Climate change adaptation: a farm level model to assess investment decisions in water storage

Abstract

One of the potential measures suggested to cope with the changes induced by Climate Change (CC) is the construction of rainwater harvesting reservoirs (Bozzola and Swanson, n.d.). The literature has focused mostly on the water allocation management but it overlooks at the structure of the investment decision. We analyse the investment decision in water storage facilities, for different farming specialization and under different climatic scenarios to assess the option value of the investment. We take an interdisciplinary approach integrating climate, agronomic and economic models. CC effects are assessed by a downscale of the A1B scenario of the IPCC (Tomozeiu et al., 2010). The resulting estimated temperatures and rainfall levels are then introduced in an agronomic model, which determines the irrigation water quantity and timing for a number of crops. Finally all these elements are included in a farm level economics model, DHYMORA (Viaggi et al., 2010). The model is applied to typical farm specializations in eastern Emilia-Romagna, including both annual and perennial crops.