We describe the development of a regional computable general equilibrium (CGE) model for the analysis of issues concerning water supply and (re)allocation in Canterbury, New Zealand. Traditionally, water has been seen as an abundant resource, but growing irrigation demands are now outstripping the supply of water and competing with in-stream uses and non-use values. In the longer term, this problem may be exacerbated by climate change, which is predicted to increase water demands and reduce supply in parts of Canterbury. It is important to be able to quantify the impact on the regional economy of changes in water availability and policies and other measures addressing water supply or demand. A particular concern is the current, relatively inflexible, ‘first-come, first-served’ system for water allocation. In this paper, we present some preliminary scenarios focusing on a reduction of irrigation supply and the interaction with changes in rainfall. These results are intended only to illustrate the potential of the modelling approach, not least because the provisional data to which the model is currently calibrated are in many cases dated or incomplete. We discuss how the model and its underlying database may be improved and extended to provide results that are qualitatively robust and policy-relevant.

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