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Abstract

Most urban centres across Australia are facing water shortages. In part, these water shortages are due to the variability of supply and demand caused by variable climatic conditions. Permanent supply augmentation to meet periodic water shortages can be costly. Water trade between rural and urban areas, through urban water options contracts, may be a less costly way to meet variability. Urban water options could be used to improve system reliability and may reduce costs by delaying investment and reducing the frequency and severity of water shortages. This paper investigates the potential to use urban water options contracts, and develops a methodology for evaluation.

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