Author(s)

Z. Paydar & E. Qureshi

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 often lack effective tools to investigate different options under uncertain conditions. The recent studies in the Murray Darling Basin have highlighted that there will be less water available in the future in many parts of the Basin which introduces a large uncertainty for the future of irrigation. However, the water sector lacks a robust approach to quantify the risks and criteria for system resilience and thresholds for setting up risk management strategies. Adopting the basic idea of spreading the risk from the field of finance, the \“Portfolio Theory” can be used in quantifying the risk against uncertainties associated with each option dealing with 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. In this paper, a range of options (e.g. retiring land from irrigation, water savings measures, ground/surface water conjunctive use, use of alternative water for irrigation) are considered and ways of applying the \“Portfolio Theory” are explored to formulate a risk-based approach to water demand management and planning with diversified options to deal with uncertain supply sources. Keywords: Portfolio Theory, irrigation, risk, uncertainty, drought. 1 Introduction Water allocations in the south eastern parts of Australia have been reduced since 2006 due to the prolonged drought. Climate change is expected to reduce water

Keywords

Portfolio Theory, irrigation, risk, uncertainty, drought