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Climate variability, and its increase with climate change, pose substantial economic risks to agriculturalists and hence, limit their ability to respond to global challenges such as food security. Enterprise mix diversification is the most common, and is widely regarded as the most effective, strategy for mitigating multiple sources of short-term economic risk to agricultural enterprises. However, assessments of enterprise mix diversification as a strategy for mitigating climate risks to ensure long term viability of agricultural enterprises are sparse. Using the Lower Murray region in southern Australia as a case study, we combined APSIM modelling with Monte Carlo simulation, probability theory, and finance techniques, to assess the extent to which enterprise mix diversification can mitigate climate-induced variability in long term net returns from rain-fed agriculture. We found that diversification can reduce the standard deviation by up to A$200 ha(-1), or 52% of mean net returns; increase the probability of breaking even by up to 20%, and increase the mean of 10% of worst probable annual net returns (Conditional Value at Risk) by up to A$100 ha(-1). We conclude that enterprise mix diversification can also be an effective strategy for hedging against climate-induced economic risk for agriculturalists in marginal areas. Refereed/Peer-reviewed

Over-allocation of fresh water resources to consumptive uses, coupled with recurring drought and the prospect of climate change, is compromising the stocks of natural capital in the world’s basins and reducing their ability to provide ecosystem services. To combat this, governments world wide are making significant investment in efforts to improve sharing of water between consumptive uses and the environment, with many investments centred on modernisation of inefficient irrigation delivery systems, and the purchase of water by government for environmental flows. In this study, spatial targeting was applied within a cost-benefit framework to reconfigure agricultural land use in an irrigation district to achieve a 20% reduction in agricultural water use to increase environmental flows and improve the provision of other ecosystem services. We demonstrate using spatial planning and optimisation models that a targeted land use reconfiguration policy approach could potentially increase the net present value of ecosystem services by up to AUS$463.7m. This provides a threshold level of investment that would be justified on the basis of benefits that the investment produces. The increase in ecosystem services include recovering 61 GL of water for environmental flows, the sequestration of 10.6m tonnes of CO2-e/yr, a 13 EC (?S/cm) reduction in river salinity, and an overall 24% increase in the value of agriculture. Without a targeted approach to planning, a 20% reduction in water for irrigation could result in the loss of AUS$68.7m in economic returns to agriculture which may be only marginally offset by the increased value of ecosystem services resulting from the return of 61 GL of water to the environment.

Conservation investment in agricultural landscapes has evolved to take a more market-based or business approach. However, current levels of conservation investment are not likely to mitigate degradation to natural capital and ecosystem services. We propose the further evolution of a conservation industry to generate substantially increased investment in conservation in agricultural landscapes, particularly from the private sector. A mature conservation industry is envisaged as comprising of investors, producers, and service providers who produce conservation products and services, exchanged via market transactions. A number of requirements for a viable and effective conservation industry are identified including institutional infrastructure (conservation market institutions and regulatory systems), information provision (quantifying benefits, business models, and accounting and auditing standards), and facilitation (entrepreneurship incubation and capacity building). A conservation industry requires careful design and planning in order to operate effectively. Whilst it is not without risk, a conservation industry has the potential to increase participation and investment in conservation actions and enhance the sustainability of agricultural landscapes. Refereed/Peer-reviewed