Integrated, dynamic economic – hydrology model of the Murray-Darling Basin

We aim to model the impact of variability in and changes to water availability in the Murray-Darling Basin on flows available to the environment and irrigation, and impact on the value of irrigated agricultural production. Our objective is to understand the opportunities for changed management of the basin, how they are constrained by climate change and other factors, and how they might affect the returns to irrigation and flows for the environment, so that we may provide information to help plan for the future. In this paper we describe the model: in other papers in this conference we describe analyses of water availability and use in the basin based on this model. The hydrology component of the model is based on a simple, monthly water balance stocks and flows model of the basin, subdivided into 58 catchments. In each catchment, the rainfall and potential evapotranspiration are used to partition the rain between actual evapotranspiration and runoff. Runoff accumulates in the rivers, and flows downstream; it is stored in dams, fills lakes and wetlands from which it evaporates, spills onto and is partly consumed on the floodplains, is diverted for irrigation, eventually (if enough water remains) flowing out of the mouth. This hydrology part of the model is calibrated against observations of flow at the downstream flow gauge of the 58 catchments (the records of which vary from a few years to the full 114 years of our typical simulation period from 1895-2009). It simulates reasonably well the full range of flows, and the development of dams and irrigation diversions. The economics part of the model is based on regressions with dependent variables: the observed areas, production, water use and gross value of production of irrigated agriculture. Each dependent variable is estimated as functions of water available, evaporation and rainfall, and crop prices, for ten major commodity groups. The regressions are based on data for 17 regions and four recent years during the drought: they cover a wide range of water uses, water availability, rainfall, evaporation and commodity price circumstances observed during the drought. We report separately in this conference on this statistical analysis (Connor et al, 2012a. In the integrated model, the hydrology model first determines the availability of water for irrigation in the 58 catchments and also calculates the flows, on a monthly cycle. Once per year, the water availability values are aggregated to the 17 economic regions, and the economic model determines the irrigation outcome in terms of areas under each commodity group in each region and the gross value of production. The integrated model has some unique features in comparison to existing MDB economics models: the coupling of economics with detailed hydrology; the ability to simulate active management of environmental flows and the resulting consumptive water use economic impacts; and, the ability to simulate the dynamics of the water balance and economic impact over 114 year historical and simulated future climate sequences.