@article{Kirby:124309,
      recid = {124309},
      author = {Kirby, Mac and Mainuddin, Mohammed and Gao, Lei and Ahmad,  Mobin-ud-Din},
      title = {Sustainable diversion limits and climate change: results  from an integrated economic – hydrology model of the  Murray-Darling Basin},
      address = {2012-02},
      number = {423-2016-27058},
      pages = {13},
      year = {2012},
      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.
3
• 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.},
      url = {http://ageconsearch.umn.edu/record/124309},
      doi = {https://doi.org/10.22004/ag.econ.124309},
}