(g)etting to the point: The problem with water risk and uncertainty

Loch, Adam; Adamson, David; Auricht, Christopher

doi:10.1016/j.wre.2019.100154

Cited by 14 publications

(8 citation statements)

References 34 publications

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“…Panic buying ensued, water shortages were widespread, and many farmers were faced with switching off water to their crops. When the drought ended, and water was again available, many farmers replanted tree‐crops with a need for (future) secure water once full production was achieved (Loch et al ., 2019).…”

Section: Resultsmentioning

confidence: 99%

“…2017), iii) tighter commodity margins for related sectors and iv) perceptions of poor future supply. Many irrigators have reached (or exceeded) thresholds related to their minimum water input requirements (Loch et al ., 2019) and, in the face of that reality, short‐term panic buying has most likely occurred (Adamson et al ., 2017). Further, in the last two decades agriculture has not experienced periods of extended recovery between extreme events, diminishing capacity to adapt and cope with change.…”

Section: Discussionmentioning

confidence: 99%

“…With respect to the third prerequisite, multiple equilibria can emerge in water markets based on supply/demand elasticities, especially for perennial producers with limited scope for input substitution where water is required in all states of nature (Adamson et al ., 2017). Underlying demand from perennial production will always be present in the market to, at a minimum, preserve costly capital investments (Loch et al ., 2019; Adamson and Loch, 2021). Under that set of arrangements, perennial producers will hedge risk until their uncertainty of supply is partially/fully resolved.…”

Section: Hirshleifer’s Theory Of Speculationmentioning

confidence: 99%

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Markets, mis‐direction and motives: A factual analysis of hoarding and speculation in southern Murray–Darling Basin water markets

Loch¹,

Auricht²,

Adamson³

et al. 2021

Aus J Agri & Res Econ

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There is a long history of concern about speculation in water markets, and potential adverse impacts on agricultural water users. However, applications of traditional analysis into price increase drivers in water markets are challenging due to data limitations. To address this, we use speculation theory, most notably Hirshleifer's four fundamentals for speculative trade, to examine whether speculation or hoarding price increase drivers are evident in Australia's largest water market, the southern Murray-Darling Basin. While speculation is likely, and with good reason given the gains possible, we find no evidence of hoarding behaviour in market price or volume trends. It is more plausible that agricultural sectorsnotably horticultural usershave driven price increases given their requirements to access water at any cost during periods of low supply. These findings conform to theoretical expectations and help to inform badly needed insights into water market fundamentals required for future analysis. Overall, calls for stricter market controls on non-agricultural water users are not supported by our findings. However, greater transparency in water market and broker activity, arising from substantial improvements in the underlying data and trade regulations associated with water markets, would be an ideal outcome from any public police extension.

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Section: Resultsmentioning

confidence: 99%

Section: Discussionmentioning

confidence: 99%

Section: Hirshleifer’s Theory Of Speculationmentioning

confidence: 99%

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Markets, mis‐direction and motives: A factual analysis of hoarding and speculation in southern Murray–Darling Basin water markets

Loch¹,

Auricht²,

Adamson³

et al. 2021

Aus J Agri & Res Econ

Self Cite

View full text Add to dashboard Cite

show abstract

“…If commodity transitions also occur, then competition for water resources will increase with non‐convex market solutions becoming more evident (Adamson et al, 2017). Importantly, if production systems (economic, natural, cultural, and social) transition toward requiring fixed water inputs in all years, then the delivery system will become less flexible and exposed (Loch, Adamson, et al, 2020).…”

Section: Framework and Critical Assessment Resultsmentioning

confidence: 99%

“…However, none of these authors offer empirical analysis of the success or likelihood of policy/program transitions toward sustainable extraction for contexts experiencing forced water demand contraction. The solutions they provide are solved with certainty, and either accidentally or deliberately ignore complex questions such as the prevention of irreversible outcomes arising from catastrophic tipping points (Loch, Adamson, et al, 2020) that may arise when dealing with uncertain water supply and an insatiable demand for water. If policy continues to lack adaptive capacity, uncertainty may force policy makers toward a continual and costly cycle of reform to deal with these complexities and achieve allocation transformation.…”

Section: Introductionmentioning

confidence: 99%

The Fifth Stage in Water Management: Policy Lessons for Water Governance

Loch

Adamson

Dumbrell

2020

Water Resources Research

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Effective management of water resources is a critical policy issue globally. Using a framework developed by Turton, and a common set of characteristics describing key stages of water demand, we examine the effectiveness of isolated technical (e.g., irrigation upgrades) and allocative (e.g., buyback) efficiency for reducing water demand to sustainable levels. We base our analysis on Australia's water reform context which offers an advanced example of applying these levers to achieve allocative and technical efficiency. The study is motivated by appreciation of the benefits from increased policy flexibility and adaptability in response to the following: potential transformations toward inflexible production systems; uncertainty associated with impacts of climate change on future water reliability; and the need for increased possible future equity between uses/users (productive/consumptive, environmental, cultural). Our results highlight that a balance between technical and allocative efficiency mechanisms is necessary, as neither is sufficient in isolation, when seeking to reduce total water use. This approach also enables a clearer representation of uncertainty in future policy choices in many global settings with respect to water demand reduction.

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Influence of crop-water production functions on the expected performance of water pricing policies in irrigated agriculture

Sapino

Pérez-Blanco

Gutiérrez‐Martín

et al. 2022

Agricultural Water Management

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Agricultural economics Water Programming Models (WPM) has found that irrigators in water scarce areas have a rather inelastic response to water prices, making water pricing cost-ineffective towards water saving. We hypothesize that the predicted water saving performance of pricing is significantly underestimated by issues of model structure, due to the exclusion of deficit irrigation from the set of decision variables available to agents in conventional WPM. To test our hypothesis, we develop a model that integrates a continuous crop-water production function into a positive multi-attribute WPM, which allows us to assess agents' adaptive responses to pricing through deficit irrigation. The model is illustrated with an application to the El Salobral-Los Llanos irrigated area in Spain. Our results show that incorporating deficit irrigation as an adaptation option makes the water demand curve significantly more elastic as compared to an alternative model setting where deficit irrigation is precluded. We conclude that ignoring deficit irrigation can lead to a significant underestimation of the cost-effectiveness of water pricing towards water saving.

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(g)etting to the point: The problem with water risk and uncertainty

Cited by 14 publications

References 34 publications

Markets, mis‐direction and motives: A factual analysis of hoarding and speculation in southern Murray–Darling Basin water markets

Markets, mis‐direction and motives: A factual analysis of hoarding and speculation in southern Murray–Darling Basin water markets

The Fifth Stage in Water Management: Policy Lessons for Water Governance

Influence of crop-water production functions on the expected performance of water pricing policies in irrigated agriculture

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