Shifts in rainfall and rising temperatures due to climate change poses a formidable challenge to the sustainability of broadacre crop yields in Western and SouthEastern Australia. Output from18 Global Climate Models (GCMs) for the Special Report on Emission Scenarios (SRES) A2 scenario was statistically downscaled to four contrasting locations. For the first time in these regions, bias corrected statistically downscaled climate data were employed to drive the Agricultural Production Systems Simulator (APSIM) crop model that integrates the effects of soil, crop phenotype, and management options for a quantitative comparison of crop yields and phenology under an historical and a plausible projected climate. The dynamic APSIM simulation model explore the implications of climate change across multiple locations and multiple time periods (1961-2010, 2030, 2060 and 2090) for multiple key crops (wheat, barley, lupin, canola, field pea) grown in three different types of soil. On average, the ensemble of downscaled GCM projections show a decrease in rainfall in the future at the four locations considered, with increased variability at two locations. At all locations and for five crops, future changes in both crop biomass and grain yield are strongly associated with changes in rainfall (P = 0.05 to P = 0.001). The overall rainfall amount is critical in determining yields but, equally, higher future temperatures can contribute to reducing crop productivity primarily due to advanced crop phenology. For example, for wheat cropping at Hamilton (a higher rainfall site), there is a significant advancement in median flowering date for 2030, 2060, and 2090 of 10, 18, and 29 days respectively with a significant 0.50% grain yield changes for each percentage change in rainfall compared to significant 0.90% grain yield changes in Cunderdin (a lower rainfall sites). At all sites except Hamilton, the change in crop grain yield is significantly correlated (P=0.001) with the percentage change in the future rainfall and the impact increased progressively from higher rainfall to lower rainfall sites. However, the magnitude of the change in crop phenology and yield were not significantly different between soil types. These results help to define regions of concern and their relative importance in the coming years. In this future climate the negative consequences for crop yields and advancement of phenology relative to baseline are not uniform across crops and locations. Of the crops studied-wheat, barley, lupin, canola and field pea-field pea is the most sensitive to the projected future climate changes, and the ensemble median changes in field pea yield range from a decrease of 12% to a decrease of 45%, depending on location. These results highlight the importance of research and policy to support strategies for adapting to climate change, such as advances in agronomy, soil moisture conservation, seasonal climate forecasting and breeding new crop varieties.

This study examines the use of water by existing downstream entitlement holders and their possible market interactions with upstream interests in new forestry plantations in the case of the Macquarie River Catchment, NSW. Demand for offset water to allow upstream plantation establishment is estimated as a function of tree product value and direct and opportunity costs in six sub-catchment areas with different rainfalls and locations with respect to urban and other high security water users (UHS). This upstream demand is aggregated with downstream demand for water. The aggregate supply of downstream water entitlements is posited in terms of marginal values to each of three sectors [stock & domestic (S&D), irrigation (IRR), and wetland (WL) areas] and their current entitlements. Assuming a fixed quantity of water entitlements, equilibrium quantities traded and the distributions of trade and associated surpluses are estimated given each of four stumpage values for tree products. This is done assuming four combinations of scenarios: with or without the policy that water entitlements must be obtained before establishing a tree plantation, and with or without one sub-catchment being very salty, the latter being a hypothetical case.

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Large-scale tree plantations in high rainfall upstream areas can reduce fresh water inflows to river systems, thereby imposing external costs on downstream irrigation, stock and domestic water users and wetland interests. We take the novel approach of expressing all benefits and costs of establishing plantations in terms of $ per gigalitre (GL) of water removed annually from river flows, setting upstream demands on the same basis as downstream demands. For the Macquarie Valley, a New South Wales sub-catchment of Australia's Murray-Darling Basin, we project changes in land and water use and changes in economic surpluses under two policy settings: without and with a policy requiring permanent water entitlements to be purchased from downstream parties, before plantation establishment. Without the policy, and given a high stumpage value for trees ($70/m 3 ), upstream gains in economic surplus projected from expanding plantations are $639 million; balanced against $233 million in economic losses by downstream irrigators and stock and domestic water users for a net gain of $406 million, but 345 GL lower mean annual environmental flows. With the policy, smaller gains in upstream economic surplus from trees ($192 million), added to net downstream gains ($138 million) from sale of water, result in gains of $330 million with no reduction in environmental flows. Sustaining the 345 GL flow for a $76 million (406-330) reduction in gains to economic surplus may be seen to cost only $0.22 million/GL; but this is much lower than the market value of the first units of that water to agriculture and forestry.

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