Water Allocation

Discussion

Need for Reform

In Australia, large water-consumers such as irrigators and urban areas compete for limited water resources, with natural ecosystems often missing out. We need a system that allocates water in a way that maximises benefit to both human and natural communities.

Water Allocation by Price

One way to allocate limited water resources is to cap the amount of water that can go to economic uses, with some water set aside to maintain natural ecosystems. And then to auction off usage rights to the water allocated to economic use - water allocation by price.

Benefits of Water Allocation by Price

Allowing consumers to access water according to their ability to pay favours those activities that add more value to the water they consume. In this way water can be conserved without undue effect on the economy. In fact, by driving water efficiency innovations, water allocation by price can create economic growth.

Problems with Water Allocation by Price

As activities that add less value to water drop out of the economy due to the rising water prices, they take jobs and household income with them, with flow-on effects to regional economies.

To manage the social consequences of water reform, regions affected by structural change need government assistance to shift to more water-value-adding activities, thus re-establishing employment.

Readings

Water Over-Allocation

Water Recycling in Australia - Australian Academy of Technical Sciences and Engineering, May 2004

The National Land and Water Resources Audit showed in 2002 that water resources from 26% of Australia's surface management areas and 31% of its groundwater management units were fully or over-allocated. In 1996-7, Australia used 26,000 GL of water, 75% for irrigation, 20% for urban and industrial purposes and 5% for stock and domestic use.

The Need for Water Allocation Reform

Water: What ’s a Fair Price to Pay? - ABC Earthbeat, 23 August 2003

Issue: How to put a value on water in a way that takes both people and the environment into account.

Scientists have called for increased environmental flows; irrigators want security and their rights to water clarified. We need water reform because there isn’t enough water to around. We’re over-committed and if the environment doesn’t get some water back, the whole system could collapse.

Waterproofing the Continent - Australian Academy of Technological Sciences and Engineering

Australia is a relatively dry continent in which water scarcity is exacerbated by climate variability. Demand for water is rising, mainly from increasing irrigation activity and in areas of rapid population growth. So too is community insistence on the need to provide more 'natural' river flows for the benefit of the environment. The challenge for industries, governments and water resource managers is to strike a balance between these competing demands.

NSW Graziers versus QLD Cotton Growers

Water Fight Continues between NSW, QLD- ABC, 13 June 2004

A war of words has erupted between the New South Wales and Queensland governments over water use.

NSW graziers say they are missing out on their share of water because it is being diverted to Queensland cotton irrigators, in particular the country's biggest - Cubbie Station.

"Queensland has to recognise that they're part of Australia and everyone should get a fair share of what is, after all, a very precious and scarce resource," New South Wales Natural Resources Minister Craig Knowles said.

But Queensland's Natural Resources Minister, Stephen Robertson, says New South Wales should first address its own problems. "Year in year out, New South Wales breaches their own cap in the Murray Darling basin," he said.

A draft plan is being prepared for the Murray Darling. Queensland claims it will put back 10 per cent of the water that can currently be extracted.

Adelaide Households versus NSW Rice-Growers

Making Waves: Water Challenges for Adelaide in the 21st Century - PDF - Peter Cullen, Adelaide Thinker in Residence, May 2004

There is a warm complacency among many Adelaidians that they will just take more water from the Murray.  It is not being suggested that you will take it from irrigators in SA itself, rather your fixation is on what you believe are wasteful rice growers upstream, who happen to be in another State.

Just why “wasteful” rice growers should destroy their community to support a “wasteful” city is not quite so clear.  Even if we do manage to establish a national water market, the companies that own the water used on rice are our largest water barons, and are purchasing water rather than selling it.

Structural Adjustment in Agriculture due to Water Allocation Cuts

Support for the Namoi Valley - New England North West Area Consultative Committee

The Water Sharing Plan for the Namoi Valley, to commence on 1 July 2004, has been developed in response to:

Water to maintain the health of water source and dependent ecosystems has first priority, followed by basic landholder rights (stock and domestic requirements and native title rights).

[Reduced water availability will result in:]

A major consideration is the flow-on effect through employment and household spending locally and across the region. The loss of employment is likely to result in the people affected leaving the area.

The major impacts of the WSP will be in the first three years of implementation. Investment in value adding opportunities and agricultural diversification will assist structural adjustment [by those affected].

The size of the cuts is an important determinant of adjustment costs and economic impacts. Relatively small cuts can be accommodated through adjustments to the way a business is operated and impacts on production and adjustment costs are small. Larger cuts will lead to changes in business structure and operating systems and therefore increase economic impacts and adjustment costs.

The size of those impacts depends on the flexibility available to operators to adjust the way they run their operations with less water. The effects are compounded by the way the reductions are introduced through the number of businesses affected and the adjustment costs that they incur.

There was low interest amongst those affected in investment and management changes that improved the efficiency of water use (this is already at a high level on most of the major irrigation properties). There was relatively low interest in the development of new enterprises and in entering into collaborative arrangements with other irrigators. The responses reflect the feelings of uncertainty and discontent with the development and implementation of the WSP.

The New England North West Area Consultative Committee (NENWACC) will support projects that:

The NENWACC will prioritise projects that demonstrate viability, and contribute to value-adding and market development opportunities.

The NENWACC in partnership with Catchment Management Authorities, the NSW Government and other relevant services will assist irrigators to understand the effects of the introduction of the WSP and provide a referral network for assistance from Australian and NSW Government programmes and private investment.

Structural Adjustment through Water Trading

Trading Up to a Sophisticated Water Market - Australian Academy of Technological Sciences and Engineering - Water Proofing the Continent

Given the high level of commitment of the resource in some major irrigation areas, growth opportunities can be realised only if markets exist to deliver water to the most productive activities.

Water trading is an equitable way of achieving structural adjustment in irrigation regions. Trading exposes the opportunity cost of water, which is its value in alternative uses to all farmers, whether or not they trade. It enables marginal producers who hold significant water entitlements to realise an asset that was previously value-less unless used or sold with the land.

The study shows that there is enough water in the low-to-marginal value end of the irrigation market to supply all the likely long-term growth needs of higher-value intensive irrigation activities in the Murray-Darling Basin.

2006.06.12