IDEAS home Printed from https://ideas.repec.org/a/bla/ajarec/v67y2023i2p303-322.html
   My bibliography  Save this article

An economic assessment of options for operating within plantation forestry water entitlements and tightening cap and trade policy

Author

Listed:
  • Courtney M. Regan
  • Jeffery D. Connor
  • Md Sayed Iftekhar

Abstract

The Green Triangle (GT) region of southern Australia is one of only two jurisdictions globally to licence plantation forestry's groundwater use. In response to declines in groundwater resources caused by historical plantation expansion, reductions in forest water allocations (~50%) are likely for some parts of the region, presenting novel challenges for forest managers in maintaining revenues and timber flows. This article presents a mathematical programming model evaluation of water trade opportunities for plantation forest owners to adapt to reduced water entitlements and explores how tightening groundwater policy could affect forestry returns and land use mix for the region. Results suggest that even absent opportunity to sell water, relatively limited 11% reduction in return could be expected for a large (−50%) water entitlement and (−48%) land‐use change out of forestry. Results suggest that opportunities for forestry companies to sell water entitlements may allow them to maintain or even increase combined returns from forestry and water sales. Whilst the results highlight the adaptive capacity of the plantation forestry sector to operate within reduced water entitlement, a significant sectoral and regional economy adjustment would be likely. The discussion focusses on the potential to realise optimisation model‐identified adaptation opportunities accounting for real‐world thin markets, transaction costs and market friction.

Suggested Citation

  • Courtney M. Regan & Jeffery D. Connor & Md Sayed Iftekhar, 2023. "An economic assessment of options for operating within plantation forestry water entitlements and tightening cap and trade policy," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(2), pages 303-322, April.
    • Handle: RePEc:bla:ajarec:v:67:y:2023:i:2:p:303-322
    DOI: 10.1111/1467-8489.12508
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-8489.12508
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1467-8489.12508?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kahil, Mohamed Taher & Connor, Jeffery D. & Albiac, Jose, 2015. "Efficient water management policies for irrigation adaptation to climate change in Southern Europe," Ecological Economics, Elsevier, vol. 120(C), pages 226-233.
    2. Howitt, Richard E. & Hansen, Kristiana, 2005. "The Evolving Western Water Markets," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 20(1), pages 1-5.
    3. Chisholm, Ryan A., 2010. "Trade-offs between ecosystem services: Water and carbon in a biodiversity hotspot," Ecological Economics, Elsevier, vol. 69(10), pages 1973-1987, August.
    4. Iftekhar, M.S. & Tisdell, J.G. & Connor, J.D., 2013. "Effects of competition on environmental water buyback auctions," Agricultural Water Management, Elsevier, vol. 127(C), pages 59-73.
    5. Le Lan & Md Sayed Iftekhar & James Fogarty & Steven Schilizzi, 2021. "Auctions for buying back groundwater for environmental purposes: Which design performs better?," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(3), pages 931-948, September.
    6. de Bonviller, Simon & Wheeler, Sarah Ann & Zuo, Alec, 2020. "The dynamics of groundwater markets: Price leadership and groundwater demand elasticity in the Murrumbidgee, Australia," Agricultural Water Management, Elsevier, vol. 239(C).
    7. N. Arnell & S. Brown & S. Gosling & P. Gottschalk & J. Hinkel & C. Huntingford & B. Lloyd-Hughes & J. Lowe & R. Nicholls & T. Osborn & T. Osborne & G. Rose & P. Smith & T. Wheeler & P. Zelazowski, 2016. "The impacts of climate change across the globe: A multi-sectoral assessment," Climatic Change, Springer, vol. 134(3), pages 457-474, February.
    8. Jean-Daniel Rinaudo & Marielle Montginoul & Marta Varanda & Sofia Bento, 2012. "Envisioning innovative groundwater regulation policies through scenario workshops in France and Portugal," Post-Print hal-00658994, HAL.
    9. Closas, Alvar & Molle, François & Hernández-Mora, Nuria, 2017. "Sticks and carrots to manage groundwater over-abstraction in La Mancha, Spain," Agricultural Water Management, Elsevier, vol. 194(C), pages 113-124.
    10. Eefje Aarnoudse & Bettina Bluemling & Wei Qu & Thomas Herzfeld, 2019. "Groundwater regulation in case of overdraft: national groundwater policy implementation in north-west China," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 35(2), pages 264-282, March.
    11. Simon Gosling & Nigel Arnell, 2016. "A global assessment of the impact of climate change on water scarcity," Climatic Change, Springer, vol. 134(3), pages 371-385, February.
    12. M. S. Iftekhar & A. Hailu & R. K. Lindner, 2014. "Does It Pay to Increase Competition in Combinatorial Conservation Auctions?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 62(3), pages 411-433, September.
    13. P. Greve & T. Kahil & J. Mochizuki & T. Schinko & Y. Satoh & P. Burek & G. Fischer & S. Tramberend & R. Burtscher & S. Langan & Y. Wada, 2018. "Global assessment of water challenges under uncertainty in water scarcity projections," Nature Sustainability, Nature, vol. 1(9), pages 486-494, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Samuel Asumadu Sarkodie & Maruf Yakubu Ahmed & Phebe Asantewaa Owusu, 2022. "Global adaptation readiness and income mitigate sectoral climate change vulnerabilities," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-17, December.
    2. Hossein Mikhak & Mehdi Rahimian & Saeed Gholamrezai, 2022. "Implications of changing cropping pattern to low water demand plants due to climate change: evidence from Iran," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(8), pages 9833-9850, August.
    3. Mengru Wang & Benjamin Leon Bodirsky & Rhodé Rijneveld & Felicitas Beier & Mirjam P. Bak & Masooma Batool & Bram Droppers & Alexander Popp & Michelle T. H. Vliet & Maryna Strokal, 2024. "A triple increase in global river basins with water scarcity due to future pollution," Nature Communications, Nature, vol. 15(1), pages 1-13, December.
    4. Maciel, Everton A. & Martins, Valeria F. & de Paula, Mateus D. & Huth, Andreas & Guilherme, Frederico A.G. & Fischer, Rico & Giles, André & Barbosa, Reinaldo I. & Cavassan, Osmar & Martins, Fernando R, 2021. "Defaunation and changes in climate and fire frequency have synergistic effects on aboveground biomass loss in the brazilian savanna," Ecological Modelling, Elsevier, vol. 454(C).
    5. Aghapour Sabbaghi, Mohammad & Nazari, Mohammadreza & Araghinejad, Shahab & Soufizadeh, Saeid, 2020. "Economic impacts of climate change on water resources and agriculture in Zayandehroud river basin in Iran," Agricultural Water Management, Elsevier, vol. 241(C).
    6. Wanlu Liu & Lulu Liu & Jiangbo Gao, 2020. "Adapting to climate change: gaps and strategies for Central Asia," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 25(8), pages 1439-1459, December.
    7. Junguo Liu & Delong Li & He Chen & Hong Wang & Yoshihide Wada & Matti Kummu & Simon Newland Gosling & Hong Yang & Yadu Pokhrel & Philippe Ciais, 2024. "Timing the first emergence and disappearance of global water scarcity," Nature Communications, Nature, vol. 15(1), pages 1-11, December.
    8. Hisham Eldardiry & Emad Habib & David M. Borrok, 2020. "Accounting for Inter-Annual and Seasonal Variability in Assessment of Water Supply Stress: Perspectives from a humid region in the USA," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 34(8), pages 2517-2534, June.
    9. Penglong Wang & Yao Wei & Fanglei Zhong & Xiaoyu Song & Bao Wang & Qinhua Wang, 2022. "Evaluation of Agricultural Water Resources Carrying Capacity and Its Influencing Factors: A Case Study of Townships in the Arid Region of Northwest China," Agriculture, MDPI, vol. 12(5), pages 1-24, May.
    10. Oliver Reader, M. & Eppinga, Maarten B. & de Boer, Hugo J. & Petchey, Owen L. & Santos, Maria J., 2024. "Consistent ecosystem service bundles emerge across global mountain, island and delta systems," Ecosystem Services, Elsevier, vol. 66(C).
    11. Mashkhura Babadjanova & Ihtiyor Bobojonov & Maksud Bekchanov & Lena Kuhn & Thomas Glauben, 2024. "Can domestic wheat farming meet the climate change-induced challenges of national food security in Uzbekistan?," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 40(3), pages 448-462, May.
    12. Pacheco de Castro Flores Ribeiro, Paulo & Osório de Barros de Lima e Santos, José Manuel & Prudêncio Rafael Canadas, Maria João & Contente de Vinha Novais, Ana Maria & Ribeiro Ferraria Moreira, Franci, 2021. "Explaining farming systems spatial patterns: A farm-level choice model based on socioeconomic and biophysical drivers," Agricultural Systems, Elsevier, vol. 191(C).
    13. Mohamed A. M. Abd Elbasit & Jasper Knight & Gang Liu & Majed M. Abu-Zreig & Rashid Hasaan, 2021. "Valuation of Ecosystem Services in South Africa, 2001–2019," Sustainability, MDPI, vol. 13(20), pages 1-18, October.
    14. Rinaudo, Jean-Daniel & Maton, Laure & Terrason, Isabelle & Chazot, Sébastien & Richard-Ferroudji, Audrey & Caballero, Yvan, 2013. "Combining scenario workshops with modeling to assess future irrigation water demands," Agricultural Water Management, Elsevier, vol. 130(C), pages 103-112.
    15. Audrey Richard-Ferroudji & Nicolas Faysse & Zhour Bouzidi & Menon Ragunath & Jean-Daniel Rinaudo, 2016. "Proposal COSUST Special Issue « Co-designing Research on Social Transformations to Sustainability » Title: The DIALAQ project on sustainable groundwater management: a transdisciplinary and transcultur," Post-Print hal-01378517, HAL.
    16. Kristiana Hansen & Jonathan Kaplan & Stephan Kroll, 2014. "Valuing Options in Water Markets: A Laboratory Investigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(1), pages 59-80, January.
    17. Jin, Ming & Han, Xulong & Li, Mingyu, 2023. "Trade-offs of multiple urban ecosystem services based on land-use scenarios in the Tumen River cross-border area," Ecological Modelling, Elsevier, vol. 482(C).
    18. Xiaopei Yi & Naijie Chang & Wuhan Ding & Chi Xu & Jing Zhang & Jianfeng Zhang & Hu Li, 2022. "Modeling Adaptive Strategies on Maintaining Wheat-Corn Production and Reducing Net Greenhouse Gas Emissions under Climate Change," Agriculture, MDPI, vol. 12(8), pages 1-16, July.
    19. Figureau, A.-G. & Montginoul, M. & Rinaudo, J.-D., 2015. "Policy instruments for decentralized management of agricultural groundwater abstraction: A participatory evaluation," Ecological Economics, Elsevier, vol. 119(C), pages 147-157.
    20. Iftekhar, M.S. & Tisdell, J.G., 2014. "Wildlife corridor market design: An experimental analysis of the impact of project selection criteria and bidding flexibility," Ecological Economics, Elsevier, vol. 104(C), pages 50-60.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ajarec:v:67:y:2023:i:2:p:303-322. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/aaresea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.