Irrigation water management in uncertain conditions—Application of Modern Portfolio Theory

Z. Paydar and Muhammad Qureshi ()

Agricultural Water Management, 2012, vol. 115, issue C, 47-54

Abstract: With increasing pressure on limited water resources, water managers and policy makers face many challenges to meet various, often conflicting, demands with limited resources and much uncertainty (e.g. climate change and variability) and often lack effective tools to investigate different options under uncertain conditions. Recent studies have highlighted that there will be less water available in the future in many parts of the Murray-Darling Basin, Australia which introduces uncertainty for the future of irrigation in the Basin. However, the water sector needs a robust approach to quantify the risks or setting up management strategies. Adopting the basic idea of spreading the risk from the field of finance, Modern Portfolio Theory is used in the current analysis to quantify the risk associated with a range of irrigation investment strategies (including retiring irrigation land, water savings options, conjunctive use of ground and surface water) to address the issue of water scarcity. The aim of this analytical approach is to increase adaptive capacity of the system by diversifying options and mitigating the associated risk and choosing more robust portfolios or management strategies. In this paper, a risk-based approach to water demand management and planning is formulated and ways of applying “Modern Portfolio Theory” are explored for addressing climate-induced variability and uncertainty in irrigation water supply.

Keywords: Climate change; Investment options; Risk; Decisions with uncertainty; Drought (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378377412002181
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:agiwat:v:115:y:2012:i:c:p:47-54

DOI: 10.1016/j.agwat.2012.08.004

Access Statistics for this article

Agricultural Water Management is currently edited by B.E. Clothier, W. Dierickx, J. Oster and D. Wichelns

More articles in Agricultural Water Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().