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Socio-economic assessment of water efficiency investments in the Murrumbidgee Valley: a study conducted for the Pratt Water Murrumbidgee Valley Water Efficiency Feasibility Project

1 Jan 2004

The economic value of the Pratt Water initiatives to save water and improve supply reliability/distribution depends largely on the extent to which water is a scarce input to production. Maximising water use efficiency per se is not necessarily in the best interests of growers or the regional economy. Many other inputs (land, labour and capital) are involved in irrigated production and it is the returns to all these factors that must be optimised, not just water. Indeed, in some situations water may not be the limiting constraint to production - land or labour may be more limiting. However, water scarcity is expected to increase in future as more water is allocated for environmental purposes and the possibility of a drier climate over the coming years. Increased scarcity would increase the value of water to users as an economic resource and thus elevate the importance of savings. To undertake this evaluation we have constructed a regional economywide model of the Murrumbidgee Valley to map out the water inputs of all the main activities in the Valley and their corresponding outputs. Such a framework is capable of explicitly modeling the linkages and interactions between economic activities in the region, which ensures that all inputs and outputs add up and there is no double counting. The model produces estimates of the value of water savings and the opportunity cost (foregone benefits) of reducing irrigation diversions, the impact of water use efficiency improvements and various other potential Pratt Water outcomes on irrigation value added as well as value added from other economic activities, the flow on effects of the changes in terms of increased value added to other industries - for example, service industries, input suppliers and processors and direct and indirect impacts on regional employment.

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