which farmers respond to increases in groundwater costs. Using a static discrete choice model, we estimate that a counterfactual $10 per-acre-foot groundwater tax—a level consistent with California’s sustainability targets—would lead farmers to reallocate 3.9 percent of cropland, with increases in fallowing and high-value fruit and nut perennials, and decreases in annual crops and low-value perennials.
Louis Preonas is an Assistant Professor of Agricultural and Resource Economics at the University of Maryland. He is an energy and environmental economist who studies market power distortions in U.S. energy markets, the economic impacts of rural electrification in India, wholesale power supply in India, and the energy-groundwater-agriculture nexus in California. His research has appeared in the Journal of the Association of Environmental and Resource Economists, the Journal of Development Economics, and the Journal of Political Economy (forthcoming). He completed his PhD in Agricultural and Resource Economics from University of California Berkeley in 2018.