The changing climate is affecting biological and physical processes occurring in the biosphere, including the biogeochemical cycles of water and carbon. The response of ecosystem carbon exchange to changes in temperature and the water balance is still very uncertain, a fact that highlights the need for research in order to understand the role of the biosphere in the future global carbon budget. South east Spain is on the borderline between the tropical and mid-latitude climate zones, with climates ranging from sub-humid to arid, and the majority representing the driest area in Europe. Initial predictions on climate change for this region point to decreases in total precipitation and the number of precipitation events, meaning a decrease in water availability underlining the vulnerability of the region to desertification. This region, due to these special climatic conditions, has been the subject of experimental carbon and water field research in recent years. This paper defines the state of the art of carbon and water balance measurement and modelling studies in this region, analyses the different processes involved in aggregate exchanges (vegetation and soil; net ecosystem carbon balance-evapotranspiration, photosynthesis-transpiration, soil respiration-evaporation), and identifies needs for future research. © 2011 Elsevier Ltd.