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Abstract
This article evaluates irrigated agriculture sector response and resultant economic impacts
of climate change for a part of the Murray Darling Basin in Australia. A water balance
model is used to predict reduced basin inflows for mild, moderate and severe climate
change scenarios involving 10, 20, 40 Celcius warming, and predict 13%, 38% and 63%
reduced inflows. Impact on irrigated agricultural production and profitability are estimated
with a mathematical programming model using a two-stage approach that simultaneously
estimates short and long-run adjustments. The model accounts for a range of adaptive
responses including: deficit irrigation, temporarily fallowing some areas, and permanently
reducing irrigated area and changing the mix of crops.
The results suggest that relatively low cost adaptation strategies are available for moderate
reduction in water availability and thus costs of such reduction are likely to be relatively
small. In more severe climate change scenarios greater costs are estimated, adaptations
predicted include a reduction in total area irrigated, investments in efficient irrigation, and a
shift away from perennial to annual crops as the latter can be managed more profitably
when water allocations in some years are very low.