IDEAS home Printed from https://ideas.repec.org/a/bla/ajarec/v60y2016i1p79-96.html
   My bibliography  Save this article

A real options analysis of Australian wheat production under climate change

Author

Listed:
  • Todd Sanderson
  • Greg Hertzler
  • Tim Capon
  • Peter Hayman

Abstract

type="main" xml:id="ajar12104-abs-0001"> A significant portion of the world's agricultural systems currently operate at the extreme end of the climate conditions that are considered to be suitable for crop and livestock production. Under these conditions, even moderate climate changes are anticipated to drive substantial transformational changes to agricultural systems. Transformations require new investments and infrastructure and can leave some assets stranded. These transformations can be partially or wholly irreversible, and hysteresis effects can make switching difficult and mistakes costly to reverse. This study demonstrates how a real options decision framework, ‘Real Options for Adaptive Decisions’ (ROADs), can be used to investigate how uncertainties about the climate affect the adaptation and transformation of agricultural systems. By building upon recent developments in the mathematics of stochastic optimisation, we extend traditional economic analyses of agricultural investment decisions based on net present values to better represent incomplete knowledge and uncertainty. We report results from a case study in South Australia that describes the transition pathways farmers might follow as their industries are transformed in response to climate change.

Suggested Citation

  • Todd Sanderson & Greg Hertzler & Tim Capon & Peter Hayman, 2016. "A real options analysis of Australian wheat production under climate change," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(1), pages 79-96, January.
    • Handle: RePEc:bla:ajarec:v:60:y:2016:i:1:p:79-96
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/ajar.2016.60.issue-1
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jean P. Palutikof & Roger B. Street & Edward P. Gardiner, 2019. "Decision support platforms for climate change adaptation: an overview and introduction," Climatic Change, Springer, vol. 153(4), pages 459-476, April.
    2. Taylor, Chris & Cullen, Brendan & D'Occhio, Michael & Rickards, Lauren & Eckard, Richard, 2018. "Trends in wheat yields under representative climate futures: Implications for climate adaptation," Agricultural Systems, Elsevier, vol. 164(C), pages 1-10.
    3. Luca Di Corato & Tsegaye Ginbo, 2020. "Climate change and coffee farm relocation in Ethiopia: a real-options approach," Working Papers 2020:02, Department of Economics, University of Venice "Ca' Foscari".
    4. West, Jason, 2018. "Optimising adaptation decisions in macadamia production using contingent claim valuation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(4), October.
    5. Gorupec Natalia & Tiberius Victor & Brehmer Nataliia & Kraus Sascha, 2022. "Tackling uncertain future scenarios with real options: A review and research framework," The Irish Journal of Management, Sciendo, vol. 41(1), pages 69-88, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ajarec:v:60:y:2016:i:1:p:79-96. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/aaresea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.