Economic impacts of climate change on the Australian dairy sector

We analyse the economic implications of climate-driven pressures on the pasture-based dairy sector in Australia. We use an integrated assessment model that includes a climate scenario generator, a climate-biophysical response framework and an economywide analytical framework. For the climate scenario generator, we use data from the OzClim database of the Commonwealth Scientific and Industrial Research Organisation. For the climate-biophysical response framework, we use the DairyMod model with inputs of changes in climate variables from OzClim to quantify climate change effects on pasture growth and productivity. For the economywide analytical framework, we use the National Integrated Assessment Model to quantify the economic implications of these effects on the dairy sector. The simulated pattern of regional changes in dairy output is not a simple function of the changes in dairy productivity. Our results show that the relative size of productivity changes across regions affects the relative competitive advantage of dairy-producing regions. Several factors affect the regional distribution of simulated dairy-output changes, including substitution among sources of dairy output and competition for inputs like supplementary feed. An increased output in regions with moderate reductions in dairy productivity may occur because the severely climate-affected regions absorb the greatest loss in output.