Jeffery D. Connor

Modelling Australian land use competition and ecosystem services with food price feedbacks at high spatial resolution

In a globalised world, land use change outlooks are influenced by both locally heterogeneous land attributes and world markets. We demonstrate the importance of high resolution land heterogeneity representation in understanding local impacts of future global scenarios with carbon markets and land competition influencing food prices. A methodologically unique Australian continental model is presented with bottom-up parcel scale granularity in land use change, food, carbon, water, and biodiversity ecosystem service supply determination, and partial equilibrium food price impacts of land competition. We show that food price feedbacks produce modest aggregate national land use and ecosystem service supply changes. However, high resolution results show amplified land use change and ecosystem service impact in some places and muted impacts in other areas relative to national averages. We conclude that fine granularity modelling of geographic diversity produces local land use change and ecosystem service impact insights not discernible with other approaches. We modeled Australian land use change and ecosystem service responses to global scenarios.The model features a novel approach to very high resolution land heterogeneity representation.To demonstrate, we model how food price feedbacks of land competition differ spatially.Modest land use change and ecosystem service impacts are observed in aggregate for Australia.High resolution impacts vary from large to minuscule depending on local land heterogeneity.

Real options analysis for land use management: Methods, application, and implications for policy

Discounted cash flow analysis, including net present value is an established way to value land use and management investments which accounts for the time-value of money. However, it provides a static view and assumes passive commitment to an investment strategy when real world land use and management investment decisions are characterised by uncertainty, irreversibility, change, and adaptation. Real options analysis has been proposed as a better valuation method under uncertainty and where the opportunity exists to delay investment decisions, pending more information. We briefly review the use of discounted cash flow methods in land use and management and discuss their benefits and limitations. We then provide an overview of real options analysis, describe the main analytical methods, and summarize its application to land use investment decisions. Real options analysis is largely underutilized in evaluating land use decisions, despite uncertainty in policy and economic drivers, the irreversibility and sunk costs involved. New simulation methods offer the potential for overcoming current technical challenges to implementation as demonstrated with a real options simulation model used to evaluate an agricultural land use decision in South Australia. We conclude that considering option values in future policy design will provide a more realistic assessment of landholder investment decision making and provide insights for improved policy performance.

Land use efficiency: anticipating future demand for land‐sector greenhouse gas emissions abatement and managing trade‐offs with agriculture, water, and biodiversity

Competition for land is increasing, and policy needs to ensure the efficient supply of multiple ecosystem services from land systems. We modelled the spatially explicit potential future supply of ecosystem services in Australias intensive agricultural land in response to carbon markets under four global outlooks from 2013 to 2050. We assessed the productive efficiency of greenhouse gas emissions abatement, agricultural production, water resources, and biodiversity services and compared these to production possibility frontiers (PPFs). While interacting commodity markets and carbon markets produced efficient outcomes for agricultural production and emissions abatement, more efficient outcomes were possible for water resources and biodiversity services due to weak price signals. However, when only two objectives were considered as per typical efficiency assessments, efficiency improvements involved significant unintended trade-offs for the other objectives and incurred substantial opportunity costs. Considering multiple objectives simultaneously enabled the identification of land use arrangements that were efficient over multiple ecosystem services. Efficient land use arrangements could be selected that meet societys preferences for ecosystem service provision from land by adjusting the metric used to combine multiple services. To effectively manage competition for land via land use efficiency, market incentives are needed that effectively price multiple ecosystem services.

Principles for Economically Efficient and Environmentally Sustainable Water Markets: The Australian Experience

With growing water demand for cities and irrigation, periods of low inflow increasingly lead to “operative” droughts when supply is insufficient to meet all consumptive and environmental water demands. This chapter focuses on water markets as a mechanism for sharing scarce water in drought. The institutional arrangements in the Australian Murray Darling Basin (MDB) that have allowed emergence of what is arguably the world’s most active water market are outlined. The evidence, consistent with economic theory, confirming significant economic benefits from water trade during the recent Murray Darling Basin drought is presented. The yet unresolved challenges arising from increased efficiency of water use in response to water market incentives eroding environmental flow are discussed. The conclusions outline institutional design principles from Australian experience for realizing efficiency benefits and avoiding adverse environmental impacts when introducing water trade.

Ecosystem services in urban water investment

Increasingly, water agencies and utilities have an obligation to consider the broad environmental impacts associated with investments. To aid in understanding water cycle interdependencies when making urban water supply investment decisions, an ecosystem services typology was augmented with the concept of integrated water resources management. This framework is applied to stormwater harvesting in a case study catchment in Adelaide, South Australia. Results show that this methodological framework can effectively facilitate systematic consideration and quantitative assessment of broad environmental impacts of water supply investments. Five ecosystem service impacts were quantified including provision of 1) urban recreational amenity, 2) regulation of coastal water quality, 3) salinity, 4) greenhouse gas emissions, and 5) support of estuarine habitats. This study shows that ignoring broad environmental impacts can underestimate ecosystem service benefits of water supply investments by a value of up to A

Impact of Drought on Adelaide’s Water Supply System: Past, Present, and Future

1.36/kL, or three times the cost of operating and maintenance of stormwater harvesting. Rigorous assessment of the public welfare impacts of water infrastructure investments is required to guide long-term optimal water supply investment decisions. Numerous challenges remain in the quantification of broad environmental impacts of a water supply investment including a lack of peer-reviewed studies of environmental impacts, aggregation of incommensurable impacts, potential for double-counting errors, uncertainties in available impact estimates, and how to determine the most suitable quantification technique.

Climate change and the economics of biomass energy feedstocks in semi-arid agricultural landscapes: a spatially explicit real options analysis

Adelaide, the capital of South Australia, has a population of approximately 1.3 million. In wet years, Adelaide obtains most if its water supply from the nearby catchments in the Adelaide hills. However, in dry years, about 90 % of Adelaide’s water supply needs are met by water that is pumped from the River Murray. Severe drought in the Murray-Darling Basin in the recent past has meant that the security of Adelaide’s water supply has been threatened. In response, strategies for securing Adelaide’s water supply into the future have been developed, including diversification of water sources and demand management strategies. A case study of the performance of the southern Adelaide water supply system under various supply scenarios has been conducted. This highlights the importance of the use of stochastic analysis, risk-based performance measures and extensive scenario analysis in order to enable the long-term planning of water supply systems in hydrologically variable and uncertain environments, rather than having to react to drought events.

China's response to a national land-system sustainability emergency

The economics of establishing perennial species as renewable energy feedstocks has been widely investigated as a climate change adapted diversification option for landholders, primarily using net present value (NPV) analysis. NPV does not account for key uncertainties likely to influence relevant landholder decision making. While real options analysis (ROA) is an alternative method that accounts for the uncertainty over future conditions and the large upfront irreversible investment involved in establishing perennials, there have been limited applications of ROA to evaluating land use change decision economics and even fewer applications considering climate change risks. Further, while the influence of spatially varying climate risk on biomass conversion economic has been widely evaluated using NPV methods, effects of spatial variability and climate on land use change have been scarcely assessed with ROA. In this study we applied a simulation-based ROA model to evaluate a landholders decision to convert land from agriculture to biomass. This spatially explicit model considers price and yield risks under baseline climate and two climate change scenarios over a geographically diverse farming region. We found that underlying variability in primary productivity across the study area had a substantial effect on conversion thresholds required to trigger land use change when compared to results from NPV analysis. Areas traditionally thought of as being quite similar in average productive capacity can display large differences in response to the inclusion of production and price risks. The effects of climate change, broadly reduced returns required for land use change to biomass in low and medium rainfall zones and increased them in higher rainfall areas. Additionally, the risks posed by climate change can further exacerbate the tendency for NPV methods to underestimate true conversion thresholds. Our results show that even under severe drying and warming where crop yield variability is more affected than perennial biomass plantings, comparatively little of the study area is economically viable for conversion to biomass under

Designing Tradable Credit Policy for Diffuse Source Salinity Ex Ante

200/DM t, and it is not until prices exceed

Analyzing the potential for water quality externalities as the result of market water transfers

200/DM t that significant areas become profitable for biomass plantings. We conclude that for biomass to become a valuable diversification option the synchronisation of products and services derived from biomass and the development of markets is vital.