Natural Hazards

, Volume 79, Issue 3, pp 1429–1449 | Cite as

Drought and the rebound effect: a Murray–Darling Basin example

  • Adam Loch
  • David Adamson
Original Paper


Droughts are natural hazards, to which irrigators must adapt. Climate change is expected to increase both the frequency and severity of future droughts. A common adaptation is investment in water-efficient technology. However, increased efficiency can paradoxically result in rebound effects: higher resource demand among consumptive users, and lower flow benefits for environmental users. Under an assumption of increasing future drought conditions, we examine anticipated rebound effect impacts on environmental and private irrigator water availability/use outcomes from current water efficiency-centric policy in Australia’s Murray–Darling Basin. We determine that rebound effects for environmental and private irrigation interests are likely. Our results identify greater technological change and higher consumptive land and water demand in northern Basin annual production systems, as irrigators switch to perennial cropping systems under subsidization incentives. Policy incentives to encourage water use efficiency paradoxically reduce environmental flow volumes on average. We find that environmental policy objectives will only be achieved when water is not a binding production constraint, typically in wet states of nature.


Rebound effects Environmental flows Drought Murray–Darling Basin 



The authors gratefully acknowledge the suggestions provided by discussants from the 2013 Belpasso International Summer School on Environmental and Resource Economics in the development of this paper, as well as very helpful insights and feedback from several independent reviewers. This research was funded by an Australian Research Council Discovery project DP140103946 and Discovery Early Career Research Project DE150100328, with additional collaborative funding provided by The University of Queensland’s School of Economics Search and Visitor’s Committee.


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Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  1. 1.Centre for Regulation and Market AnalysisUniversity of South Australia Business SchoolAdelaideAustralia
  2. 2.Risk and Sustainability Management Group, School of EconomicsUniversity of QueenslandBrisbaneAustralia

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