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

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Abstract

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.

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Notes

  1. One gigalitre (GL) equates to approximately 810.71 acre-feet.

  2. The SRWUIP recovery figure was downgraded from the previous report (i.e. 31 December 2013). Therein, the Department reported that 616 GL of water had been recovered from the SRWUIP program. The new estimate represented a 12 % change over the intervening periods, highlighting the uncertainties that are possible in programs of this nature.

  3. In fact the MDB Plan lists nine monitored threats to water quality: salinity; suspended matter (e.g. river turbidity); nutrient levels such as nitrogen and phosphorus; toxins from biological systems (e.g. blue-green algae or cyanobacteria); toxins from human systems (e.g. pesticides and heavy metals); water temperature; pathogens from animal waste; acidity; and dissolved oxygen levels. Our simple model constrains the discussion of MDB water quality to salinity.

  4. A megalitre (ML) is equal to one million litres of water, or 0.812 acre-feet.

  5. This constraint may also result in an unfortunate condition where Section 1.07 of the Basin Plan is violated if the Basin manager is provided with perverse incentives to lock resources into regions and/or discourages interstate or inter-regional water trade—but we digress.

  6. Beyond drought uncertainty is the issue of greater ongoing water recovery strategy uncertainty, as evidenced in DoE (2014b). While policy-makers continue to debate and alter the SDL arrangements, farmers will continue to operate in uncertainty—which they consistently raise objections to—providing additional motives for exit.

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Acknowledgments

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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  1. Centre for Regulation and Market Analysis, University of South Australia Business School, GPO Box 2471, Adelaide, SA, 5001, Australia

    Adam Loch

  2. Risk and Sustainability Management Group, School of Economics, University of Queensland, Brisbane, QLD, 4072, Australia

    David Adamson

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Correspondence to Adam Loch.

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Loch, A., Adamson, D. Drought and the rebound effect: a Murray–Darling Basin example. Nat Hazards 79, 1429–1449 (2015). https://doi.org/10.1007/s11069-015-1705-y

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