Climate change and adaptation in Australian wheat dominant agriculture: a real options analysis

Greg Hertzler, Todd Sanderson, Timothy Capon, Peter Hayman and Ross S. Kingwell

No 152196, 2013 Conference (57th), February 5-8, 2013, Sydney, Australia from Australian Agricultural and Resource Economics Society

Abstract: Australian crop and livestock farmers face uncertain climate change and variability and a challenge for adaptation decisions. These decisions can be (1) adjustments to practices and technologies, (2) changes to production systems, or (3) transformation of industries, for example, by relocation to new geographical areas. Adjustments to existing practices are easy to make, relative to changes to production systems or transformations at the industry level. Transformations require new investments and infrastructure and can leave assets stranded. These transformations can be partially or wholly irreversible and hysteresis effects can make switching difficult and mistakes costly to reverse. Real Options offers a framework to structure thinking and analysis of these difficult choices. This paper generalises and extends the principles of real options to capture the expected time until transformative thresholds are crossed. An application to South Australian wheat dominant agriculture is explored.

Keywords: Agricultural and Food Policy; Environmental Economics and Policy; International Relations/Trade (search for similar items in EconPapers)
Pages: 24
Date: 2013-02
New Economics Papers: this item is included in nep-agr, nep-cwa and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aare13:152196

DOI: 10.22004/ag.econ.152196

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