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Abstract
Climate change and the proposed Murray-Darling Basin Plan both result in less water
for irrigation. Climate change is projected to take water from all uses including the
environment, whereas the likely sustainable diversion limit in the Plan aims
(amongst other things) to return water to the environment. We examine the impact
on flows and the returns to irrigation of potential reductions in irrigation allocations,
and the interaction with projected climate change impacts.
Our analysis is based on an integrated hydrology – economics model of the Murray-
Darling Basin, described in Kirby et al. (2012a). The model can quickly and easily run
new climate or other scenarios, accounting for flows at key environmental assets. It
uses a statistically calibrated economic model that can closely predict drought
outcomes accounting for allocation, climate and price circumstances.
We examined a 2,800 GL reduction to diversions, and compared it to a base case of
no reductions. We modelled the flows and irrigation returns for the no reduction and
reduction cases under the assumption of historical climate, a median climate change
and a more severe climate change. The climate change projections were those
examined in the CSIRO Murray-Darling Basin Sustainable Yields project, slightly
extended for more recent years.
The broad results of this analysis are that:
• The reduction of water available to irrigation under the sustainable diversion
limit results in a less than proportional reduction in returns to irrigation. A 25
% reduction in water available on average over 114 years is estimated to
reduce the gross value of of irrigated agricultural production by about 3 % on
average. This is consistent with observation of reduced water availability in
the drought (Kirby et al., 2012b, Conner et al., 2012).
• Future droughts projected under climate change might be more severe that
those experienced to date, with an expectation of greater economic impact;
• A median climate change projection removes from the overall system slightly
more water than is gained for the environment under the sustainable
diversion limit. Under current sharing rules, this reduction in water comes
primarily from the environment. The exact impact on flows varies from valley
to valley. The impact of climate change is not considered in other analyses of
the Murray-Darling Basin plan.
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• The returns to irrigation are not much affected by a median climate change,
with a 2 % reduction in gross value resulting from 3 % reduction in water
availability (on top of the reductions due to the diversion limit). This detail in
this result depends on the exact form of water sharing rules, and rules will
change in the future; we used a default assumption that the behaviour
resulting from the rules will be much as it is now.