Economic assessment of acquiring water for environmental flows in the Murray Basin *

This article is an economic analysis of reallocating River Murray Basin water from agriculture to the environment with and without the possibility of interregional water trade. Acquiring environmental flows as an equal percentage of water allocations from all irrigation regions in the Basin is estimated to reduce returns to irrigation. When the same volume of water is taken from selected low-value regions only, the net revenue reduction is less. In all scenarios considered, net revenue gains from freeing trade are estimated to outweigh the negative revenue effects of reallocating water for environmental flows. The model accounts for how stochastic weather affects market water demand, supply and requirements for environmental flows. Net irrigation revenue is estimated to be 75 million less than the baseline level for a scenario involving reallocating a constant volume of water for the environment in both wet and dry years. For a more realistic scenario involving more water for the environment in wet and less in dry years, estimated net revenue loss is reduced by 48 per cent to 39 million. Finally, the external salinity-related costs of water trading are estimated at around 1 million per annum, a quite modest amount compared to the direct irrigation benefits of trade. Copyright 2007 The Authors Journal compilation 2007 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd .

Historical regulation of Victoria's water sector: A case of government failure? *

This paper analyses the role of government failure in Victoria's water sector between 1905 and 1984 as evidenced in the rise of in-stream salinity. It will be shown that high levels of salinity can, in part, be attributed to regulatory failure for two reasons. First, the method of water allocation, a compulsory minimum charge with the marginal cost of water being zero, encouraged over watering, resulting in increased water tables via groundwater recharge. Second, the government did not provide adequate finance for construction of appropriate removal of saline drainage water, and thereby allowed increasing in-stream salinity. Copyright 2007 The Author Journal compilation 2007 Australian Agricultural and Resource Economics Society inc. and Blackwell Publishers Ltd .

Declining inflows and more frequent droughts in the Murray-Darling Basin: Climate change, impacts and adaptation

It is likely that climate change will be associated with reductions in inflows of water to the Murray–Darling Basin. In this study, we analyse the effects of climate change in the Murray–Darling Basin using a simulation model that incorporates a state-contingent representation of uncertainty. The severity of the impact depends, in large measure, on the extent to which climate change is manifested as an increase in the frequency of drought conditions. Adaptation will partially offset the adverse impact of climate change

Defining tradable water entitlements and allocations: a Robust System

Robust systems are characterized by a capacity to recover gracefully from the whole range of exceptional inputs and situations in a given environment. They have a connotation of elegance.This paper will highlight the importance of separating the different elements of any tradable property entitlement and allocation system into its component parts. The result is a constellation of institutional arrangements that can be expected to last, to withstand the test of time. Often, considerable reform is required to put in place robust systems. Using examples from Australia, this paper will highlight the importance of sequencing implementation of the reforms necessary to put robust systems in place. Robustness is achieved by using three instruments rather than one instrument to allocate water and control use, and coupling these three instruments with three separate planning instruments.Mike Young and Jim McCol