Australian Natural Resources Atlas

Australians and Natural Resource Management

National Land and Water Resources Audit, Commonwealth of Australia
March 2002
ISBN 0 642 37123 7

Regional economic assessment

Dryland salinity – a case study

Key points

Assessment framework context

As part of the Audit’s report Australian Dryland Salinity Assessment 2000 (NLWRA 2001b) four representative case study regions were chosen for detailed economic analysis of the opportunities for managing dryland salinity (Figure 6.1). They were:

The information in this chapter brings the rapid assessment framework together (Steps 2, 3 and 4 in Figure 2.6 of Chapter 2) and presents, by way of an example, benefit–cost analyses of options to address dryland salinity.

In each of the four catchment case study areas, the Bureau of Rural Sciences and CSIRO undertook detailed assessments of the groundwater systems and how they would respond to different management regimes—in particular, management regimes that would decrease groundwater recharge. This work has greatly increased our understanding of groundwater movement and how this influences the extent of dryland salinity and opportunities for mitigating measures. Groundwater flow systems were classified (Box 6.1) into three broad types:

Changes to the landscape over the past 200 years have greatly increased the rate of recharge of surface water to groundwater systems and all three types of groundwater flow systems are slowly but surely filling up, causing the spread of dryland salinity. A result of the Audit is a greater appreciation of the slow response times of these groundwater systems. Changes to recharge in even local systems may show no apparent changes in groundwater levels in the lower parts of the catchment for periods of up to between 30 and 50 years. This period may extend to 200 years or more in the case of large regional groundwater systems. Growing trees or deep-rooted perennials on individual farms may in some cases cause a ‘dent’ in the groundwater profile which may result in some, very localised, beneficial response—more likely to occur in local groundwater flow systems.

Figure 6.1 Case study areas.

Figure 6.1 Case study areas.

Economic and social assessment of case study regions

For each of the four catchment case study regions the options to reduce recharge in the upper catchments by 50%, 75% and 90% over the next 50 years were estimated. Comprehensive fieldwork in each region was undertaken to assist in key parameter estimation, assessing both the practicalities of alternative options and the capabilities of land managers to change (Read Sturgess and Associates 2001).

Social and structural adjustment trends were considered in the context of capacities of communities and land managers to change land use in a way that would contribute to salinity control (Tables 6.1, 6.2).

Table 6.1 Summary of results from case studies—qualitative.

Kamarooka Lake
Warden		 Upper
Billabong		 Wanilla
Substantial environmental benefits yes yes no no
Substantial impacts for agriculture and rural infrastructure yes yes no yes
Substantial impacts for urban infrastructure no no no no
Substantial impacts for water users no no yes no
Availability of effective option(s) for salinity control yes yes yes no
Implementation of substantial salinity control is occurring yes yes no no

Table 6.2 Summary of results from case studies—quantitative.

Kamarooka Lake
Warden		 Upper
Billabong		 Wanilla
Catchment area (ha) 10 000 171 000 300 000 17 000
Mean farm size (ha) 800 1 300 850 700
Present extent of severely salinised catchment (%) 7 8 0.1 8
Projected extent (2050) of severely salinised catchment
without control (%)		 7 > 45 1.1 15
Present impact of salinity ($/yr) 50 000 1 400 000 40 000 300 000
Projected impacts from salinity over next 50 years without control (NPV) ($) 900 000 probably
> 200 000 000		 3 700 000 8 400 000
Agricultural share of impacts (%) 85 43 80 95
Environmental share of impacts (%) not significant 42 not significant not significant
Roads, rural, urban share of impacts (%) 2 15 6 5
Water users share of impacts (%) 10 ni 14 nil
Net economic benefit over next 50 years from
implementing 50% reduction in recharge (NPV $ million)		 0.6 44 na na
Net economic benefit over next 50 years from
implementing 75% reduction in recharge (NPV $ million)		 na -65 na na
Net economic benefit over next 50 years from
implementing 90% reduction in recharge (NPV $ million)		 -0.4 -251 na -27

Box 6.1 Groundwater, the key to understanding dryland salinity

The process of salinisation is now well known, but differs across Australia according to different groundwater flow systems. The removal of deep-rooted trees or other vegetation in the elevated recharge areas of a catchment increases the rate of recharge into the groundwater. Consequently, the groundwater level rises in the catchment and in the lower areas comes close to or reaches the surface. During this process, salts in the soil are mobilised and rise to the surface causing salinity. Across large areas of Australia these groundwater aquifers are slowly but surely filling up, causing the spread of dryland salinity. Only recently has the length of time taken for ground water to flow through the subsurface rock or sediment substrate been appreciated. This depends on the nature of the groundwater flow system. A classification system that categorises groundwater flow systems into local, intermediate and regional was developed as part of Australian Dryland Salinity Assessment 2000 (see NLWRA 2001b, p. 48 for details). Each is further classified into four subcategories based on underlying geological structures.

Local groundwater flow systems are fully contained within small catchments; the area contributing to groundwater discharge is readily identifiable; and the number of landholders who must adopt alternative management practices if salinity is to be controlled is relatively small. Local systems afford some opportunities for dryland salinity mitigation through the application of land management practices.

Intermediate groundwater flow systems operate within much larger catchments than local systems and afford much greater challenges for farm-based catchment management programs aimed at dryland salinity mitigation. Engineering options such as pumping and drainage, and ‘living with salt’ options are important in dryland salinity management in these systems.

Regional groundwater flow systems are the most difficult of all to manage using farm management. They occur on a scale that is so large as to make farm-based catchment management options impractical and dryland salinity mitigation under these circumstances will involve selective engineering measures to protect high value assets and infrastructure, together with adopting ‘living with salt’ strategies.
Photo: Mirko Stauffacher

Wanilla catchment—South Australia

The Wanilla catchment is a small basin of about 17 000 ha. The groundwater flow system is local to intermediate in deeply weathered rock. Groundwater discharge occurs at the break of slope and valley floors. There are 25 farms in the catchment and the average farm area is around 700 ha. It is estimated that farm numbers in the catchment declined by about 50% in the decade to 1996. Eighty-six percent of the catchment is cleared, with the remainder mainly being remnant vegetation. Broadacre cropping and sheep are the main farming enterprises.

Approximately 8% of the catchment is severely salinised. This land is located mainly adjacent to natural drainage lines. On the basis of a water balance model developed for the catchment, estimates are that under a ‘business as usual’ scenario, the extent of dryland salinity will increase to 15% by 2020 and to nearly 17% of the catchment over the next 50 years (Figure 6.2; Tables 6.1, 6.2).

The total net profit (gross margin) from agriculture in the catchment is estimated at $2.3 million per year. This would be increased by 12% or $300 000 if no salinity was present. Thus, $300 000 represents the current value of yield loss. Based on current prices, the value of yield loss is estimated to increase to $620 000 a year by 2050. This also represents the maximum agricultural or ‘on-site’ benefit from salinity control. Over the next 50 years, assuming a 5% social discount rate, the net present value of the maximum potential benefits of eliminating salinity would be $8.4 million in additional net farm income. In the Wanilla catchment the downstream or off-site effects are thought to be small (e.g.. eliminating salinity is estimated to save only $.04 million in road maintenance costs). Water quality is not a critical issue for the catchment.

A 50% reduction in recharge in the catchment would mean that the extent of salinity would increase to about 13% of the area of the catchment over the next 50 years compared with nearly 17% under a ‘business as usual’ scenario and 8% at present. The 50% reduction in recharge could be achieved by replacing all current farmland with trees in the upper catchment and replacing all annual pastures with lucerne in the lower catchment areas. This would amount to abandoning all agricultural production in the upper catchment regions (40% of the catchment). Furthermore, soil types mean that lucerne is unlikely to be a suitable enterprise for most farms in Wanilla.

Even using optimistic assumptions regarding lucerne yields and returns for firewood from woodlots and assuming a 5% discount rate, it is estimated that achieving a 50% reduction in recharge would result in a net loss in net present value of $13 million in farm profits compared with a ‘business as usual’ scenario. Under more pessimistic yield assumptions for woodlots and lucerne, this loss increases to $40 million.

Farmers in this catchment do not have high farm incomes and would, in general, have substantial difficulty in funding significant changes in land use to control salinity (Barr 2001). The lucerne planting option is untested and unlikely to be adopted given the soil conditions. Catchment-wide tree planting would substantially lower farm incomes compared with a ‘business as usual’ scenario. Overall, catchment-scale changes to vegetation cover to control salinity are clearly not within the capacity of existing landholders.

Conclusions

Figure 6.2 Wanilla catchment and recharge modelling results.

Figure 6.2 Wanilla catchment and recharge modelling results.
Photo: Mirko Stauffacher

Kamarooka catchment—Victoria

This catchment has an area of 10 000 ha and is situated on the northern slopes of the Great Divide in north central Victoria, just north of Bendigo. Discharge occurs mainly on farmland along the ‘break of slope’. The catchment is situated on a local groundwater flow system in deeply weathered rock (Figure 6.3). This means that there are likely to be some opportunities to address salinity within a reasonable time scale. Indeed, the catchment has been the focus of intensive extension projects and research as well as grants to landholders, with the result that a substantial amount of salinity control on farms is practised. Farmers have been encouraged to grow lucerne for salinity control and, at present, about 20% of pastures contain lucerne in most seasons. Average farm size in the catchment is about 800 ha and the area has 13 farms. On average, around 30% of farm area is cropped each year. Farming is based on traditional sheep–wheat and grazing enterprises. Farm incomes in this region are relatively low and it is likely that they are supplemented in most cases by off-farm income (Figure 6.3; Table 6.1, 6.2).

Dryland salinity affects about 7% of this catchment and appears to have stabilised even without further management of the problem (i.e. the water balance in the groundwater system appears to have reached equilibrium). The estimated value of the yield gap due to salinity is only $50 000 per year through minor losses in agricultural yield. Over the next 50 years this would give a net present value of losses of $900 000. It is estimated that about 87% of the impacts of salinity are related to loss of agricultural incomes. There is only a small impact on water quality and rural infrastructure—11% and 2% respectively. The catchment is extensively cleared so that there are virtually no losses of native vegetation or biodiversity directly due to salinity.

A 50% reduction in recharge in the upper parts of the catchment would result in a 50% reduction in the area of land affected by dryland salinity over the next 20 years: and a further reduction to 2% of the catchment within 100 years. A 50% reduction in recharge could be achieved by replacing all annual pastures with lucerne in the pasture phase of crop rotations. Benefit–cost analysis of this option indicates that if adopted by farmers, their net farm incomes would increase by about 40% relative to the ‘business as usual’ scenario. That is, it would be highly profitable for farmers to adopt this option of including lucerne in crop rotations. Overall, the net economic benefit from this option would be a net present value of $0.6 million.

Approximately 20% of pastures in the catchment are lucerne although a common view among landholders was that radical changes to farming systems would be required to incorporate lucerne and many indicated that they would not be expanding their lucerne production even though they recognised the benefits of lucerne for salinity control. Farmers placed high value on flexibility in farming systems so that they can respond to commodity prices. The establishment of lucerne reduced that flexibility.

Lucerne has been promoted as a farming enterprise for many years and the area sown to lucerne was steadily increasing up until 1991, at which time the area of lucerne was about 7.6% of farmland. But over the next five years to 1996 little increase occurred—those actively taking up lucerne growing were matched by previous lucerne farmers returning to traditional cropping rotations. During this period some farmers were responding to buoyant cereal prices and growing more cereals while others were introducing lucerne into rotations. With better returns to livestock prices, mainly since 1996, some further steady increases in areas under lucerne have occurred. Past activities show that farmers are responding to market forces and will change farming enterprises according to commodity prices and relative profitability regardless of salinity impacts.

A 70% reduction in the area of land affected by dryland salinity could be achieved within 20 years, and complete elimination within 100 years by reducing recharge by 90% in those parts of the catchment above the break of slope. This would require tree plantings on 80% of the recharge areas in the catchment. Benefit–cost analysis of this option revealed that it would result in a 30% drop in net farm income amounting to a loss in net present value of profits from farming of $0.4 million over 50 years.

Conclusions

Figure 6.3 Kamarooka catchment and recharge modelling results.

Figure 6.3 Kamarooka catchment and recharge modelling results.
Photo: Mirko Stauffacher

Upper Billabong Creek catchment—New South Wales

This catchment is located near Holbrook in southern New South Wales in the Murray–Darling Basin. It was originally chosen as a case study area because it was located upstream of a gauging station that was showing rapidly increasing water salinity levels. It is also in a high rainfall area providing some opportunity for introducing plantation softwood forestry as a way to reduce recharge and controlling salinity. The groundwater flow systems are local and intermediate in variably weathered fractured rocks connected to a regional flow system in alluvial aquifers. The catchment has an area of around 300 000 ha with average farm size being around 850 ha. There are about 350 farms in the catchment.

Tree clearing started about 150 years ago with most clearing occurring prior to 1900. Dryland salinity is only a very minor problem, affecting less than 1% or 140 ha of the catchment. Even without any measures to control salinity, the extent of dryland salinity is expected to expand to only about 1% of the catchment area over the next 50 years (Figure 6.4; Tables 6.1, 6.2).

Impacts of salinity are not great enough to warrant implementation of any specific salinity control measures. This catchment is significant in that the small amount of existing salinity does have a small impact on water quality in the catchment. It is estimated that 78% of the projected impact costs of salinity, albeit small impacts, arise through the adverse impacts on water quality. This, taken in isolation, is of no real consequence. But there are a large number of catchments similar to this one, in the Murray–Darling Basin. Collectively each small impact on water quality adds up to rising salinity in our major rivers.

The present in-stream salt load from the catchment is estimated to be 310 tonnes of salt each year. This is estimated to increase the salinity content of water downstream at Morgan by 0.085 EC at a cost to downstream water users of about $13 000 per annum, based on marginal cost functions (see Chapter 5).

Yield losses from dryland salinity are valued at about $22 500 per year and impacts on roads are estimated at $2000 a year. These are quite small costs relative to agricultural incomes earned in the catchment.

Rainfall varies significantly across the catchment and economic analysis of tree planting indicates that most landholders would face reductions in income if this measure was adopted. But some landholders with higher rainfall in the upper catchment could achieve increases in income over the longer term with tree planting. Given that benefits from tree planting or other measures would primarily eliminate salinisation for only about 1% of the catchment area, there is no great incentive for landholders in the catchment to adopt radical and extensive land use changes. However, in the high rainfall regions, tree planting may be considered for its own sake, as a commercial crop.

Conclusions

Figure 6.4 Upper Billabong catchment and recharge modelling results.

Figure 6.4 Upper Billabong catchment and recharge modelling results.
Photo: John Bourke

Lake Warden—Western Australia

This catchment is near Esperance in Western Australia and mainly has a regional groundwater flow system in alluvial sediments with low to moderate ability to move groundwater. Some of the local groundwater flow systems are located on top of the regional systems, and, in some cases, the two systems appear to be connected. The key feature of this catchment is that salinity is expanding quite rapidly (Figure 6.5; Tables 6.1, 6.2).

Lake Warden catchment has about 130 farms with an average farm size of 1300 ha. Farms are, therefore, larger than average Australian farms. A small number of quite large farms account for most of the agricultural land area and agricultural production. The predominantly mallee scrub was cleared in the 1960s and 1970s and secondary salinity has developed relatively quickly as a result, reflecting the influence of the local groundwater flow systems. About 8% is salinised—2% on agricultural land and 6% around wetlands and other low-lying water bodies. Approximately 7.5% or 12 500 ha of cleared agricultural land in the catchment is affected by dryland salinity.

Under a ‘business as usual’ scenario, the part of the catchment that is both agricultural and severely salinised will rise to 27% by 2020 and 45% by 2050. If current land use is maintained, watertables will reach the surface in most of the lower parts of the catchment within 40 years. This is one catchment where salinity is expanding quite rapidly and farmers are aware of and concerned about this prospect.

The catchment is significant because it contains a series of diverse and internationally recognised lakes and wetlands that come under the Ramsar Convention. The Western Australia Government has already given high priority to the rehabilitation and protection of these wetlands that are at risk from increasing salinisation. Lake Warden has been declared a Biodiversity Recovery Catchment under Western Australia’s State Salinity Action Plan.

It is estimated that the net value of lost agricultural production as a result of dryland salinity across all farms in the catchment is about $0.7 million a year or about $20 000 per affected farm. Taking account of other ‘off-site’ effects, the total impact costs of salinity are estimated at approximately $1.4 million a year. Total impact costs are made up of:

Under a ‘business as usual’ scenario it is estimated that, given the projected substantial increases in areas of land affected by dryland salinity, the net present value of yield losses over the next 50 years would amount to $110 million at a 5% social discount rate. Only relatively minor additional impacts on roads and railways were estimated. Major environmental damage, especially to the wetlands, would occur.

Benefit–cost analyses were undertaken for three scenarios—50%, 75% and 90% reductions in recharge.

A 50% reduction in recharge could be achieved by replacing all annual pastures with kikuyu and replacing 50% of cropped land with perennial kikuyu grass pastures. This option would delay the spread of salinity so that by 2050, 33% rather than 45% of the catchment would be affected by salinity. It is estimated that this change in land use would slightly improve farm incomes relative to the ‘business as usual’ scenario. Adverse environmental impacts on the wetlands would remain high and engineering options may need to be considered.

A 75% reduction in recharge could be achieved by replacing all annual pastures with kikuyu, two-thirds of crop lands with trees and the remaining one-third of crop land with a rotation based on phased farming with lucerne. By 2050 this would mean that only 7% of the catchment would be affected by salinity. This change would be very radical and would lower farm incomes by 25%; equal to a net present value loss of $65 million. There would be large environmental benefits compared with a ‘business as usual’ scenario, and the saving on road and rail damage would be $10 million net present value.

A 90% reduction in recharge could be achieved by replacing all annual pastures and 90% of cropped land with trees. This option would lead to stabilisation of the area of salinisation on present agricultural lands at 4% to 5% of the catchment by 2020. Farm incomes would be almost eliminated representing a net present value loss of about $250 million. This option would result in substantial environmental benefits from protection of the wetlands but they would need to be in excess of $250 million to be economic. Social disruptions to communities also need to be considered.

Figure 6.5 Lake Warden catchment and recharge modelling results.

Figure 6.5 Lake Warden catchment and recharge modelling results.

Table 6.3 Benefits and costs of various reductions in recharge to 2050 for Lake Warden catchment.

Options Reduction in recharge

50%

Replace all annual pastures and 50% of crop land with kikuyu

75%

All pastures replaced with kikuyu, two thirds with trees and the remaining crop land phase farming with lucerne

90%

All annual pastures and 90% of crop land replaced with trees
Change in farmers incomes (NVP) compared with business as usual Marginally profitable
 Loss of $65 million over 50 years
 Incomes almost eliminated—net loss of $250 million
Extent of catchment affected by salinity by 2050 33% 7% 4%
Environmental effects compared with business as usual Few benefits but buys time Substantial reduction of adverse effects on wetlands Net present value of benefits from saving species of $40 million to $100 million—major benefits to wetlands

Assessment of the consequences of these catchment-wide options indicate significant trade-offs between losses of income from farming and environmental gains. Landholders in the catchment are individually pursuing some control measures on their farms especially those on local ground water flow systems. These include planting kikuyu and in some cases oil mallee.

Significant structural adjustment has already occurred in the catchment, driven largely by declining terms of trade and other macro-economic changes. Over the next few decades, farmers in the catchment will experience significant additional adjustment pressures through rising groundwater levels.

Conclusions


Lessons from the four case studies on dryland salinity

Results from the case studies highlight important information on managing dryland salinity. They enable a clearer understanding that managing dryland salinity is much wider than landholders just adopting recommended sustainable farming practices. The extent of externalities involved means that the management of dryland salinity requires a whole of community approach with each sector, including the farming sector, having an important role to play in finding and implementing solutions.

Key messages

There are no simple and universally applicable solutions or recommended responses.

Each of the four case studies represents a unique situation and no doubt many other catchments have different and special circumstances. The results highlight the dangers of imposing common strategies to address dryland salinity across all catchments or even transferring what may work in one catchment to others without very careful consideration of the unique characteristics of each catchment.

Circumstances in each catchment must be thoroughly examined and options to control salinity carefully investigated before any costly control measures are implemented.

Broadscale reafforestation of recharge zones will mostly prove to be a poor investment from an economic and social perspective.

Results of economic modelling of alternative control actions for the case studies clearly indicate that broadscale tree planting in the upper catchments would substantially reduce land holder incomes and lead to major social disruption of communities—a case of the cure being worse than the disease. Most salinised catchments across Australia are not well suited to commercial tree growing because of insufficient rainfall. Vast areas of the upper catchments need to be planted to make any significant difference and the beneficial effects of tree planting on salinity in the lower part of catchments are unlikely to be apparent for many years—in several cases, well beyond the lifetime of current landholders.

Furthermore, large-scale tree planting in the upper part of catchments may reduce surface run-off and may worsen salinity in rivers and streams in the short to medium term. Farm-based control measures are unlikely to be effective on intermediate or regional groundwater flow systems and these make up over 50% of projected area ‘at risk’ from salinity (Table 6.4).

Exceptions occur where only a relatively small portion of the catchment requires revegetation and/or where substantial off-site benefits would be achieved.

Table 6.4 Projected area of land in Australia ‘at risk’ from salinity in 2050, by groundwater system.

Groundwater
system		 Area at risk
from salinity
2050		 Proportion of
total area of
salinity risk
(million ha) (%)
Local 7.8 43
Intermediate 5.3 29
Regional 5.1 28
Total 18.2 100

Expectations of farm-based change leading to salinity control need to be tempered.

Relying solely on farmers to implement farming practices that will control salinity and achieve socially acceptable results may be expecting too much. Modelling work in the four case studies indicates that the level of adoption of salinity control measures such as planting deep-rooted perennials or trees needs to be very high to have any effect on salinity.

Not all farmers will adopt even profitable practices and very few will adopt unprofitable practices. Adoption rates of farming practices that are beneficial for salinity control have been shown to be low where:

A lack of profitable and technically feasible options is a major constraint on farmers’ capacity to contribute to salinity control.

Most Australian farmland is unsuitable for the commercial production of trees. A few exceptions occur in Western Australia and the higher rainfall areas. Deep-rooted perennial pastures are an option in some catchments but adoption is limited because they significantly reduce flexibility in overall farming systems.

Without new farming systems that offer both reduced leakage and improved profitability and flexibility, the scope for major changes in farming systems sufficient to make a significant difference to lowering watertables is limited.

This provides some incentives for researchers to find better options. In catchments like Kamarooka, it appears that improved farming practices may have halted the spread of salinity but in other cases, a lack of profitable options will mean that farmers may have to learn to ‘live with salt’ and concentrate on productivity improvements elsewhere. Living with salt may mean better use of salt-tolerant species.

Where significant public assets are at risk, other solutions such as engineering works—drainage or pumping—may need to be implemented and publicly funded.

Some large-scale strategies are profitable (Thomas & Williamson 2001) but detailed analyses of particular situations should be carried out before public funds are committed. The analyses of benefits should include the restoration or prevention of damage to natural assets of particular value, biodiversity and other non-tangible attributes.

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