Economic analysis of investment in MCV Phases II, III and IV (ex-post)

Research objective

Conduct an economic evaluation (benefit–cost analysis) of the Managing Climate Variability program’s investment for years ending 30 June 2009 to 2016.

Project duration

April 2015 – June 2015

Outcomes

Current investment in the Managing Climate Variability program (MCV) is entering its final year of funding. This project updated a 2013 economic evaluation of the impacts of the MCVP Phases II (2007–08 to 2009–10) and III (2010–11 to 2012–13), and added analysis of Phase IV (2014–16).

Of the benefits identified in the evaluation, the principal benefit was a general increase in farm profits. The total investment of $24.1 million in present value was estimated to produce total gross benefits of $160.3 million in present value, providing a net present value of $136.2 million. The benefit–cost ratio was 6.64 to 1 and the internal rate of return was 48.2%.

In total, 35 projects were funded in MCV Phases II, III and IV, covering research and development, communication and management/administration. In comparison to previous investments, there was a greater concentration on climate science to target improved skill in regions and seasons because farmers had identified these areas as priorities.

Improved climate risk management through more effective use of forecasts with increased skill is recognised as a key, ongoing way to adapt to a changing climate. The investment continued improvements to seasonal climate forecasting and included projects in a new area of research aimed at better forecasting of extremes on a multi-week or monthly timescale.

Four particularly notable outputs that MCV has contributed to will make significant contributions to improved risk management by Australian farmers:

  • more rapidly developing the Predictive Ocean Atmosphere Model for Australia (POAMA-2), resulting in the launch in 2013 of a new and superior forecast of the three month season ahead replacing statistical forecasts [statistical forecasts are likely to be less reliable as a result of climate change]
  • accelerating the use of POAMA-2 to launch ground-breaking forecasts for the two separate months ahead (based on multi-week capability) and a new forecast of the northern rainfall onset prediction launched in 2015
  • launching CliMate, a free mobile application that can be used to readily access and interrogate recent weather and climate to answer questions such as ‘soil water accumulated at a location’; there are now over 12,000 iPad and iPhone users throughout the grain regions
  • contributing to enable the Bureau of Meteorology monthly session on the Seasonal Outlook now featured on the ABC Landline program; the exposure to a high proportion of the rural and regional audience within the estimated national audience of half a million viewers will contribute to a much increased awareness and use of MCV products.

Farmers benefiting from MCV investment in seasonal forecasts can be categorised as follows:

  • farmers already using the Seasonal Climate Outlooks (SCO) of the Bureau of Meteorology transferring to POAMA-2 when it becomes operational, and capturing mostly a marginal benefit
  • farmers already using other seasonal forecasts transferring to POAMA-2, and capturing mostly a marginal benefit
  • farmers not using either SCO or other seasonal forecasts and increasingly using POAMA-2, with potentially a large benefit.

The impact valued in this analysis is based on an estimate of an earlier adoption of improved seasonal forecasts due to the investment, compared with the situation without the investment. The improvements will result from the diverse MCV investments in the underlying science to improve forecast skill, from improved communication to and from users through projects such as the Climate Champion program, and through applications and tools that develop the capacity of users to manage climate risks.

Read the full report online [1.1 MB].

Research contact

Dr Barry White

bjwhite@iinet.net.au

Phone: 07 3371 5878

Dr Peter Chudleigh, Agtrans Research

peter@agtrans.com.au

Phone: 07 3870 9564

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