PS 79-197
An agent-based modeling approach to estimating impacts of climate change policy on New Zealand land use
This paper assesses the implications on farm income, land use and the environment when farmers are faced with environmental constraints, namely a GHG emissions reduction policy. There are various ways to model economic and land use impacts of environmental policy, yet most of these approaches are focused on a particular impact or limited by its model structure. Additionally the lack of heterogeneity in how farmers respond to environmental policy, the way environmental mitigation techniques are transferred through their peer networks, and the effect that both have on the resulting effectiveness of environmental policy are under-examined in the literature. As a result, we use a spatially explicit agent-based economic model - Agent-based Rural Land Use New Zealand (ARLUNZ) - that is capable of analyzing the impact of a variety of policies on plot level-land use, farm returns and several environmental indicators such as nutrient loadings and soil erosion. The model can also forecast the resulting land use effects caused by changes in the social networks and decision making. We use the Hurunui and Waiau catchments in Canterbury, South Island, New Zealand for this analysis, as these catchments are located in a region with a large and diverse set of land uses and agricultural enterprises. A survey of 278 landowners in the region is used to define farmer typologies and willingness to adopt new technologies to adapt to climate change and commodity price risk. We simulate a GHG emission reduction policy that imposes a carbon price on land-based emissions ($0-$50/tCO2e) through 2055 to illustrate the utility of the agent-based model.
Results/Conclusions
We estimate that GHG price on land-based emissions could lead to large reduction in GHGs, and a price as low as $10/tCO2e could turn the catchments from a net source to a net sink because additional forest carbon sequestration. Substantial land-use change likely to occur over next 50 years; e.g., dairy expands for all scenarios because of high relative profits, and forestry more than doubles by 2055 for all GHG price scenarios. Farm profits at catchment level could actually increase over simulation period because payments for forest carbon sequestration more than offset costs to sheep and beef and dairy enterprises, but farmers would have to be willing to become at least part-time foresters to do so. GHG prices also reduce nitrogen and phosphorus losses from diffuse sources, suggesting GHG policy could improve water quality.