| Summary: | Transformational adaptations are expected to become more frequent and widespread in Australia, and globally, with a changing climate. However, any transformation adaptation will have complex and interconnected effects on rural communities, particularly income, employment and service provision, which will impact on regional sustainability. This paper investigates regional transformative adaptation options to manage climate risks for the rice and cotton industries of northern Queensland, Australia. More specifically, it seeks to identify when to move from incremental adaptation to transformative adaptation and, more importantly, to assess the potential regional economic consequences of such a transformative adaptation. The results indicate transformative adaptation could have large negative effects on regional economies. Relocation of rice or cotton in sugarcane production system will not compensate some negative regional impacts. More importantly, the increase in wheat production in Riverina will not compensate for the reduction in the higher value rice commodity. However, the cotton production system in Queensland is capable of transformational adaptation and incremental adaptation with little impact on regional communities. In contrast, the southern rice production region of the Riverina shows limited capacity for incremental adaptation, given the already high adoption of improved irrigation technologies and practices, and the limited scope to improve these further. The market incentives for the transformation adaptation of cotton and/or rice production in north Queensland are limited without government support. Alternatively, there may be interest from international investors, which would shift the focus from market opportunities to international food security. Keywords: Structural adjustment, Climate change, Environmental and water policy, Rice, Cotton, Regional economic model
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