Investment in irrigation infrastructure and technologies, particularly those that reduce on-farm water use have become a major focus of government programs both at a State and Commonwealth level. Particular attention has been given to increasing the uptake of water âsavingâ technologies among irrigators. The design of programs capable of achieving government objectives at least cost requires an understanding of farm level investment decisions. In this context, the influence of uncertainty on decisions to invest in irrigation technology and infrastructure is examined. The potential for uncertainty to influence investment decisions via strategies to manage risk is demonstrated using the method of real options valuation. The approach is applied to case studies of investment in evaporation mitigation technologies. It is shown that there are circumstances where uncertainty surrounding the value of water savings is significant enough to influence the decision to invest in water saving technologies. The results also demonstrate that where uncertainty exists, rates of subsidy to encourage faster uptake of these technologies need to be higher than those indicated by traditional NPV analysis. This is further exacerbated when irrigators are required to relinquish water entitlements in return for the subsidy.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: