Abstract
Climate change is likely to have substantial effects on irrigated agriculture. It is
anticipated that many areas that are already dry will become drier, while areas
that already receive high rainfall may experience further increases. Extreme
climate events such as droughts are likely to become more common. These
patterns are evident in projections of climate change for the Murray-Darling
Basin in Australia.
To understand the effects of climate change, as modified by mitigation and
adaptation, active management responses designed to improve returns in
particular states of nature, such as in the case of drought must be considered. A
change in the frequency of drought will induce a change in the allocation of land
and water between productive activities. Even with action to stabilize
atmospheric concentrations of CO2 at or near current levels, climate change will
continue for some decades and adaptation will therefore be necessary.
Conversely, most adaptation strategies are feasible only if the rate and extent of
climate change is limited by mitigation. In this paper, a simulation model of
state-contingent production is used to analyze these issues.
Key words: Irrigation, Uncertainty, Climate Change
JEL Codes: Q25, Q54