Investment in irreversible irrigation technology under uncertainty

Ahmed Hafi, Anna Heaney and Stephen Beare

No 139769, 2006 Conference (50th), February 8-10, 2006, Sydney, Australia from Australian Agricultural and Resource Economics Society

Abstract: Australian governments have agreed to develop and implement policies to promote more efficient use of water resources and improved water quality. Policy objectives may include incentives for investment in efficient irrigation technologies. However, the presence of large, sunk investment and the uncertainty of future returns will have an impact on the efficiency of such policies and the timing of the water savings and environmental benefits that they generate. A case study of Murrumbidgee Irrigation Area is used to quantify the effect of sunk investment cost and uncertainty of future returns on the effectiveness and efficiency of policy initiatives to increase water use efficiency. The results indicate that these factors slow adoption rates substantially. Policies that promote greater certainty with respect to water resource can potentially increase adoption rates and resultant environmental outcomes.

Keywords: Financial Economics; Research and Development/Tech Change/Emerging Technologies; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 25
Date: 2006
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aare06:139769

DOI: 10.22004/ag.econ.139769

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