Optimizing Regional Food and Energy Production under Limited Water Availability through Integrated Modeling

Across the world, human activity is approaching planetary boundaries. In northwest China, in particular, the coal industry and agriculture are competing for key limited inputs of land and water. In this situation, the traditional approach to planning the development of each sector independently fails to deliver sustainable solutions, as solutions made in sectorial silos' are often suboptimal for the entire economy. We propose a spatially detailed cost-minimizing model for coal and agricultural production in a region under constraints on land and water availability. We apply the model to the case study of Shanxi province, China. We show how such an integrated optimization, which takes maximum advantage of the spatial heterogeneity in resource abundance, could help resolve the conflicts around the water-food-energy (WFE) nexus and assist in its management. We quantify the production-possibility frontiers under different water-availability scenarios and demonstrate that in water-scarce regions, like Shanxi, the production capacity and corresponding production solutions are highly sensitive to water constraints. The shadow prices estimated in the model could be the basis for intelligent differentiated water pricing, not only to enable the water-resource transfer between agriculture and the coal industry, and across regions, but also to achieve cost-effective WFE management.