Irrigation, water market and climate change: three essays

Abstract

Irrigation water is vital for agriculture, but climate change presents substantial challenges to its management. This thesis comprises three studies that examine the multidimensional challenges of irrigation water governance, the functionality of water markets, and their potential contribution to mitigating the impacts of climate change. The studies also investigate the effects of climatic conditions on the trading behaviour of water market participants.

The first study presents a comprehensive framework for assessing the ability of water governance to cope with climate change. My findings indicate an improvement in the economic efficiency of irrigation water use over the past few decades and the contribution of market-based instruments in managing the impact of climate change. The second study takes a closer look at the functionality and performance of the Murray-Darling Basin (MDB) water market in Australia. The study investigates several key market attributes across a number of trading zones in the sMDB. Overall, the findings document that water markets serve well their fundamental purpose in water resource management, and that various products available in the market enhance market efficiency. The third study uses a portfolio approach to analyse the impacts of climatic conditions, particularly water availability, on the optimal trading strategies of water market participants. The findings illustrate the benefits of portfolio management in improving returns, reducing risks and securing water supply, as opposed to the traditional ownership of a single type of water right.

In summary, this thesis addresses the challenges that irrigation water governance confronts in the context of climate change and provides in-depth discussions about potential tools to deal with the challenges. My research highlights the crucial role of economic instruments, particularly water markets, in mitigating these challenges, based on empirical evidence and optimization results.