The implications for irrigation in the Murray Darling Basin

Transcription

1 Garnaut Climate Change Review Prepared by John Quiggin, David Adamson, Peggy Schrobback, Sarah Chambers Risk and Sustainable Management Group, School of Economics and School of Political Science and International Studies, University of Queensland June 2008 Contents Acronyms Summary Background to the study Introduction The Murray Darling Basin and climate change Introduction The basin s population The environment Agricultural production and irrigation Water resources Climate change implications for the basin Summary The model Introduction Aim of the model State contingent analysis The treatment of uncertainty Data and assumptions used Limitations in the study Summary Baseline simulation Introduction Results Discussion Economic return versus total returns versus gross output The business-as-usual scenarios Introduction Unmitigated Scenario 1 (U1) Unmitigated Scenario 2 (U2) Unmitigated Scenario 3 (U3) Summary business-as-usual scenarios...35 Garnaut Climate Change Review 1

2 8 The mitigation scenarios Introduction Mitigation Scenario 1 (M1) Mitigation Scenario 2 (M2) Mitigation Scenario 3 (M3) Mitigation Scenario 4 (M4) Comparing mitigation scenarios Summary Concluding comments Bibliography...54 Appendix 1 $/ML for each state before being adjusted for climate change and salinity...56 Appendix 2 GIS DATA sets used to construct maps...59 Disclaimer This publication has been designed as an information source to discuss potential impacts from climate change to the irrigation industry in the Murray Darling Basin and is not designed to provide management recommendations for the irrigation industry growers. This information is provided solely on the basis that the reader will be responsible for making their own assessment of the matter discussed herein and is advised to verify all relevant representations, statements and information. RSMG does not accept any liability to any person for the information provided in this publication or incorporated into it by reference or loss or damages incurred as a result of reliance upon the material contained in this publication. Acknowledgments We would like to thank: Nina Rogers from the Garnaut Climate Change Review Secretariat for her coordination efforts; Dr Roger N Jones from CSIRO Marine and Atmospheric Research for letting us use his inflows model and providing guidance in the inflows estimations; to Matt Clark and Naomi Lewis from Queensland Treasury for their feed back during the study; and Nancy Wallace for her helpful comments and criticisms. The sources of information concerning the GIS databases is outlined in Appendix 2. Garnaut Climate Change Review 2

3 Acronyms $m millions of dollars % percentage ABS Australian Bureau of Statistics ACT Australian Capital Territory ARC Australian Research Council Basin The Murray Darling Basin Cap Is the limit put on water extraction in the Murray Darling Basin CGE Computable General Equilibrium D A drought state of nature EC Electrical conductivity is a measure of salinity concentration in water Economic Value Return from a production system including operator and labour costs GL Giga-litre, is 1,000 ML of water Gross Output Return from a production system considering yield and income only H High water use irrigation technology (e.g. flood irrigation) Irr Irrigation L Low water use irrigation technology (e.g. drip irrigation) MDBC Murray Darling Basin Commission ML Mega-litre = 1 million litres of water N A normal state of nature NSW New South Wales QLD Queensland RSMG Risk and Sustainable Management Group SA South Australia SAMDB South Australian Murray Darling Basin a catchment within the Basin Total Returns Return from a production system not including operator and labour costs VIC Victoria W A wet state of nature Garnaut Climate Change Review 3

4 1 Summary Travelling irrigator near Lake Alexandrina, South Australia April 2008,photo by Peggy Climate change is likely to have significant effects on the economic and environmental sustainability of irrigated agriculture in the Murray Darling Basin. Adaptation to a changing climate will require farmers to change their use of land and water, and will also necessitate changes in the governance of water rights and environmental management. Forecasting the outcomes of climate change is a complex task, especially in view of continuing uncertainty about the way in which the climate will be affected. The aim of this analysis is to provide a consistent framework for analysing the responses of land and water use, and economic returns to agriculture, under a range of climate scenarios. The analysis distinguishes three factors that determine the severity of the impact of climate change. The modelling work here determines the impact climate change may have on rainfall and consequently inflows to the basin. Under business as usual, both median and dry scenarios show significant reductions in inflows to the basin. As shown in Figure I the reductions in inflows projected by 2100 would make irrigated agriculture economically infeasible. Figure I Policy inaction on climate change $'m $5,000 Economic Return Under Climate Change Scenarios (Without Mitigation) $4,000 $3,000 $2,000 $1,000 $ Year U1-Dry U2-Avg U3-Wet The second factor is the extent to which there is effective international action to mitigate climate change, resulting in stabilisation of atmospheric concentrations of greenhouse gases. The analysis here considers the implications of stabilisation at 450 ppm or 550 ppm. As shown in Figure II and Figure III, most damage can be avoided in the median scenarios with stabilisation at 450 ppm. Stabilisation at 550 ppm is sufficient to avoid severe damage in the median scenario, and to delay, but not permanently prevent, damage in the dry scenario. No projections were available for the case of stabilisation at 450 ppm in a dry scenario, but it appears likely that damage would be reduced substantially relative to the business as usual and 550 ppm scenarios. Garnaut Climate Change Review 4

5 Figure II Policy inaction on climate change $'m $5,000 Economic Return Under Climate Change Scenarios (with Mitigation) $4,000 $3,000 $2,000 $1,000 $ Year M1 550-Dry M2 550-Avg M3 550-Wet M4 450-Avg The final factor is the extent to which land and water users adapt to climate change. The model analysis incorporates optimal adaptation to changing conditions by farmers and other water users, given the constraints under which they operate. These constraints reflect existing institutional arrangements. Other work undertaken by the Group indicates that improved institutional arrangements could increase the economic and social value derived from water use, and improve capacity to adapt to climate change. Figure III Benefits from policy action $'m $5,000 Economic Return Under Climate Change Scenarios $4,000 $3,000 $2,000 $1,000 $ Year U1-Dry U2-Avg M2 550-Avg M4 450-Avg Garnaut Climate Change Review 5

6 2 Background to the study This study was funded by the Garnaut Climate Change Review Secretariat to provide an analysis of what may occur to irrigation in the Murray Darling Basin based on a series of scenarios developed and supplied by the Garnaut Climate Change Review Secretariat. The two principal outputs required for this study were datasets to be used by Queensland Treasury on behalf of the Garnaut Review and a report summarising the outputs and other implications from climate change scenarios for the Murray Darling Basin. 3 Introduction Australian agriculture has always been subject to climatic change and variability. Over the course of the 21st century, climate change arising from human action will have increasingly significant effects. The extent of climate change will depend both on the extent to which action to mitigate climate change is effective and on the response of global and regional climatic systems Irrigated agriculture is particularly sensitive to climate change. Relatively modest changes in precipitation and temperature can have substantial effects of inflows of water to river systems and therefore on the availability of water for irrigation. In the Murray-Darling Basin, effects of this kind arising from the recent prolonged drought are already being observed. To assess the impact of climate change, with or without global agreement on mitigation, it is necessary to model the responses of farmers and other users of land and water to changes in the availability of water arising from climate change. Particularly in the case of systems like the Murray- Darling Basin where natural variability is high, modelling must take account of uncertainty. The aim of this report is to project the effects of climate change under a range of scenarios, taking account of resulting changes in patterns of land and water use under uncertainty. We consider a baseline scenario without climate change and two sets of alternative scenarios. The business-asusual scenarios are based on projections in which emissions grow rapidly. The range of variation reflects uncertainty in models of the regional impact of climate change on the Murray-Darling Basin. In the mitigation scenarios, it is assumed that atmospheric concentrations of CO 2 and other greenhouse gases are stabilised at levels of 450 or 550 ppm CO 2 equivalent. Again, a range of projections are examined so that uncertainty about regional impacts is taken into account. This report has been divided into the following sections: firstly the basin, its resources and the climate change scenario are introduced then a description of the model; its limitations; and how climatic uncertainty is dealt with is outlined then the results for the baseline without climate change scenario are presented this is followed by the results for the business-as-usual (i.e. no mitigation policy) case scenarios then the results from embracing policy mitigation scenarios are then discussed then final comments are presented. The generated model data provided to Queensland Treasury, operating on behalf of the Garnaut Review Secretariat, only considered gross income and production values so that the results were compatible with their needs. The results presented here consider the full economic costs of irrigated production as then full costs of adjustment for individuals and to provide comparison with other published material by the group. Garnaut Climate Change Review 6

7 4 The Murray Darling Basin and climate change 4.1 Introduction The basin, as illustrated in Figure1, dominates most of inland south-eastern Australia, east of the Great-Dividing-Range. The basin covers over one million km 2 and has three major rivers tributaries: the Darling River in the north carrying water from Queensland (hereafter QLD) and northern New South Wales (hereafter NSW); the Murrumbidgee in NSW and the Australian Capital Territory (hereafter ACT); and the Murray which is feed from inflow in southern NSW and Victoria (hereafter VIC). These three major river systems eventually drain through South Australia and, if climatic conditions are favourable, out to the sea. Figure 1 The basin The basin is a complex system and the water resources have to meet the competing demands of supplying potable water for drinking, industrial use, both dryland and irrigated agriculture and the environment for not only within but systems outside the basin as well. All of these uses are in competition with one another both in regards to quantity and quality of water. Its way in which water is utilised upstream, that impacts on the quality and quantity for those downstream. Water is a heavily regulated property right within the basin and complex management systems determine the supply and regulation of volume and quality for the competing often mutually exclusive needs. The basin is regulated by the Murray Darling Basin Commission (hereafter MDBC) whose goal is Garnaut Climate Change Review 7

8 to promote and co-ordinate effective planning and management for the equitable, efficient and sustainable use of the water, land and other environmental resources of the Murray-Darling Basin (MDBC 2006) 4.2 The basin s population In 2001 approximately 2.5 million people live in the basin (ABS, 2001) and all are in some way dependent on water flowing in the basin either as a source of potable drinking water, for the industry they work in (primary or secondary), for recreation activities and community networks. While a further 1.1 million people in Adelaide rely on the basin to provide their drinking water (ABS, 2001). Figure 2 The basin s population Population Distribution < > 50001!. Adelaide population > 1 Mio! Rural centres Salinity influences the quality household, industrial and commercial uses within the basin, however, this report will treat the impact to society by determining by the quality of water received at Adelaide and this is based on the <800 EC rule. The MDBC is required to ensure that water reaching Morgan, where Adelaide s urban water is sourced, is <800 EC, 95% of the time (MDBC 206). This analysis will only report the change to EC and not prescribe management responses to increasing salinity for an investigation into this issue see Schrobback et al. (2008). Garnaut Climate Change Review 8

9 4.3 The environment Before irrigation development the natural flows to the seas where approximately 12,890 GL with 10,960 GL being used by wetlands per annum MDBC (2003). Since the irrigation development (11,580 GL) the trade-off has been declining flow to the seas (5,070 GL) and wetlands (6,970 GL), despite 1,200 GL being transferred into the basin (see Table 2). The size of this trade-off has been the fundamental question asked in numerous studies investigating environmental quality in the basin. In 2002 this culminated in the MDBC established the living Murray Initiative 1 which aims to restore 500GL back to the environment. The 500 GL is aims to water the six icon sites (identified in Figure 3) and can be considered the first formal acknowledgement that the basin s society has accepted that the environmental has a value. Figure 3 The icon sites The basin is home to a total of ten Ramsar listed 2 wetlands covering approximately 406,500 Ha and a further 25 wetlands with an area greater than 5,000 Ha (approximately 1.6 million Ha) (ANCA, 1996). These wetlands provide important ecosystems and habitat services: including: bird breeding sites; filtration services; water supplies for native animals; fish spawning areas; and recreation zones for society. This study will provide anecdotal evidence on what may happen to environmental quality under alternative climate change scenarios and the model described environmental quality by two indicators: salinity (EC) flow to the sea. The lower the salinity the greater the environmental benefits (i.e. reduce the toxicology impacts of salt on the environment) and the greater the flow to the sea the better off the environment is (increased 1 For details of the initiative visit: 2 For details of RAMSAR wetlands visit: Garnaut Climate Change Review 9

10 flushing out of sediment, water reaches the Coorong). It is important to note that agricultural production benefits from lower salinity as commodity choice increase and it negates yield loss. 4.4 Agricultural production and irrigation The basin produces over 40% of Australia s total gross value of agricultural production. It also utilises over three quarters of the total irrigated land in Australia, which consumes 70% of Australia s total irrigation water (ABS, 2007). In 2001, only 70% of the total irrigated area was in the basin in 2001 (see Table 1) and note that the total area reported and total area do not align due to double cropping (e.g. the same Ha being used to plant both a summer and winter crop). Table 1 Irrigation area in Australia 2001 ( 000 Ha) Commodity (Ha) Australia Basin % Cereals Other cereals Cotton Fruit (including nuts) Grape vines Rice Sugar cane Vegetables Other crops Pastures (native or sown) 1, Total Area reported 2, , Total Area 2, , Data Adapted from ABS 2004 Estimations for the value of production systems used in the model came from a variety of published gross margin budgets. Agricultural commodities like fauna and flora are sensitive to alternative concentration of salt within water supplies. In 1995 the Cap was introduced to provide a maximum limit on water extractions from the basin. The Cap was set at 1993/94 extractions levels however, is moderated depending upon seasonal climatic conditions as illustrated in Figure 4 where the actual extractions over time are displayed data is considered the last normal year in the basin. Garnaut Climate Change Review 10

11 Figure 4 Water extractions from the basin by state GL 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Extractions from the Murray Darling Basin NSW Vic SA QLD ACT TOTAL Data based on the annual MDBC Review of Cap Implementation series For a variety of reasons the volume under the CAP quoted in Table 2 is higher than many estimates because: the CAP for QLD is not defined there are still unregulated sections along the basin ground water extraction limits have only just been not defined actual extractions are probably an underestimate due to the inaccuracy of monitoring equipment (Marsden Jacob Associates, 2005). Irrigation demand has altered the natural flow patterns especially in the southern basin from a winter to summer dominated flow to meet irrigated crop requirements. Irrigators have the ability to use, store until next year or sell their water allocation in a given year and this ability is due to the management of the basins water resources. 4.5 Water resources The basin is one of the world s most variable inflow systems in the world, but natural variability has been modified by storage that enables high security irrigations supplies to be meet 99 years out of 100, assuming a continuation of historically observed flows. The four principal storages (Dartmouth Reservoir, Hume Reservoir, Lake Victoria and Menindee Lakes) have a total capacity of 9,352 GL. Conjunctive management will be the key to the basin s long terms sustainability. Table 2 outlines the water resources in the basin. Supplementary flows into the basin, primarily from the Snowy River have increased the amount of water available for irrigation. Garnaut Climate Change Review 11

12 Table 2 Water resources in the basin Water in the basin by catchment (GL) Catchment Inflow Ground Water Transfers CAP Condamine Border Rivers, QLD Warrego-Paroo Namoi Central West 1, Maranoa-Balonne 1, Border Rivers-Gwydir 1, Western Lachlan 1, Murrumbidgee 4, ,535 North East 4, ,920 Goulburn-Broken 3, ,838 Wimmera North Central Murray 2, ,729 Mallee Lower Murray Darling SA MDB Total Water 24,050 1,241 1,197 13,217 Water Resource Data Adapted from MDBC 2003, Cap various sources and assumptions NB CAP also includes urban supplies for household, commercial and industrial purposes Interconnectivity with the basin either via capital works (pipes) or natural system (ground water recharge) also supply irrigation districts outside the basin. In SA the Barossa region is also dependent upon water from the basin (Government of South Australia, 2006). The basin provides 206 GL of water to Adelaide for drinking and from the information above some of this could be diverted for irrigation purposes. While as Figure 5 illustrates the ground water interconnectivity between the basin and other regions. It is this interconnectivity and conjunctive manor that the model deals with water resources. The basin is already strained by the pressure to deliver quality water to competing needs. Australian irrigation systems are particularly prone to salinisation as many soils and groundwater bodies in the basin are naturally highly saline and flows of water are highly variable. Decreasing water quality has negative impacts on a local and national level by: reducing crop yields; limiting the feasible range of production systems; constrains the supply of potable water for urban use; and reducing native biodiversity. Garnaut Climate Change Review 12

13 Figure 5 Ground water SA MDB The relationship between salinity and water use is complicated by management responses for example: periodic flushing events to neutralise salt pulses mitigation works the irrigation technology, the corresponding reflow and soil types the salinity of the ground water as over 32,000 EC along the Darling has been recorded by Oliver et al. (1999) deliberately over watering crops to disperse the build up of salt in root zones. All of these factors will be influenced by the adaptation to and mitigation from increased climate variability under climate change scenarios. 4.6 Climate change implications for the basin The Garnaut Climate Change Review Secretariat set seven case studies to evaluate the implications from climate change and mitigation. The data for these case studies were developed by Roger Jones at CSIRO and which forecast annual changes to rainfall, temperature, humidity and evaporation on an annual basis on a spatial scale from 2010 to 2100.With the exception of scenario U1, the changes in inflows observed as a result of climate change are well within the range of natural variation observed in the historical record and simulated in the model. For the seven scenarios, 3 scenarios were business as usual scenarios where society ignores the risks from climate change and take no action and there are four mitigation scenarios where society accepts the risk from climate change and takes policy action to remedy the risk. The scenarios are as follows: Garnaut Climate Change Review 13

14 Business-as-usual scenarios Unmitigated Scenario 1 (U1) Hot, dry business-as-usual scenario, usinga1f1 emissions path, 10th percentile rainfall and relative humidity surface for Australia (dry extreme), 90th percentile temperature surface. Mean global warming reaches ~4.5 C in Unmitigated Scenario 2 (U2) Best estimate (median) business-as-usual scenario, usinga1f1 emissions path, 50th percentile rainfall and relative humidity surface for Australia, 50th percentile temperature surface. Mean global warming reaches ~4.5 C in Unmitigated Scenario 3 (U3) Warm, wet business-as-usual scenario using A1F1 emissions path, 90th percentile rainfall and relative humidity surface for Australia (wet extreme), 50th percentile temperature surface. Mean global warming reaches 4.5 C in Strong mitigation scenarios Mitigation Scenario 1 (M1) Dry mitigation scenario where stabilisation of 550 ppm CO 2 equivalent (CO 2 stabilised at 500 ppm) is reached by 2100, 10th percentile rainfall and relative humidity surface for Australia (dry extreme), 90th percentile temperature surface. Mean global warming reaches ~2.0 C in Mitigation Scenario 2 (M2) Best Estimate (median) mitigation scenario where stabilisation of 550 ppm CO 2 equivalent (CO 2 stabilised at 500 ppm) is reached by 2100, 50th percentile rainfall and relative humidity surface for Australia, 50th percentile temperature surface. Mean global warming reaches ~2.0 C in Mitigation Scenario 3 (M3) Wet mitigation scenario where stabilisation of 550 ppm CO 2 equivalent (CO 2 stabilised at 500 ppm) is reached by 2100, 90th percentile rainfall and relative humidity surface for Australia, 50th percentile temperature surface. Mean global warming reaches ~2.0 C in Mitigation Scenario 4 (M4) Best Estimate (median) strong mitigation scenario where stabilisation of 450 ppm CO 2 equivalent (CO 2 stabilised at 420 ppm) is reached by 2100, 50th percentile rainfall and relative humidity surface for Australia, 50th percentile temperature surface. Mean global warming reaches ~1.5 C in Climate projections were provided for each statistical district in the basin, along with inflow equations estimated for each catchment. To allow these to be used for model input, projections and equations were aggregated, by averaging, to the Catchment Management Area scale used in the model. A crucial feature of the analysis is that inflows to river systems vary much more than precipitation, and particularly rainfall. This is because inflows are a residual variable, consisting of water flows that are not lost to evapotranspiration, or absorbed by the soil. This evaluation models the impact of climate change by estimating the change to inflow both in terms of volume and frequency. Jones et al. (2001) use a simple model relating proportional changes in mean annual inflows to proportional changes in mean annual precipitation and potential evapotranspiration. When applied to the Macquarie catchment in the Murray Darling Basin, this model yielded an elasticity of inflows with respect to precipitation in excess of 3.5, indicating that a 10 per cent reduction in precipitation will generate a reduction in inflows of at least 35 per cent. Similarly a 10 per cent increase in evaporation will reduce inflows by around 8 per cent. Thus, quite modest changes in precipitation and evaporation could reduce inflows substantially. Similar results are derived for Victoria by Jones and Durack (2005). Jones et al. (2007) apply the methods of Jones et al. (2001) and Jones and Durack (2005) to derive inflow projections for the Murray Darling Basin from regional projections of precipitation and temperature derived from various climate models (include models developed in Australia and overseas) and scenarios. Garnaut Climate Change Review 14

15 The implications of higher temperatures for yields and for the water requirements of crops are not taken into account. Some analysis taking these variables into account has been undertaken by Trang (2006), but only for a limited range of crops and regions. 4.7 Summary The climate change threat to the basin comes from declining inflow entering the system. Without adequate water flow in the basin: irrigation activity is constrained the ability to provide water for households and commercial use becomes threatened for the 2.5 million and 1.1 people living inside and outside of the basin respectively environmental resources will be further degraded. This report will concentrate its analysis on determining the implications from changing inflow within the basin primarily to the impact to agricultural irrigation within the basin. However, it must be remembered that the outcomes from changing inflow are wide ranging and complex. Therefore anecdotal evidence plus key indicators on salinity and environmental flows will be presented to further the discussion for policy makers to consider. Garnaut Climate Change Review 15

16 5 The model 5.1 Introduction The model simulates the allocation of land and water in the Murray Darling Basin, under uncertain and changeable climatic conditions. A detailed description is given in Adamson, Mallawaarachchi and Quiggin (2007), and documentation is described in RSMG (2006). 5.2 Aim of the model The model represents the basin as a directed network of flows, divided into 18 regions corresponding broadly to Catchment Management Authority areas as illustrated in Figure 2. Urban water supply to Adelaide, inflows from the Snowy Hydro system and environmental flows through the river system are also modelled. Figure 6 Catchment management regions in the basin Within each region, land and water are allocated among 13 production activities that use alternative levels of inputs and delivery differing outputs (yield) that respond to the availability of land, labour, capital, water volume and water quality (salinity) by three states of nature (normal, drought and wet). The model allocates land farming systems rather than commodities. For example Rice is estimated at 1/3 rice and 2/3 wheat as producers can only plant 1/3 of their total area to rice. Also for rice in the normal and wet states some areas then produce a vegetable crop to utilise the soil moisture. The Garnaut Climate Change Review 16

17 cotton fixed production system assumes planting an irrigated crop every year but the flexible cotton production system assumes that in the drought state that a drought and crop is planted. In the simulations undertaken here, land and water are allocated between commodities: citrus, grapes, stone fruit, vegetables, cotton, rice, wheat, dairy and a mixed wheat-sheep activity. Area not used for irrigated agriculture is allocated to dryland production. 3 The level of commodity disaggregation is considered sufficient to capture all irrigated agriculture in the basin. Allocations are modelled as the decisions of a representative farmer, seeking to maximise expected returns subject to physical and policy constraints. The most important policy constraint is the Cap imposed in 1994 to limit average extractions from each catchment. The model is solved by linear programming within each catchment. Water and land use in upstream catchments, along with variations in inflows, determines flows and salinity levels in downstream catchments, as well as affecting environmental flows and the availability and quality of water for Adelaide. 5.3 State contingent analysis A crucial feature of the model is the treatment of uncertainty. Even under stable long term climatic conditions, the probability distribution of inflows to the Murray Darling Basin displays high levels of risk compared to other major river systems. Farmers and other water users do not respond passively to risk, but choose production strategies to manage risk. To represent this appropriately, it is necessary to analyse production under uncertainty in state-contingent terms. A general theory of state-contingent production is developed by Chambers and Quiggin (2000) and applied to the modelling of the Murray Darling Basin by Adamson, Mallawaarachchi and Quiggin (2007). In the model employed here are S possible states of nature corresponding to different levels of rainfall/snowmelt and other climatic conditions. In the present simulations, S=3. That is, there are three states of nature: Drought (low rainfall and inflows), Normal (normal rainfall and inflows) and High (high rainfall and inflows). Thus the model explicitly deals with seasonal climate variability, which is a key for understanding the importance of climate uncertainty. In the baseline version of the model, the Normal state of nature occurs with probability 0.5 and is characterised by aggregate inflows of 24,050 GL. In the Drought state of nature, which occurs with probability 0.2, inflows are reduced by 40 per cent in all catchments relative to the Normal state. In the Wet state of nature, which occurs with probability 0.3, inflows are increased by 20 per cent in all catchments relative to the Normal state. With these parametric values, the distribution of inflows has a mean of 23,600 GL and a standard deviation of 5,300 GL. The mean value is comparable to that observed historically (Murray Darling Basin Commission, personal communication, July 2007). The standard deviation is lower than the historically observed standard deviation for natural inflows. This is because management of the system using dams and controlled releases of water means that the annual variability of inflows of water available for irrigation is less than the variability of natural inflows. The key to a state contingent approach is that it acknowledges that producers adapt to changing conditions and react accordingly. Therefore production in each state can be fundamentally different as each state can use alternative inputs to derive its output. 3 In the computable general equilibrium modelling work undertaken by Queensland Treasury the outputs of the RSMG model are aggregated into seven groups: beef/sheep, dairy, other livestock, broadacre (cotton, rice and grains), other agriculture (grapes, stone fruit and vegetables). Garnaut Climate Change Review 17

18 5.4 The treatment of uncertainty The climate model projections provide estimates of changes in mean temperature and precipitation. Using the approach described above, these estimates can be converted into estimates of changes in mean inflows. However, changes in the variability of inflows are at least as important as changes in mean inflows. Adamson Mallawaarachchi and Quiggin (2008) show that, under plausible conditions, increases in the frequency of drought conditions will have substantially larger adverse effects than proportional reductions in mean inflows in all states of nature. The first of these changes raises the variance of inflows, while the second reduces variance. In this study, the case of most interest is the hot dry scenario U1 where inflows decline by as much as 84 per cent after This scenario as modelled as generating both an increase in the frequency of droughts and a reduction in inflows in all states of nature. In these analyses the model has altered the probability of droughts, changing flow levels and inflow movement away from the current baseline to mimic what may occur under alternative climate change scenarios. 5.5 Data and assumptions used RSMG (2006) outlines the original datasets used in the model. Where possible the model has utilised widely published data. The main data sets and assumptions used in this analysis are: Main data sets used The model is calibrated to the 2001 agricultural production statistics from the Australian Bureau of Statistics (2004) as this is considered the last normal year of production. Salt data was provided by Andy Close and Cris Diaconu from the MDBC. Salt mitigation data is based on 2005/06 extractions. Water resources are based on Table 2. Costs of production are based on published gross margin budget data available from each of the states. Commodity tolerances from salinity thresholds and corresponding yield penalties come from published domestic and international studies. Major assumptions Climate change influences all water resources equally. The CAP will not be increased. Horticultural area can increase by 50% to take into account water moving towards commodity with higher returns. Water within the catchments can be traded. To take account of basin interconnectivity the SAMDB area includes a % of SA production outside that basin. ACT has been considered as part of the Murrumbidgee catchment. The model allows for irrigators to store water based on seasonal conditions by only constraining the average water use to the CAP. Garnaut Climate Change Review 18

19 5.6 Limitations in the study The model used in this study is imperfect and there are several limitations in the study that could have significant impact to the long-run picture. Biophysical and management responses: changes to yields from climate change are not considered (see Tran 2006) changes to dam release rules are not considered the study does not consider salinity mitigation strategies in response to climatic uncertainty; (see Adamson, Schrobback & Quiggin 2008) impacts from changing spatial nature of pests, pathogens, diseases, etc due to climatic conditions are not examined new and novel commodities and production systems are not examined forecasting future state probabilities. Market responses and shocks such as: changes to long terms prices and costs rural labour supply it based on gross margin budget data thus providing an average return on investment at a catchment scale and not actual returns for individuals ability to raise capital. Are not included in the simulation modelling undertaken here, but are taken into account in the CGE modelling to which the results presented here are an input. Despite these limitations the greatest importance from the results will be the implication from the results. The greater the movement away from the current climatic conditions the greater the impact from climate change. It is the magnitude of change that is of importance and not what the model predicts may or may not happen to an individual production system within the basin. 5.7 Summary The model despite its flaws is the only one in Australia that models the entire basin. The models use of state contingent analysis allows a better representation of the fact that producers do adapt to changing inter-temporal climatic conditions and alter their management and production systems accordingly. It must be remembered that the model aims to test policy responses by attempting to optimise production within the basin and therefore it does not represent the basin in fine detail. The aim of this analysis is to illustrate how resources could be utilised within the basin and then compares this to the new baseline inflow data to mimic what may happen to irrigated production, water quality and environmental flows. In short the major item to take out of this analysis is the further away from the baseline the numbers are the greater the impact to the basin. Garnaut Climate Change Review 19

20 6 Baseline simulation 6.1 Introduction The aim of this section is to describe the results of the baseline simulation for the model, in the absence of climate change. The model simulates changes in equilibrium allocations of land and water in response to changing availability and prices for water. 6.2 Results Table 3 outlines the results for the base case where current conditions continue. Here it has been assumed that: a normal state occurs 50% of the time and inflow is 100%; the drought state occurs 20% of the time and has only 60% of the normal inflow; and the wet state occurs 30% of the time and in those years water flow is 120% of the normal state. Under these assumptions, 1,774,800 Ha of irrigation in the basin is expected to use 10,534.7 ML, to return $4,507.9 million in production, allow 6,307.3 ML to the sea and provide water to Adelaide at EC units on average. Table 3 Result for base case INPUTS OUTPUTS Probability of State Inflow Rate Average Year N D W N D W $m EC Irr Use (ML) Flow to sea (ML) $4, ,535 6,307 Table 2 outlines the optimised results from the model Note this is not actual current production but rather illustrates that as resources are transferred to their most efficient use greater economic return can be achieved. The model in effect is predicting what the production will look like in the future if there was no climate change. 6.3 Discussion Table 4 and 5 provide the detailed results for the baseline simulation. Here the data is divided into what is expected to occur in a normal, drought, wet state of nature and the average return. The results are for water use, salinity and economic return by state in Table 4 and Table 5 provides the breakdown in farming systems by region. In the commodities listed in Table 5, H stands for high water use technology (e.g. flood irrigation) and L stands for low technology use (e.g. drip irrigation).for the results it is important to remember that Rice refers to a rice production system where there is 1/3 rice and 2/3 wheat so there is an estimate 192,700 Ha of rice planted per annum which is only an increase of about 14,600 Ha on 2001 production in Table 1. One area of concern will be the massive changes in production for grapes the model predicts. This is partly due to the model being allowed to increase horticultural area by 50% and as the model optimises it moves all resources to the highest return and for horticultural production this is grapes. The prediction about future grape plantings may not be unrealistic as Fletcher et al. (2007) estimated that the grape area planted in Australia was 152,000 Ha in and would increase to 162,000 Ha by In 2001 (see Table 1) area planted to grapes was 133, 000 Ha so it is estimated that it took only 8 years for 30,000 Ha of grapes have been planted in Australia during one of the worst droughts. ABS estimated that by grapes area in the basin increased to 102,325 Ha (ABS 2008.a) and total irrigation in the basin was approximately 7,370 GL (ABS 2008.b).Interestingly enough in Figure 3 total allocations in the basin in according to the MDBC were over 9,000 GL and this highlights the fundamental problem for the basin, conflicting datasets. In this case allocation does not include conveyance losses. Garnaut Climate Change Review 20

21 Garnaut Climate Change Review 21 Table 4 Detailed analysis of the base case Catchment Water Use (GL) Salinity (EC) Return ($/m) Normal Drought Wet Average Normal Drought Wet Average Normal Drought Wet Average Condamine $242.1 $40.8 $260.1 $207.2 Border Rivers, Qld $181.8 $62.1 $210.8 $166.5 Warrego-Paroo $1.4 $1.4 $1.4 $1.4 Namoi $96.1 -$1.5 $92.0 $75.4 Central West $181.5 $40.7 $233.9 $169.1 Maranoa Balonne $19.7 $16.3 $20.8 $19.4 Border Rivers Gwydir 1, , $ $0.8 $182.1 $142.1 Western , ,069.6 $26.9 -$1.4 $24.4 $20.5 Lachlan $197.2 $106.7 $254.7 $196.4 Murrumbidgee 2, , , , $704.4 $123.7 $981.4 $671.4 North East $97.4 $49.7 $141.1 $100.9 Goulburn-Broken 1, , , , $386.7 $10.1 $654.8 $391.8 Wimmera $29.4 $14.5 $49.2 $32.3 North Central $83.9 $29.1 $125.6 $85.5 Murray 1, , , , $ $23.2 $399.6 $270.7 Mallee $405.0 $210.3 $810.2 $487.6 Lower Murray Darling $169.4 $126.4 $247.0 $184.1 SA MDB $1,239.7 $751.0 $1,718.7 $1,285.7 Adelaide TOTAL 11, , , ,534.7 $4,548.8 $1,555.9 $6,407.8 $4,507.9 FLOWS to SEA 6, , , ,

22 Garnaut Climate Change Review 22 Table 5 Catchment Irrigated area after optimisation under current climatic conditions Citrus -H Citrus -L Grapes Stone -H Stone -L Veg Cotton Flex Cotton Fixed Rice Wheat Dairy- H Dairy- L Sheep/ Wheat Total Irrigation Condamine $207.2 Border Rivers, QLD $166.5 Warrego-Paroo $1.4 Namoi $75.4 Central West $169.1 Maranoa-Balonne $19.4 Border Rivers-Gwydir $142.1 Western $20.5 Lachlan $196.4 Murrumbidgee $671.4 North East $100.9 Goulburn-Broken $391.8 Wimmera $32.3 North Central $85.5 Murray $270.7 Mallee $487.6 Lower Murray Darling $184.1 SA MDB $1,285.7 TOTAL ,774.8 $4,507.9 Return

23 The pattern of land and water use modelled here is broadly comparable to that observed by ABS (2004) for 2001, a year of close to average flows. ABS estimated a total irrigated area of some 2.3 million hectares. Water used in agricultural production was estimated at 10,800 ML. The estimated flow to the sea was 6,300 ML. The average salinity of water supplied to Adelaide was 451 EC. 6.4 Economic return versus total returns versus gross output The model solution is based on the maximisation of average economic value, that is, returns to agriculture net of input costs and payments to labour and capital. The first three data columns in Table 6 show economic value in the three states of nature (Normal, Drought and Wet). The fourth column shows average economic value. The fifth column shows total returns including payments to labour and capital. The final column shows the gross value of agricultural output, including input costs. Table 6 Base case results and difference between values ($m) Economic Value Catchment Normal Drought Wet Average Total Return Gross Output Condamine $242.1 $40.8 $260.1 $207.2 $286.4 $448.0 Border Rivers, QLD $181.8 $62.1 $210.8 $166.5 $253.2 $367.2 Warrego-Paroo $1.4 $1.4 $1.4 $1.4 $2.0 $3.1 Namoi $96.1 -$1.5 $92.0 $75.4 $136.8 $313.2 Central West $181.5 $40.7 $233.9 $169.1 $280.1 $594.0 Maranoa-Balonne $19.7 $16.3 $20.8 $19.4 $25.7 $39.4 Border Rivers-Gwydir $ $0.8 $182.1 $142.1 $258.7 $628.5 Western $26.9 -$1.4 $24.4 $20.5 $39.2 $95.9 Lachlan $197.2 $106.7 $254.7 $196.4 $331.5 $581.9 Murrumbidgee $704.4 $123.7 $981.4 $671.4 $1,203.2 $2,067.2 North East $97.4 $49.7 $141.1 $100.9 $158.5 $226.5 Goulburn-Broken $386.7 $10.1 $654.8 $391.8 $978.4 $1,427.5 Wimmera $29.4 $14.5 $49.2 $32.3 $81.2 $116.2 North Central $83.9 $29.1 $125.6 $85.5 $164.2 $234.6 Murray $ $23.2 $399.6 $270.7 $537.6 $928.5 Mallee $405.0 $210.3 $810.2 $487.6 $887.5 $2,136.2 Lower Murray Darling $169.4 $126.4 $247.0 $184.1 $305.0 $414.0 SA MDB $1,239.7 $751.0 $1,718.7 $1,285.7 $1,731.9 $2,457.8 Total $4,548.8 $1,555.9 $6,407.8 $4,507.9 $7,661.1 $13,079.9 Garnaut Climate Change Review 23

24 7 The business-as-usual scenarios 7.1 Introduction The business-as-usual scenarios simulate changes in inflows to the in the absence of policy actions to mitigate climate change. Because of uncertainty regarding the impact of climate change on the basin, three scenarios are considered: U1 the hot dry case; U2 the median case; and U3 the warm wet case. All scenarios are derived from climate models downscaled to the catchment level. The modelling undertaken here simulates the changes in the allocation of land and water resources as farmers respond to changes in the availability of water. 7.2 Unmitigated Scenario 1 (U1) Introduction In scenario U1 climate change leads to a hotter and dryer climate based on the A1F1 emissions path, 10th percentile rainfall and relative humidity surface for Australia (dry extreme), 90th percentile temperature surface. Mean global warming reaches ~4.5 C in Data used Table 7 presents projected mean inflows as a proportion of the current mean inflows. By 2050 flows have fallen to low levels in most catchments. By 2080 the minimum constraint imposed on simulations, that mean inflows should not fall below 16 per cent of the initial level, is binding in all catchments. Table 7 U1 (average) inflow forecast Catchment Condamine 88% 72% 49% 19% 16% 16% 16% 16% 16% Border Rivers, QLD 88% 73% 50% 19% 16% 16% 16% 16% 16% Warrego-Paroo 84% 66% 40% 19% 16% 16% 16% 16% 16% Namoi 93% 79% 60% 32% 16% 16% 16% 16% 16% Central West 91% 77% 57% 28% 16% 16% 16% 16% 16% Maranoa-Balonne 84% 66% 40% 19% 16% 16% 16% 16% 16% Border Rivers-Gwydir 93% 80% 61% 34% 16% 16% 16% 16% 16% Western 87% 71% 48% 19% 16% 16% 16% 16% 16% Lachlan 93% 80% 60% 33% 16% 16% 16% 16% 16% Murrumbidgee 96% 84% 67% 42% 17% 16% 16% 16% 16% North East 101% 92% 78% 59% 39% 22% 16% 16% 16% Goulburn-Broken 96% 85% 68% 44% 19% 16% 16% 16% 16% Wimmera 94% 81% 63% 37% 16% 16% 16% 16% 16% North Central 96% 84% 67% 43% 17% 16% 16% 16% 16% Murray 93% 80% 60% 33% 16% 16% 16% 16% 16% Mallee 92% 79% 59% 32% 16% 16% 16% 16% 16% Lower Murray Darling 89% 73% 51% 19% 16% 16% 16% 16% 16% SA MDB 90% 76% 55% 25% 16% 16% 16% 16% 16% Snowy River 82% 73% 60% 42% 22% 10% 10% 10% 10% Garnaut Climate Change Review 24

25 By 2050 projected inflows, ground water and transfers from the Snowy have fallen to 9, and 503 GL respectively. This means that over 16,127 GL less is entering the basin in a normal year in comparison to the current inflows listed in Table 2. Scenario and summarised results Climate change involves not only the decreasing volume of inflows but the increased variability in rainfall that is expected to occur. This has been represented in the model by altering the flow and the probability of states. The Normal flow is always 1 but it is a based on the new inflows estimates and it is expected that Wet years no longer occur from Table 8 U1 (dry) scenario data and results INPUTS OUTPUTS Probability of State Inflow Rate Average Year N D W N D W $m EC Irr Use (ML) Flow to sea (ML) NOW $4, , , $3, , , $2, , , , $2, , , , $1,594.5 >10,000 5, $1,303.7 >10,000 2, $765.8 >10,000 1, $239.2 >10, $198.0 >10,000 1, $151.6 >10, Discussion Table 9 illustrates the change in agricultural production systems and the implications for agricultural production are significant by 2050 and by 2100 only opportunistic irrigation for cotton has been modelled to occur in the basin. The production system is one in which irrigation is used to produce cotton in years of normal flow, while land is allocated to dryland wheat production in low flow (drought) years. It is important to remember that we are discussing agricultural production systems here and that for rice it is a 1/3 rice and 2/3 wheat base. The values for the current area of grapes is far higher than the 133,000 Ha of irrigated area for Australia in Table 1 however Fletcher et al. (2007) estimates that by grape area will be approximately 162,000 Ha. In the simulations reported here, the only irrigated activity that persists on a significant scale is cotton production in upstream catchments. This reflects the model assumption that, subject to policy constraints, upstream water users can use their entitlements to maximise their returns, without regard for downstream impacts. In the solutions reported here, there is no change in current policy regarding allowable extractions, and no trade in water rights between catchments. Under these assumptions, cotton production, which is the highest value use of water in upstream catchments, uses most available water. Garnaut Climate Change Review 25

26 Table 9 U1 optimised agricultural production system ( 000 Ha) Current Citrus Grapes Stone Fruit Veg Cotton Rice Wheat Dairy TOTAL 1, , Alternative policy settings might yield a reduction in cotton production and the use of remaining flows in downstream catchments. The most profitable use of water, in the absence of changes in market prices, is likely to be wine grape production. However, if hot dry conditions affected agricultural production throughout south-eastern Australia, it is likely that the price of fruit and vegetables for urban consumption would rise, and that the associated horticultural industries would attract additional resources. Figure 7 illustrates the impacts on each catchment in the basin. By 2030 economic production falls by $2 billion, by 2050 a further $1.2 billion has been lost and by 2100 over $4.4 billion has been lost due to climate change. The continuing decline in water available for irrigation and the environment places greater pressure on the salinity levels arriving at Adelaide. By 2050 this leads to principally on the headwater catchments still being able to irrigate and then by 2100 only opportunistic irrigation cropping is expected to occur. Summary The biggest possible problem in this analysis is the assumptions that the normal and drought seasons occur with equal probability. For individuals attempting to stay in farming may actually experience a sequence of drought years that drains all of their reserves and they are forced to leave the land. If drought periods are too long their will be hidden industry restructuring costs that are not included in this analysis As noted, while it is impossible to make definite predictions, the limits on water availability in the U1 projection ensure that water use will be restricted to a small area, devoted to the production of highvalue commodities. With water scarcity as the major constraint on agriculture, we can anticipate more radical changes in activity than those considered in the current model. In place of current patterns of irrigation we may observe: increased reliance of horticultural producers in areas around the nation s major cities which would rely on grey water and storm water harvesting techniques. In order for that to become viable urban spread would have to no longer occur, forcing land prices up and also requiring greater concentration of urbanisation. Failing that an increased reliance on imports would have to occur for fruit and vegetables. This may potentially require a relaxation of quarantine protocols which could have irrevocable consequences for the native flora and fauna; increased use of fallow land to increase soil moisture before planting. Careful management of fallow land would have to occur; and Garnaut Climate Change Review 26

27 significant changes in future commodities planted depending upon prices paid and plant breeding developments. Figure 7 Potential economic returns for the U1 scenario Economic Value ($m) These effects are not easily interpreted in monetary terms. The model estimates the economic value of urban water use in Adelaide and includes a social value for environmental flows. However, only changes in the value of agricultural output have been used as inputs to CGE modelling. This is appropriate as most other costs affect non-market values, but have little direct effect on market outcomes. Results for the period after 2050 must be treated with caution. Inflows in the dry state are projected to be so low that large sections of the river will fail to flow. In these circumstances, if irrigated agriculture is not abandoned altogether, significant changes in production plans will be required, and the activities undertaken will differ radically from those used in the simulation analysis here. Although detailed prediction of responses is difficult, it seems clear that activities relying on a reliable supply of water will be replaced by more opportunistic plans in which water is used when it is available, while activity can be diverted to dryland agriculture in seasons when water is unavailable. Garnaut Climate Change Review 27

28 Projections of salinity and water quality raise similar difficulties, reflected in the drastic increase in projected estimates of salinity. The absence of flow will leave significant amounts of salt trapped in the soil profiles that will mobilise after rain. Once this water becomes mobilised there is also likely to be further water quality issues to consider such as blue-green algae detrimentally influencing potable water supplies. The projected values should be regarded as indicative of severely declining water quality, but not as reliable estimates of future salinity levels. 7.3 Unmitigated Scenario 2 (U2) Introduction In scenario U2 policy inaction leads to a hotter and median dryer climate based on the A1F1 emissions path, 50th percentile temperature surface. Mean global warming reaches ~4.5 C in This is regarded as the most likely scenario if policy makers fail to act and in other words the U1 and U3 results can be perceived as the bounds on this analysis. Data used Table 10 outlines the implications for inflow in the basin and there is significant difference to the U1 scenario as the rate of inflow decrease occurs at a far slower process. The data presented here suggests that NSW catchments, the Snowy and North East catchment in Victoria are less affected by climate change by around about 20% of their normal inflow compared to the rest of the basin. The implications for South Australian inflow are particularly severe. By 2050 inflow, ground water and transfers from the Snowy have fallen to 22,992,1185 and 1208 GL respectively.1,103 GL less is entering the basin in a normal year in comparison to the current inflow listed in Table 2. Table 10 U2 (average) inflow forecast Catchment Condamine 92% 93% 92% 91% 84% 77% 70% 64% 49% Border Rivers, QLD 92% 93% 93% 91% 84% 77% 71% 65% 50% Warrego-Paroo 91% 93% 92% 90% 83% 75% 68% 61% 47% Namoi 93% 96% 97% 97% 93% 89% 86% 83% 69% Central West 93% 96% 97% 98% 94% 91% 87% 85% 71% Maranoa-Balonne 91% 93% 92% 90% 83% 75% 68% 61% 46% Border Rivers-Gwydir 93% 96% 97% 98% 94% 90% 87% 84% 70% Western 93% 95% 95% 95% 90% 85% 80% 76% 62% Lachlan 93% 96% 96% 97% 93% 89% 86% 83% 69% Murrumbidgee 93% 96% 97% 98% 94% 90% 87% 84% 70% North East 94% 97% 98% 100% 97% 94% 92% 91% 77% Goulburn-Broken 92% 93% 93% 91% 85% 78% 71% 65% 50% Wimmera 90% 91% 88% 84% 75% 65% 54% 44% 29% North Central 91% 93% 92% 90% 82% 74% 67% 60% 45% Murray 93% 95% 95% 94% 89% 84% 79% 75% 60% Mallee 91% 92% 91% 88% 81% 72% 64% 57% 42% Lower Murray Darling 92% 94% 94% 93% 87% 81% 75% 70% 56% SA MDB 89% 89% 86% 81% 70% 58% 46% 35% 20% Snowy River 94% 97% 99% 102% 101% 100% 100% 101% 87% Garnaut Climate Change Review 28

29 Scenario and summarised results This slowing rate of decline in inflow is reflected in the probability of the states where the transition away from Wet states occurs at a far slower rate than in the Dry scenario. This allows more water to flow until 2050 after which the value of output declines significantly (see Table 11). It is the transition towards more drought states that has the greatest influence on the selection of agricultural commodities. As the system gets drier the inability to supply irrigators and the environment will intensify as the declining flows increase salinity altering the mix of production possibilities alters. This appears as a transition as between 2040 to 2060 producers and production systems have to adjust to the wet state failing. Table 11 U2 (average) scenario data and results INPUTS Probability of State Inflow Rate Average OUTPUTS Year N D W N D W $m EC Irr Use (ML) Flow to sea (ML) NOW $4, , , $4, , , $3, , , $3, , , $2, , , , $2, , , , $1, , , , $1, , , , $1, , , , $358.5 >10,000 1, ,297.9 Discussion Table 12 illustrates in the impact of salinity on agricultural production. By 2030 all the Stone fruit has moves to grape production and then by 2050 the grape area is starting to shift towards citrus. The major changes to production occur after This includes transferring away from high water use technology to low water use technology in the dairy industry. Table 12 U2 optimised agricultural production area ( 000 Ha) Current Citrus Grapes Stone Fruit Veg 0.0 Cotton Rice Wheat Dairy TOTAL 1, , , Garnaut Climate Change Review 29

30 While the increasing salinity leads to a transition away from stone fruit, to grapes and then to citrus as salinity increases. Cotton remains an opportunistic crop up north by 2100 however, due to the increasing frequency of the drought events, perennial horticultural is at grave risk and the inability to supply water regularly in the drought years will force a steep decline in the industry. It is highly likely that farming systems will adapt to utilise flows in the normal in an opportunistic manner. By this stage however, unsecured (general) water licences will be worthless as even high security licences are unlikely to have their entitlements filled. Figure 8 illustrates the impacts on regional catchment within the basin from not curbing CO 2 emissions for the basin. Here we can see that by 2030 economic production falls by over $540 million, by 2050 this loss increases to $2.15 billion from the base and by 2100 over $4.2 billion has been lost due to climate change. It is the transfers in from the Snowy River and the slower rate of inflow decline in NSW catchments that keep the system functioning for longer than it does in the U1 scenario by not allowing the negative impacts from salinity impact on production systems as severely. Without these transfers water quality rapidly decreases as discussed in Wagner et al In comparing Figure 8 (U2) with Figure 7 (U1) the difference between 2030 and 2050 are notable as the southern sections and NSW remain productive for longer under the U2 scenario. Garnaut Climate Change Review 30

31 Figure 8 Potential economic returns for the U2 scenario Economic Value ($m) Summary The expected unmitigated climate change scenario suggests that although irrigation will continue in the basin in the immediate term that the decreasing inflow and increased variation in inflow will limit the basin s ability to recharge storages. This inability will then place significant pressure on current water entitlements is likely to lead to producers being allowed to hold water over in storages for future seasons. It could lead to an annual use it of loose it management strategy. By 2030 Adelaide s water quality is expected to fall to around about 1,000 EC in the drought state and then serious questions about the future of the salinity mitigation program will have to be addressed as this violates the threshold of 95% of the time Adelaide s water supply must be less than 800 EC (Schrobback et al. 2008). The impact for the environment is a twofold; reduced ability to meet base environmental flows combined with increasing pressure from salt levels is likely to exasperate the current problems in the Coorong. Garnaut Climate Change Review 31

32 7.4 Unmitigated Scenario 3 (U3) Introduction The U3 scenario is the most favourable outcome of climate change. In this scenario inflow increases as it becomes warmer and wetter. This scenario is based on the A1F1 emissions path, 90th percentile rainfall and relative humidity surface for Australia (wet extreme), 50th percentile temperature surface. Mean global warming reaches 4.5 C in Data used The data used here suggests that there will be a significant increase in rainfall in the northern parts of the basin by 2050 (20 30% increase) and the only catchments in Victoria (excluding Mallee) are not expecting any significant increase by 2100 (see Table 13). This would suggest that there would be more regular seasons for irrigation in QLD and northern NSW and it is likely that the Darling River would recharge the Menindee Lakes on a regular basis increasing water security for irrigators in the Lower Murray Darling catchment and South Australia. This increased water security will also be a boom for the environment and it has been assumed that the CAP will remain constant. By 2050 increased inflow would account to an extra 3,372 GL for the basin, in a normal year in comparison to the current inflow listed in Table 2. Table 13 U3 (wet) inflow forecast Catchment Condamine 109% 114% 120% 128% 136% 144% 152% 160% 166% Border Rivers, QLD 108% 114% 120% 127% 136% 144% 152% 159% 166% Warrego-Paroo 111% 117% 125% 134% 145% 155% 165% 174% 182% Namoi 108% 112% 118% 124% 132% 139% 146% 153% 158% Central West 108% 112% 118% 124% 132% 139% 146% 153% 158% Maranoa-Balonne 111% 117% 125% 134% 145% 155% 165% 174% 182% Border Rivers-Gwydir 107% 112% 117% 124% 131% 138% 145% 152% 157% Western 110% 116% 123% 132% 141% 151% 160% 168% 176% Lachlan 106% 110% 114% 119% 125% 131% 136% 141% 146% Murrumbidgee 104% 107% 109% 113% 117% 121% 125% 128% 131% North East 101% 102% 103% 104% 105% 106% 107% 108% 109% Goulburn-Broken 101% 102% 102% 103% 104% 105% 106% 107% 108% Wimmera 101% 101% 102% 103% 104% 104% 105% 106% 107% North Central 101% 101% 102% 103% 104% 105% 106% 106% 107% Murray 105% 108% 112% 116% 121% 125% 130% 134% 138% Mallee 103% 106% 108% 111% 115% 118% 121% 124% 127% Lower Murray Darling 108% 113% 119% 126% 133% 141% 149% 155% 162% SA MDB 103% 105% 107% 109% 112% 114% 117% 119% 121% Snowy River 103% 105% 107% 109% 112% 115% 117% 120% 122% Scenario and summarised results This scenario assumes that the CAP will not be increased and this means that extractions from the basin do not increase, consequently ground water extractions and transfers from the Snowy also do not increase and all extra water is then diverted towards environmental flow either for the basin or the Garnaut Climate Change Review 32

33 Snowy River. In other words by doing nothing the environment gains this benefit for this new resource which has further benefits for potable water supplies in Adelaide and production benefits to producers from improved water quality. We can see in Table 14 that this extra water to the environment helps reduce the salinity (EC) through time and this reduction has a slight improvement in water quality. Interestingly enough the results suggest that as water supplies become more secure that producers transfer towards production systems that utilise same volume of water in each state and this then leads to a slight reduction in overall irrigation use. Table 14 U3 (wet) scenario data and results INPUTS OUTPUTS Probability of State Inflow Rate Average Year N D W N D W $m EC Irr Use (ML) Flow to sea (ML) NOW $4, , , $4, , , $4, , , $4, , , $4, , , $4, , , $4, , , $4, , , $4, , , $4, , ,639.4 Discussion The improved water supply and quality become notable in 2050 when more area comes into production and by 2100 where grape area is shifting into stone fruit (see Table 15). By 2050, inflow increases to 27,421 compared to 24,050 (see Table 2) increasing water availability to around 29,860 (as ground water and transfers into the Snowy remain constant) and this equates to about 3,372 GL going to the environment. This extra flow is close to the 4,000 GL estimated by Jones et al. (2002) required to restore the environment in the basin. By 2100 there would be over 8,000 GL transferred to the environment. It is highly likely that this scenario negates some of the externalities from warmer water conditions as pests and diseases (i.e. fungicides and moulds) are not modelled. This may in fact increase costs of production in the southern regions. Figure 9 suggests that Adelaide water supply will continue to improve through time with no need to invest in mitigation works in the foreseeable future. During severe droughts there may be some need to release water at critical stages to level out any salinity surges as already occurs. Garnaut Climate Change Review 33

34 Table 15 U3 optimised agricultural production area ( 000 Ha) Current Citrus Grapes Stone Fruit Veg 0.0 Cotton Rice Wheat Dairy TOTAL 1, , , ,772.4 Figure 9 Potential salinity levels under a U3 scenario (EC), drought years Salinity Level (EC) < > 800!. Adelaide: !. Adelaide: Garnaut Climate Change Review 34

35 Summary The increased water supply would allow for greater flexibility in commodity choices and reduce the stress level on producers for the bulk of the time. However, as in any real world situation there may be unforseen adverse times that may still call for exceptional circumstances funding to deal with what could be defined as extreme droughts once production systems are fully adjusted to relying on greater water security. If this occurs by rights we will be far better off and should be able to take advantage of any shifts into bio-fuel crops and increased commodity prices. Policy makers should ensure however, that under such a scenario that the CAP is not adjusted and that the environment and not agriculture nor urban water supplies see this as a new boom. 7.5 Summary business-as-usual scenarios The alternatives options from ignoring climate change are illustrates in Figure 10 where if we are really lucky we may in fact be better off (U3). However, it is far more likely that a U2 scenario will have major implications for future generations to overcome while a U1 scenario will have major ramifications for this generation. One of the major conclusions from the scenarios is the radical shifts the irrigation industry will have to adjust to if droughts become more frequent as the modelling suggests that in its current framework the current allocation system will fail to meet the competing needs between the irrigators, potable water supplies and the environment. Figure 10 Business as usual summary $'m $5,000 Economic Return Under Climate Change Scenarios (Without Mitigation) $4,000 $3,000 $2,000 $1,000 $ Year U1-Dry U2-Avg U3-Wet Adjustment for irrigators will occur on a multifaceted approach including: attempting to minimise evaporation and seepage losses while transporting and storing water; increased soil moisture monitoring; restructuring and adapting to new water application techniques including pulse irrigation and greater reliance on low water technology (drip and partial root zone drying); the adoption of alternative crops which are have a higher return per ML (i.e. current move from cotton to chickpeas); and the reliance on new genotypes. The policy implications for the future of Adelaide s water supply will have to consider their reliance on water from the basin to reliance on sea desalinisation plants. As illustrated in Figure 11 by 2030, during droughts, both U1 and U2 are exceeding the 800 EC thresholds at Adelaide and this implies that further investment in salinity mitigation works will have to occur. Schrobback et al. (2008) discuss that reducing 1 unit of EC is approaching $4 million and therefore reducing the U2 by 200EC at Garnaut Climate Change Review 35

36 Adelaide would cost in the order of $800 million. This may lead to overturning the 800 EC threshold and opting for greater reliance on desalination plants to supply Adelaide s water in the future. The lack of potable water for all residents in Adelaide and the basin is likely to mean greater urban restrictions in the short to medium term until adequate alternative sources are obtained or the nature of urban water entitlements are redesigned Figure 11 Adelaide s salinity during droughts by 2030 EC 10,000 Adelaide's Water Quality by 2030 (EC, Dry State), Sequential 1, Year Base U3 U2 U1 Garnaut Climate Change Review 36

37 8 The mitigation scenarios 8.1 Introduction In the light of the potential risks to changing inflow from increased temperatures, evaporation, humidity and changes to rainfall society has to balance this with the tradeoffs associated from doing nothing to a range of policies designed to combat increasing CO 2 emissions. The Garnaut Climate Change Review Secretariat provided four mitigation scenarios: three scenarios of atmospheric CO 2 stabilising at 550ppm (dry, median and average) one scenario of atmospheric CO 2 stabilising at 450ppm (median). 8.2 Mitigation Scenario 1 (M1) Introduction The M1 scenario reflects the worst case from mitigation where conditions remain drought once stabilisation occurs around about 550 ppm CO 2 equivalent (CO 2 stabilised at 500 ppm) is reached by 2100, 10th percentile rainfall and relative humidity surface for Australia (dry extreme), 90th percentile temperature surface. Mean global warming reaches ~2.0 C in Data used Table 16 M1 (550 ppm dry) inflow forecast Catchment Condamine 87% 66% 44% 28% 20% 15% 15% 17% 15% Border Rivers, QLD 88% 66% 45% 29% 21% 16% 15% 17% 15% Warrego-Paroo 82% 57% 33% 15% 13% 14% 15% 17% 15% Namoi 94% 76% 58% 45% 39% 37% 35% 35% 30% Central West 92% 73% 54% 40% 34% 31% 29% 27% 23% Maranoa-Balonne 82% 57% 33% 15% 13% 14% 15% 17% 15% Border Rivers-Gwydir 94% 77% 59% 46% 41% 38% 37% 37% 32% Western 86% 65% 42% 26% 17% 14% 15% 17% 15% Lachlan 94% 76% 58% 45% 40% 38% 36% 36% 31% Murrumbidgee 98% 82% 67% 55% 52% 51% 51% 52% 46% North East 105% 93% 81% 73% 72% 74% 76% 81% 73% Goulburn-Broken 99% 83% 68% 57% 54% 53% 54% 55% 49% Wimmera 95% 79% 62% 49% 44% 43% 42% 42% 37% North Central 98% 83% 67% 56% 52% 51% 52% 53% 47% Murray 94% 76% 59% 46% 40% 38% 37% 36% 31% Mallee 93% 75% 57% 44% 38% 36% 34% 34% 29% Lower Murray Darling 88% 67% 46% 31% 23% 18% 15% 17% 15% SA MDB 91% 71% 51% 37% 30% 26% 24% 22% 18% Snowy River 103% 90% 78% 69% 68% 69% 72% 75% 68% The changes to inflow in the M1 scenario are presented in Table 16. Here QLD catchments especially west of the Condamine face faster declines to inflow than the south-eastern catchments. By 2050 Garnaut Climate Change Review 37

38 both the Warrego-Paroo and Maranoa-Balonne are have lose more than 85% of current inflow. While by 2100 the North-East and Snowy regions still maintaining around about 70% of their inflow by By 2050 this sort of reduction would mean that inflow, ground water and transfers from the Snowy have fallen to 11,284, 510 and 746 GL meaning that over 12,766 GL less is entering the basin in a normal year in comparison to the current inflow listed in Table 2. In comparison to the U1 scenario this is an extra 2,179 GL for the basin. Scenario and summarised results The M1 drought scenario is expected to have increasing pressure on the wet states as more droughts and more severe droughts occur in the future (see Table 17). However, unlike the unmitigated scenarios the wet years still occur to allow some storage refill but the drought years become more frequent and more severe in the volume of inflow. Table 17 M1 (550 ppm dry) scenario data and results INPUTS OUTPUTS Probability of State Inflow Rate Average Year N D W N D W $m EC Irr Use (ML) Flow to sea (ML) NOW $4, , , $4, , , $3, , , , $2, , , , $2, , , , $1, , , , $1, , , , $1, , , , $ , , , $ , , ,948.8 Discussion Table 18 illustrates the potential impacts to irrigation in the basin from investing in mitigation as we can see here production still occurs within the basin by The benefits in comparison to the U1 scenario in Figure 3 however are The decline in the perennial horticultural crops is due to the longer and more severe droughts as producers will not have enough water to save all their potential areas of production and therefore the area of production will become more concentrated. Although not picked up in the model this may lead to very opportunistic irrigation or partial irrigation cropping in the southern parts of the basin. In this case it would appear as most of the major industry adjustment will occur after Garnaut Climate Change Review 38

39 Table 18 M1 optimised agricultural production area ( 000 Ha) Current Citrus Grapes Stone Fruit Veg 0.0 Cotton Rice Wheat Dairy TOTAL 1, , , Figure 12 illustrates the impacts on each catchment in the basin. Here we can see that by 2030 economic production falls by over $700 million, by 2050 this loss increases to $2.4 billion from the base and by 2100 over $4 billion has been lost due to climate change. Figure 12 Potential economic returns for the M1 scenario Economic Value ($m) Garnaut Climate Change Review 39

40 In comparing Figure 12 with Figure 7 (U1) we can see the positive impacts mitigation policies have for irrigated production in the basin by slowing down the decline in production especially for irrigation system along the Murrumbidgee and Murray rivers. Benefits from mitigation Figure 12 illustrates the potential benefits from investing in mitigation when comparing the U1 to the M1 scenario. From the results although there is are benefits from slowing the decline to irrigation in the basin that it is still likely that the basin will have catastrophic failure. The results suggest that the M1 scenario will buy about years time. (i.e. $3,000 year U1 = 2020, M1 = 2040, $1,000 U1 = 2065, M1 = 2080) Figure 13 Benefits of mitigation U1 versus M1 $'m $5,000 Dry Climate Change Scenarios (U1 versus M1 ) $4,000 $3,000 $2,000 $1,000 $ U1 Year M1 Summary In the M1 scenario, mitigation delays, but does not prevent the adverse effects of climate change, allowing more time for the development of long term solutions to help with the adjustment process. There is still significant loss to the irrigated community in the basin. The risk of adverse outcomes such as those modelled here is one reason for preferring a stabilisation target of 450 ppm CO 2 equivalent. 8.3 Mitigation Scenario 2 (M2) Introduction The M2 policy mitigation scenario provides the best estimate scenario where stabilisation of 550 ppm CO 2 equivalent (CO 2 stabilised at 500 ppm) is reached by 2100, 50th percentile rainfall and relative humidity surface for Australia, 50th percentile temperature surface. Mean global warming reaches ~2.0 C in Data used In this scenario, all catchments experience reduced flows, but the decline in average inflows is relatively modest, averaging around 25 per cent by Relatively modest adjustments to land and water use are needed to respond to these changes. By 2050 this sort of reduction would mean that inflow, ground water and transfers from the Snowy have fallen to 19,229, 510 and 746 GL meaning that over 21,224 GL less is entering the basin in a normal year in comparison to the current inflow listed in Table 2. Garnaut Climate Change Review 40

41 Table 19 M2 (550 ppm average) inflow forecast Catchment Condamine 91% 86% 81% 77% 80% 78% 77% 76% 76% Border Rivers, QLD 91% 86% 81% 77% 80% 78% 77% 77% 76% Warrego-Paroo 91% 86% 80% 76% 79% 77% 76% 76% 75% Namoi 93% 89% 84% 81% 85% 83% 83% 82% 82% Central West 93% 89% 85% 82% 85% 84% 83% 83% 82% Maranoa-Balonne 91% 86% 80% 76% 79% 77% 76% 76% 75% Border Rivers-Gwydir 93% 89% 85% 82% 85% 84% 83% 82% 82% Western 92% 88% 83% 80% 83% 82% 81% 80% 79% Lachlan 93% 89% 84% 81% 85% 83% 83% 82% 82% Murrumbidgee 93% 89% 85% 82% 85% 84% 83% 82% 82% North East 93% 90% 86% 83% 87% 86% 85% 84% 84% Goulburn-Broken 91% 86% 81% 77% 80% 78% 77% 77% 76% Wimmera 89% 83% 77% 73% 74% 73% 72% 71% 70% North Central 91% 85% 80% 76% 79% 77% 76% 75% 75% Murray 92% 87% 83% 79% 82% 81% 80% 80% 79% Mallee 90% 85% 79% 75% 78% 76% 75% 74% 74% Lower Murray Darling 92% 87% 82% 78% 81% 80% 79% 78% 78% SA MDB 89% 82% 75% 71% 72% 70% 69% 68% 67% Snowy River 94% 90% 87% 84% 88% 88% 87% 87% 86% Scenario and summarised results Table 20 M2 (550 ppm average) scenario data and results INPUTS OUTPUTS Probability of State Inflow Rate Average Year N D W N D W $m EC Irr Use (ML) Flow to sea (ML) NOW $4, , , $4, , , $4, , , $4, , , $4, , , $3, , , , $3, , , , $3, , , , $3, , , , $3, , , ,324.3 Despite mitigation there is still the expectation that there will be increasing probability of drought events occurring, with the Drought states becoming increasingly drier in the future (see Table 20). So when this occurs in 2060 average salinity levels are expected to increase in the basin. Garnaut Climate Change Review 41

42 Discussion We can see in Table 21 that by 2050 production systems have fairly well adapted to the new conditions with less salt tolerant commodities (stone fruit) moving towards salt tolerant species as adjustment to the new distribution and variance of inflow patterns has occurred. Table 21 M2 optimised agricultural production area ( 000 Ha) Current Citrus Grapes Stone Fruit Veg 0.0 Cotton Rice Wheat Dairy TOTAL 1, , , ,673.1 Figure 14 illustrates the impacts on each catchment in the basin. Here we can see that by 2030 economic production falls by over $150 million, by 2050 this loss increases to $300 million from the base and by 2100 over $900 million has been lost due to climate change. In comparison to M1 maps in Figure 12 there is significant improvement for all catchments in the basin. The biggest winner appears to be South Australia where the model suggests there will be significant investment in wine grapes Summary The M2 scenario provides will provide a hope for irrigators as although change occurs in the short to medium term producers should be able to adapt to the lower inflow and allocations available. However there will be significant pressures still on the basin in regards to high salinity predictions for Adelaide once the transitions to more frequent droughts occurs and the transfers from the Snowy River will remain critical to help manage salinity. Garnaut Climate Change Review 42

43 Figure 14 Potential economic returns for the M2 scenario Economic Value ($m) Mitigation Scenario 3 (M3) Introduction The M3 scenario is the most optimistic scenario for the 550ppm where conditions become wetter, 90th percentile rainfall and relative humidity surface for Australia, 50th percentile temperature surface. Mean global warming reaches ~2.0 C in Data used In this scenario the northern catchments become significantly wetter, see Table 22 where inflow is expected to increase by 30 40%. This is particularly useful for the basin as irrigation is far less developed in Queensland and this allows more water from the Darling River to flush the basin south of where it joins the Murray River. It still has been assumed that the CAP for Queensland or any other state and territory does not increase. By 2050 increased inflows account for an extra 762 GL for the basin, in a normal year in comparison to the current inflow listed in Table 2. Garnaut Climate Change Review 43

44 Table 22 M3 (550 ppm wet) inflow forecast Catchment Condamine 110% 116% 122% 126% 129% 130% 131% 132% 133% Border Rivers, QLD 110% 116% 122% 126% 128% 130% 131% 132% 132% Warrego-Paroo 113% 120% 127% 132% 136% 137% 139% 140% 140% Namoi 109% 114% 119% 123% 125% 127% 128% 128% 129% Central West 109% 114% 119% 123% 125% 127% 128% 128% 129% Maranoa-Balonne 113% 120% 127% 132% 136% 137% 139% 140% 141% Border Rivers-Gwydir 109% 114% 119% 123% 125% 126% 127% 128% 128% Western 112% 118% 125% 130% 133% 135% 136% 137% 137% Lachlan 107% 111% 115% 118% 120% 121% 122% 122% 123% Murrumbidgee 105% 108% 110% 112% 113% 114% 115% 115% 115% North East 101% 102% 103% 104% 104% 104% 104% 104% 104% Goulburn-Broken 101% 102% 103% 103% 104% 104% 104% 104% 104% Wimmera 101% 102% 102% 103% 103% 103% 103% 103% 103% North Central 101% 102% 102% 103% 103% 103% 103% 103% 103% Murray 106% 109% 113% 115% 116% 117% 118% 118% 119% Mallee 104% 106% 109% 111% 112% 112% 113% 113% 113% Lower Murray Darling 109% 115% 120% 124% 127% 128% 129% 130% 130% SA MDB 103% 105% 107% 108% 109% 110% 110% 110% 111% Snowy River 104% 106% 109% 111% 112% 113% 113% 114% 114% Scenario and summarised results Increased water flow in the basin will allow society to avoid harder policy questions regarding too long term water adjustments. The increased flow: provides necessary environmental flows; improves the quality and reliance of potable water for rural and urban areas; and allows for greater reliability of irrigation supplies. In short by being able to have only slightly higher temperatures and guaranteed water supplies will lead to improved economic and social welfare. Garnaut Climate Change Review 44

45 Table 23 M3 (550 ppm wet) scenario data and results INPUTS Probability of State Inflow Rate Average OUTPUTS Year N D W N D W $m EC Irr Use (ML) Flow to sea (ML) NOW $4, , , $4, , , $4, , , $4, , , $4, , , $4, , , $4, , , $4, , , $4, , , $4, , ,164.5 This flushing of the system will potentially mean that the current salinity mitigation program being run by the MDBC could if fact be scaled back as the increased environmental flows will dilute the mobilised salt. The increased flow would also help ease the pressure on keeping the basins mouth open by dredging. Also potential benefits for the Snowy Hydro power generation from a more guaranteed water supply may exist. Discussion As the guarantee of water supply increases there is a shift towards high irrigation use commodities as i.e. away from flexible to fixed cotton and in general water use for irrigators becomes more stable. As Table 24 suggested irrigation area will actually concentrate as land moves towards production systems that require more water in every state thus negating farming systems that take account of risk as in the M1 and M2 scenarios. Table 24 M3 optimised agricultural production area ( 000 Ha) Current Citrus Grapes Stone Fruit Veg 0.0 Cotton Rice Wheat Dairy TOTAL 1, , , ,769.5 Higher temperatures may require varietal changes to ensure that yields remain constant especially for perennial horticultural crops that require exposure to cold conditions to sets buds (i.e. vernalisation) to ensure proper return on long term capital investments. Garnaut Climate Change Review 45

46 The decreasing salinity levels, illustrated in Figure 15, will allow for greater use of varieties with lower salt tolerance, which may in fact boost yield. While the pressure is removed from future salinity mitigation works as the increased inflow helps water quality. Figure 15 Potential salinity levels in the M3 scenario (EC), drought years Salinity Level (EC) < > 800!. Adelaide: !. Adelaide: Summary Wetter and slightly warmer conditions provide significant environmental, social and economic benefits for much of the basin. The increased rain, especially in Queensland will provide significant benefits for irrigators. Dryland agricultural producers will also benefit from increased overland flows. If this scenario was to occur there it would be a win for irrigators, the environment and securing urban supplies. 8.5 Mitigation Scenario 4 (M4) Introduction This scenario describes the mitigation run if society invests in strong mitigation strong mitigation scenario where stabilisation of 450 ppm CO 2 equivalent (CO 2 stabilised at 420 ppm) is reached by Garnaut Climate Change Review 46