4628.0.55.001 - Completing the Picture - Environmental Accounting in Practice, May 2012  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 10/05/2012  Final
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Adaptation and environmental-economic accounting
Adapting to changes in water availability
Water and agriculture
Adapting to other changes in natural systems


The first pillar of Australia's climate change policies is reducing the amount of greenhouse gases released into the atmosphere, as discussed in Chapter 2. The second pillar of Australia's climate change policies is adaptation - that is, Australia's ability to adapt to climate changes which cannot be avoided.

The recently released State of the Climate Report(footnote 1) stated that it is clear that increasing greenhouse gas concentrations will result in significant further global warming. The report also acknowledges that uncertainties remain regarding future levels of greenhouse gas concentrations, and the precise timing and magnitude of changes, particularly at regional scales.

In 2007 the Council of Australian Governments endorsed a National Climate Change Framework to guide practical activities to adapt to climate change. This was followed in 2009 by Australia's fifth communication on climate change to the United Nations Framework Convention on Climate Change (UNFCCC), where adaptation was recognised as one of the Australian Government's climate change policy responses(footnote 2) .

In 2011 the Productivity Commission began an inquiry into climate change adaptation(footnote 3) . The inquiry will review regulations and policies that may be barriers to effectively adapting to the impacts of climate change. It will also examine the costs and benefits of options to remove those barriers.

The Australian Government identified the following areas as the initial national priorities for adaptation to climate change:

  • coastal management
  • water
  • infrastructure
  • natural systems of national significance
  • prevention, preparedness, response and recovery with regard to natural disasters
  • agriculture

Other areas of importance include human health, energy, fisheries, forestry and tourism.

Adaptation to climate change requires the implementation of a wide range of actions and measures. These include: changing agricultural production practices, enhancing water efficiency, changing building codes, and construction of barriers as well as improved engineering against floods(footnote 4) . Adaptation measures are undertaken by both the public and private sectors and include investments in infrastructure, new technology and policies to promote behavioural change.

Reporting on adaptation to climate change poses a number of challenges. The measures of adaptation span social, economic and environmental issues. The System of Environmental-Economic Accounting (SEEA) could provide a valuable framework for measuring, organising and analysing statistics on adaptation to climate change. This chapter includes a number of examples of behaviours which could be used to adapt to climate change and the possible approaches for analysis of climate change adaptation. Analysis could focus on the management of an important environmental issue or resource that is impacted by climate change, for example biodiversity or water. Alternatively, structural changes in the economy in response to climate change could be analysed by recording the changes in industry activity, such as electricity supply or water supply. The international statistical community is working to develop a framework to measure expenditure on climate change adaptation, based on the SEEA(footnote 5) . The following sections examine how environmental accounts could be used to inform policy on adapting to climate change.

Water is a vital natural resource and changes in its availability will affect the environment and the economy, and impact on society. Measures to manage and adapt to changes in water availability include improvement in the efficiency of irrigation systems, creation of tradable water markets, and increased use of water saving technologies in industrial processes and in homes. Other changes are likely to include production processes that are more adaptable to variable water availability and increased flood mitigation.

Figure 3.1 shows rainfall in Australia July 2007 to June 2010, compared to long-term averages (presented as deciles of historical rainfall).

Rainfall is important for analysing water availability as it determines how much of the resource is stored in the landscape as surface water, groundwater, and in dams and other storages. There was substantial variation in rainfall over the continent, with historically very low rainfall over much of southern and western Australia, with historically very high levels over much of Queensland and the Northern Territory (with the highest rainfall ever recorded in some regions).

3.1 RAINFALL, Australia - Deciles: July 2007 to July 2010
Diagram: 3.1 RAINFALL, Australia—Deciles: July 2007 to July 2010

The Australian Bureau of Statistics (ABS) Water Account, Australia (cat. no. 4610.0) is useful in analysing the changes in water use likely to result from changes in water availability. The account provides information on the supply and use of water, detailing the use of water by different industries and the value of the water supplied (by the water industry) to industry and households. The presentation of both economic and physical information on the same basis make it particularly suited to analysing the economic efficiency of water use - and therefore of the likely economic impact of changes in water use resulting from changes in water availability.

The agriculture industry is the largest consumer of water in Australia. Both rain-fed and irrigated agriculture are dependent on water availability. Understanding how agricultural production could be affected by changes in water availability is a national climate change adaptation priority.

The following series of graphs are derived from the ABS Water Account, Australia (ABS cat. no. 4610.0; see the Appendix). They illustrate how Australian irrigators have adapted to changing patterns of water availability. For example, in dry years crops that require greater quantities of water to ensure production, like cotton and rice, are not grown. It also shows that while total use of water in agriculture has declined, the gross value of irrigated agricultural production has increased.

Figure 3.2 shows that water consumption by the agriculture industry fell by 55% between 1996-97 and 2009-10. In other industries, water consumption fell by 5% over the same period.

3.2 Water consumption - Agriculture & all other industries, 1996-2010
Graph: 3.2 Water consumption – Agriculture & all other industries, 1996–2010

3.3 Changes in water intensities of the Agriculture and all other industries, 1996-97 to 2009-10
Graph: 3.3 Changes in water intensities of the Agriculture and all other industries, 1996-97 to 2009-10

Water intensity is a measure of the water consumed to produce one unit of economic output. It is calculated by dividing total water consumption by Industry Gross Value Added (GL/$m IGVA). The volume of water required by the agriculture industry to produce one unit of economic output fell by 66% between 1996-97 and 2009-10 to 0.29 GL/$m IGVA. The water intensity of all other industries also declined over the period, although to a lesser extent, falling by 39% (Figure 3.3).

Gross Value of Irrigated Agricultural Production (GVIAP) refers to the gross value of agricultural commodities that are produced with the assistance of irrigation. The gross value of commodities produced is recorded at wholesale prices. Note that this definition of GVIAP does not refer to the value that irrigation adds to production, or the "net effect" that irrigation has on production - rather, it simply describes the gross value of agricultural commodities produced with the assistance of irrigation. GVIAP is not a measure of productivity.Figure 3.4 shows that GVIAP has increased by over 20% between 2002-03 and 2009-10. Over the same period, the water volume used in irrigation decreased by 40%. The decrease in water volume corresponds to the decline in cotton and rice production.

3.4 Gross Value of Irrigated Agriculture(a)(b), Volume of Water Applied - 2002-2010
Graph: 3.4 Gross Value of Irrigated Agriculture(a)(b), Volume of Water Applied—2002–2010

In Australia in 2009-10, the largest proportion of irrigated land was 'pasture for grazing' (542,000 hectares), with the volume of irrigation water applied (1,722 GL) representing 26% of the national total. Pasture for grazing requires relatively little water for a given area of land, compared to rice, sugar cane, cotton and nurseries. Figure 3.5 shows that between 2002-03 and 2009-10 the volume of water applied per hectare of irrigated land decreased for all commodities.

The crop types grown under irrigation vary across Australia. Victoria, South Australia, Western Australia, and Tasmania mainly irrigate pasture for grazing, while New South Wales and Queensland irrigate cotton and a range of other broadacre crops. The Northern Territory uses water mainly to irrigate orchards and plantation fruits.

3.5 Water use per area irrigated, selected crops
Graph: 3.5 Water use per area irrigated, selected crops

The Murray-Darling Basin as a region rates specific mention in relation to climate change adaptation, because of its significant agricultural production, ecological significance and reliance on water. Figure 3.6 illustrates the use of water in agriculture, in the Murray-Darling Basin and elsewhere. In the Murray-Darling Basin, a greater proportion of agricultural water is used for irrigation than the balance of Australia. The use of environmental-economic accounting to inform decision-making related to the Murray-Darling Basin is explored in detail in Chapter 6.

3.6 Water use in Agriculture - 2009-10
Graph: 3.6 Water use in Agriculture—2009–10


Increasing temperatures, changes to rainfall patterns and the frequency and severity of cyclones and other natural disasters will influence the types of human activity able to be undertaken in particular places. It is also recognised that these changes will impact on natural systems of international significance, such as the Great Barrier Reef. For example the June 2009 Great Barrier Reef Intergovernmental Agreement(footnote 6) makes special mention of the pressures arising from climate change. The use of environmental accounting to assist the management of the Great Barrier Reef is addressed in more detail in Chapter 5.

The impact of climate change on human activities can be seen in the use of land. ABS experimental Land Accounts for the Great Barrier Reef provide information on land cover and land usage, agricultural water use and the gross value of irrigated and non-irrigated agricultural production at a fine level of geographic disaggregation. These data can be combined with demographic information from the Census of Population and Housing to better understand the socio-economic context of land usage in a given region.

Agriculture, forestry and fisheries

In 2009-10, Agriculture, forestry and fisheries together contributed about 2% to industry gross value added in Australia and employed around 5% of all persons employed. These industries are particularly vulnerable to climate variability. For agriculture, climate variability could mean the development or instillation of new irrigation systems, or a change in agricultural production to crops, or livestock that can withstand hotter or colder, dryer or wetter climates than previously experienced.

The Forestry and logging industry is relatively small component of Australia's economy. However, the importance of forested ecosystems and the potential of forests to contribute to carbon sequestration and storage make forestry very important for future generations(footnote 7) . Adaptation measures focus on increasing the forests' resilience to change by maintaining the diversity of species and the age structures of forest stands in the landscape(footnote 8) .

The Fisheries industry is closely linked to ecosystem condition, which affects the distribution and abundance of marine organisms. Fishing, if undertaken unsustainably (i.e. overfishing) can cause pressures on fish stocks and climate change will change the balance of fish stocks. Internationally, measures proposed to aid in fisheries' adaptation to climate change include changing the types of species harvested, increasing imports of fish, and increasing production efficiencies and reducing waste(footnote 9) .

Each of these industries relies on the direct input of natural resources. The supply and consumption of natural resources lend themselves to long-term measurement in an integrated environmental-economic framework and such long-term measurements are important in monitoring adaptation to climate change.

The Water supply industry

In 2009-10, the Water supply, sewerage and drainage services accounted for less than 1% of the industry gross value added and employed about 0.3% of persons employed in the country(footnote 10) . However, the availability of clean water is critical to the functioning of Australian society. The variations in rainfall as well as the changes in water temperature and water flows will affect the quality of available water. Also sea level rise, saline intrusion in coastal aquifers may increase, affecting the suitability for drinking water(footnote 11) .

Because of the need to maintain water supplies to people in times of drought there has been an increase in the amount of water that has or can be supplied by desalinating water. Desalination of water in Australia has been undertaken for over a hundred years and was previously used mostly to provide water to remote areas for household consumption or use in mining, defence or tourism. Desalination is now undertaken or planned in several of Australia's capital cities, including Sydney, Melbourne, Adelaide and Perth. The ability to produce water reliably, independent of climate variations, is an important driver of the increasing interest in desalination. Between 2009 and 2013, 976 desalination plants were under construction and another 925 plants were proposed(footnote 12) . Producing water from desalination relies on upfront investments in desalination plants as well as on-going expenses and in particular of energy. The on-going energy costs generally make desalination expensive compared to water sourced from more traditional sources(footnote 13) .Energy and renewable energy

In 2009-10 the Electricity supply industry accounted for about 2.5% of gross industry value added and accounted for 0.5% of total employees(footnote 14) . In 2009-10, renewable energy represented 2% of total primary energy supply (about 286 PJ)(footnote 15) . Part of Australia's plan for adapting to climate change is to increase the share of energy supplied from renewable sources(footnote 16) .

Figure 3.7 shows the amount of electricity generated from each renewable source as well as the percentage of total electricity generated from renewable sources. Historically, renewable electricity production has fluctuated based on the supply of hydro power, but in recent years wind energy has become a larger source of electricity, accounting for 24% of renewable electricity in 2009-10.

3.7 Quantity of electricity generated, from renewable sources: 1995-96 to 2009-10
Graph: 3.7 Quantity of electricity generated, from renewable sources: 1995–96 to 2009–10

Energy production and distribution will to some extent be vulnerable to climate variations. Electricity transmission wires are damaged through extreme weather events and there might also be increased losses in transmission due to higher temperatures. Internationally, measures to adapt have been proposed to involve a combination of new insurance products and public responses so that the energy services can keep the infrastructure up and running and maintain energy security(footnote 17) .

Hydroelectric power plants are dependent on continued access to water. The variability of rainfall will impact on the production as well as the safety of dams and reservoirs. Investments in storage and increasing connectivity between grids to reduce losses are examples of measures to adapt to climate change.

Higher temperatures and storms can negatively affect the efficiency of photovoltaic power cells. On the other hand, increasing average wind velocities can improve the electricity production from wind turbines. Measures to adapt would include locating specific types of energy power generation to areas less vulnerable to high temperatures, storms or sea level rise as well as to take advantage of changed conditions (e.g. in the case of wind turbines).

Coastal management

Ports, airports, military facilities, as well as residential and other private infrastructure located in vulnerable coastal locations may require increased monitoring in the future. There will also be adverse impacts on coastal and estuarine ecosystems. The frequency of extreme sea level events (including storm surges) can increase with a modest sea level rise, making many existing coastal assets vulnerable.

Measurement indicators for coastal regions and for coastal management can be extracted from land accounts and in particular can answer questions like: how many people and what physical infrastructure would be affected by rising sea levels?

ABS has produced experimental Land Accounts that provide information on population, land cover and agricultural production in areas with bearing on the Great Barrier Reef(footnote 18) . One of the strengths of this style of account is that it incorporates a spatial aspect to the data. An expansion of this type of account to other areas of Australia and in particular to coastal regions could be used as a tool to understand which areas may be adversely affected by rising sea levels or increased frequency of storms and floods.

Data for coastal management crosses many statistical areas. The experimental land accounts for the Great Barrier Reef provide information on a range of areas, including: land cover, land use, land value, agricultural water use and the gross value of irrigated and non-irrigated agricultural production. These data can be combined with demographic information from the ABS Census of Population and Housing to better understand the socio-economic context of land use in this region. Chapter 5 is dedicated to the Great Barrier Reef and discusses how a variety of accounts, including land, water, emissions (water pollution), and biodiversity as well as tourism satellite accounts can inform management of this area.Natural disaster preparation and management

There is some evidence that climate change is already impacting the frequency and intensity of extreme events(footnote 19) . In the past 20 years Australia has suffered a number of natural disasters with a range of impacts on the population, the economy and the environment (Figure 3.8). Across Australia, storms and floods are a yearly feature.

3.8 Extreme weather events - 1990-2010
Graph: 3.8 Extreme weather events—1990–2010

Land accounts, such as those presently available for the Great Barrier Reef, can help natural disaster management and planning. Land accounts provide spatially explicit information on the population and number of businesses at a local level, which can be used to estimate the magnitude of socio-economic effects of natural disasters. As the land accounts use Geographical Information System (GIS) users can add their own spatial data and examine areas of particular interest. For example, areas close to coasts, rivers, or fire-prone land.

In addition to identifying vulnerable land areas and ecosystems through spatial information, it is also of interest to measure how much is spent on activities, technologies, infrastructure etc. related to reducing the impacts of climate change. The aggregation (and disaggregation) of data sets that accurately account for the costs and expenditures relating to adaptation measures can be used for the purpose of a wide range of policy analysis, particularly if integrated with physical measures and outcomes. The ABS has compiled Environment Protection Expenditure Accounts (EPEA) in the past, and expenditure accounts for climate change adaptation could be an extension of these estimates(footnote 20) ,(footnote 21) .

Tracking the monetary flow of adaptation to climate change

Environmental protection and natural resource expenditure accounts track financial transactions related to activities aimed at reducing environmental impacts or protecting our natural resources. Internationally work on developing new methodologies based on SEEA to create a separate set of statistics on expenditure for adaptation to climate change is progressing(footnote 22) . The methodology focuses on measures undertaken by the General Government but it is known that businesses are already starting adaptation activities(footnote 23) .

In the fifth national communication to the UNFCCC Australia stated that adaptation is already part of the financial budget. Investments in research to increase the understanding of the impacts of climate change has been made as well as investing in building adaptive capacity and increase efficient risk management(footnote 24) . At this point in time it is not possible to produce monetary statistics on adaptation, but an example is provided below showing what types of measures are being put in place and how much is invested.

Figure 3.9 shows some measures that the Australian government has flagged for funding through the Water for the Future program. This program is a 10 year initiative addressing four issues:
  • taking action on climate change
  • using water wisely
  • securing water supply
  • supporting healthy rivers
3.9 Water for the future program, Adaptation Components - 10 YEAR INITIATIVE
Graph: 3.9 Water for the future program, Adaptation Components—10 YEAR INITIATIVE

1 CSIRO and BoM 2012. State of the Climate 2012. <back
2 http://www.climatechange.gov.au/~/media/publications/international/Australia-fifth-national-communication.pdf <back
3 Productivity Commission 2011. Barriers to Effective Climate Change Adaptation. <back
4 Adapting to Climate Change in Australia–An Australian Government position paper 2010. <back
5 Statistics Sweden, 2011. Climate Change Adaptation Expenditure – A proposal for a methodology to compile, define and classify national and EU economic information as statistics. <back
6 Great Barrier Reef Intergovernmental Agreement. <back
7 ABARES. Fast Facts Carbon in Australia's Forests. <back
8 European Commission (2009). WHITE PAPER Adapting to climate change: Towards a European framework for action – Impact assessment. Brussels, 1.4.2009 SEC(2009) 387. <back
9 European Commission (2009). WHITE PAPER Adapting to climate change: Towards a European framework for action – Impact assessment. Brussels, 1.4.2009 SEC(2009) 88. <back
10 Australian Industry, 2009–10 (ABS cat. no. 8155.0). <back
11 CSIRO, 2009. Desalination in Australia. <back
12 CSIRO, 2009. Desalination in Australia. <back
13 Productivity Commission, 2011. Australia's Urban Water Sector. Vol. 1. <back
14 Australian Industry, 2009–10 (ABS cat. no. 8155.0). <back
15 Energy Account, Australian 2009–10. (ABS cat. no. 4604.0). <back
16 See for example, Australian Government, 2011. Clean Energy Australia. <back
17 European Commission, 2009. WHITE PAPER Adapting to climate change: Towards a European framework for action – Impact assessment. Brussels, 1.4.2009 SEC(2009) 387. <back
18 Land Account, Great barrier Reef Region, Experimental Estimates. (ABS cat. no. 4609.055.001). <back
19 IPCC, 2007. Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge University Press. Table SPM.2. <back
20 ABS, 2002. Environment Protection, Mining and Manufacturing Industries, Australia, 2000–01. (ABS cat. no. 4603.0). <back
21 ABS, 2004. Environment Expenditure, Local Government, Australia, 2002–03. (cat. no. 4611.0). <back
22 Statistics Sweden, 2011. Climate Change Adaptation Expenditure – A proposal for a methodology to compile, define and classify national and EU economic information as statistics. <back
23 CSIRO. Adaptation benchmarking survey: initial report. Climate Adaptation National Research Flagship Working paper #4. <back
24 Australian Government (2011) Australia's 5th National Communication on Climate Change. <back