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Natural capital and climate change: Possible negative sustainability impacts from 'gold plating' irrigation infrastructure

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  • Adamson, David
  • Loch, Adam

Abstract

For an individual irrigator water use efficiency increases in response to investments in on-farm capital. Sustainable river systems require sufficient flows to maintain the value and function of natural capital assets. In constrained water resource settings, federal basin managers may view on-farm capital investments as a policy objective to rebalance water shares between all users to offset negative externalities from over allocation. This paper uses a state contingent modelling approach to review an extended farm capital investment policy in Australia’s Murray-Darling Basin. We examine technical efficiency gain implications for irrigation and environmental water managers under alternative states of inflow variability and the role increasing climatic uncertainty has on policy objectives. Results suggest that the incentives provided to recover environment water via on-farm capital investments could have two principal negative feedbacks given future uncertainties. First, farm capital investments may encourage inflexible production systems that fail to respond to future water scarcity, exposing that investment to increased risk. Second, technical efficiency gains may reduce return flows leading to perverse policy outcomes to achieve environmental objectives. By highlighting these ulterior policy outcomes it provides both irrigators and policy makers the capacity to adapt and increase their flexibility to develop robust policy and management solutions to help negate future uncertainty.

Suggested Citation

  • Adamson, David & Loch, Adam, 2013. "Natural capital and climate change: Possible negative sustainability impacts from 'gold plating' irrigation infrastructure," Risk and Sustainable Management Group Working Papers 156480, University of Queensland, School of Economics.
  • Handle: RePEc:ags:uqsers:156480
    DOI: 10.22004/ag.econ.156480
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    References listed on IDEAS

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    1. David Adamson & Thilak Mallawaarachchi & John Quiggin, 2009. "Declining inflows and more frequent droughts in the Murray-Darling Basin: climate change, impacts and adaptation ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(3), pages 345-366, July.
    2. Connor, Jeffery D. & Schwabe, Kurt & King, Darran & Knapp, Keith, 2012. "Irrigated agriculture and climate change: The influence of water supply variability and salinity on adaptation," Ecological Economics, Elsevier, vol. 77(C), pages 149-157.
    3. Puree Sirasoontorn & John Quiggin, 2007. "The Political Economy of Privatization in the Thai Electricity Industry," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 12(3), pages 403-419.
    4. John Quiggin & David Adamson & Sarah Chambers & Peggy Schrobback, 2010. "Climate Change, Uncertainty, and Adaptation: The Case of Irrigated Agriculture in the Murray–Darling Basin in Australia," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 58(4), pages 531-554, December.
    5. Mike Young, 2002. "A preliminary Assessment of the economic and social implications of Environmental Flow Scenarios for the Murray River System," Natural Resource Management Economics 02_009, Policy and Economic Research Unit, CSIRO Land and Water, Adelaide, Australia.
    6. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521622448.
    7. David Adamson & Thilak Mallawaarachchi & John Quiggin, 2007. "Water use and salinity in the Murray-Darling Basin: A state-contingent model ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 263-281, September.
    8. Chiesura, Anna & de Groot, Rudolf, 2003. "Critical natural capital: a socio-cultural perspective," Ecological Economics, Elsevier, vol. 44(2-3), pages 219-231, March.
    9. Adamson, David, 2013. "Buying Paper and Giving Gold: The Murray Darling Basin Plan," Risk and Sustainable Management Group Working Papers 156481, University of Queensland, School of Economics.
    10. Kingwell, Ross S., 2006. "Climate change in Australia: agricultural impacts and adaptation," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 14.
    11. Quentin Grafton & Hoang Long Chu & Michael Stewardson & Tom Kompas, 2010. "Optimal Dynamic Water Allocation: Irrigation Extractions and Environmental Tradeoffs in the Murray River, Australia," Centre for Water Economics, Environment and Policy Papers 1008, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
    12. Just, Richard E. & Pope, Rulon D., 1978. "Stochastic specification of production functions and economic implications," Journal of Econometrics, Elsevier, vol. 7(1), pages 67-86, February.
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    Cited by:

    1. Onil Banerjee, 2015. "Investing in recovering water for the environment in Australia's Murray-Darling Basin," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 31(4), pages 701-717, December.

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