Modelling future urban and rural water requirements in a CGE framework

Water is increasingly being treated as a tradable commodity. This paper describes our efforts to include water accounts in a multi-regional CGE model. In order to understand the conditions under which water trade might occur, we need to add a number of features to the model and scenarios. These might concern structural change in the economy, differences in yield functions between different crop types, dynamics and hydrology. Each of these features requires substantial theoretical and database additions. As a first step, we consider the first of these, structural change, by projecting the model forwards to the point in the future at which Australia has 25 million people. We use this application as a platform for discussing further possible changes to the model.