Climate change and adaptation in Australian wheat dominant agriculture: a real options analysis

Australian crop and livestock farmers face uncertain climate change and variability and a challenge for adaptation decisions. These decisions can be (1) adjustments to practices and technologies, (2) changes to production systems, or (3) transformation of industries, for example, by relocation to new geographical areas. Adjustments to existing practices are easy to make, relative to changes to production systems or transformations at the industry level. Transformations require new investments and infrastructure and can leave assets stranded. These transformations can be partially or wholly irreversible and hysteresis effects can make switching difficult and mistakes costly to reverse. Real Options offers a framework to structure thinking and analysis of these difficult choices. This paper generalises and extends the principles of real options to capture the expected time until transformative thresholds are crossed. An application to South Australian wheat dominant agriculture is explored.


Issue Date:
2013-02
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/152196
Total Pages:
24




 Record created 2017-04-01, last modified 2017-08-22

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