Water Resour Manage (2007) 21:919–932 DOI 10.1007/s11269-006-9064-9 ORIGINAL ARTICLE Use of climate scenarios to aid in decision analysis for interannual water supply planning James S. Risbey · Kais Hamza · John S. Marsden Received: 11 August 2005 / Accepted: 9 June 2006 / Published online: 5 July 2006 C  Springer Science + Business Media B.V. 2006 Abstract This work addresses the issue of climate change in the context of water resource planning on the time scale of a few years. Planning on this time scale generally ignores the role of climate change. However, where the climate of a region has already shifted, the use of historical data for planning purposes may be misleading. In order to test this, a case study is conducted for a region, the Australian Capital Territory, where long term drought is raising concerns of a possible climate shift. The issue is cast in terms of a particular planning deci- sion; the option to augment water supply in the next few years to hedge against the drought persisting. A set of climate scenarios are constructed for the region corresponding to the historical climate regime and to regimes where progressively greater levels of change are as- sumed to have already taken place (5%, 10%, 20% reductions in mean rainfall). Probabilities of the drought persisting are calculated for each of the scenarios. The results show substantial increases in the probability of the drought persisting for even moderate reductions in mean rainfall. The sensitivity of the decision to augment supply to the scenario results depends ultimately on the planners tolerable thresholds for the probability of the drought persisting. The use of different scenarios enables planners to explore the sensitivity of the decision in terms of their risk tolerance to ongoing drought and to their degree of belief in each of the scenarios tested. Keywords Drought management . Climate scenarios . Climate change . Water resources . Decision analysis J. S. Risbey CSIRO Marine and Atmospheric Research, Hobart, Australia K. Hamza School of Mathematical Sciences, Monash University, Australia J. S. Marsden Marsden Jacob Associates, Kew, Australia Springer