Including the costs of water and greenhouse gas emissions in a reassessment of the profitability of irrigation

Irrigated cropping helps stabilise farm and regional income and contributes to productivity gains but the net benefits should include the full cost of water and greenhouse gas (GHG) emissions. This study examines the costs and returns of switching from a dryland rotation for four crops in the Darling Downs region of Australia, to a rotation of the same crops under irrigation, including greenhouse gas (GHG) values. The value chain, including all inputs was identified and emissions estimated using a range of studies and models. Over four year cropping cycle, the irrigated system would result in more than six times the emissions than from the dryland system. If GHG and water prices are not embedded in the production process, irrigation is more profitable per hectare. In this scenario, the landholder makes more than twice as much from the irrigated crops, with gross margins for the dryland and irrigated crop rotations of $1597 and $3490/ha, respectively. If the value of GHGs is included, the gap closes but irrigated crops are still more profitable. If however, a relatively high cost of the water, based on price ranges from the last decade, is included, then dryland crops are financially preferable. These results could be useful in designing national mitigation and water buy-back policies, both of which are being developed in Australia. (C) 2011 Elsevier B.V. All rights reserved.