research
Economic assessment of acquiring water for environmental flows in the Murray Basin
- Publication date
- Publisher
Abstract
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 75millionlessthanthebaselinelevelforascenarioinvolvingreallocatingaconstantvolumeofwaterfortheenvironmentinbothwetanddryyears.Foramorerealisticscenarioinvolvingmorewaterfortheenvironmentinwetandlessindryyears,estimatednetrevenuelossisreducedby48percentto39 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.Resource /Energy Economics and Policy,