Economic effects of climate change in the Murray-Darling Basin, Australia

Abstract

This study uses a hydro-economic model to examine the role of water trading, and the economic impacts of climate change and reduced surface water availability in the Murray-Darling Basin. The results show that losses to irrigated agriculture under a median climate change scenario are modest, but under a 'modified 2030 dry extreme scenario' there would be substantial reductions in water use, irrigated land use and profits. Nevertheless, the Basin-wide proportional economic impacts would be less than the percentage decline in water use. A comparison of model results with and without inter-regional water trade shows that inter-regional water trade in periods of much reduced water availability mitigates the on-farm impacts of climate change. Given that agricultural production in the Basin is likely to be affected by climate change, the development of drought-tolerant crops and cultivars along with learning and extension of best farming practices to reduced water use could also assist irrigated agriculture adapt to climate change within the Basin.