Rural water markets in Australia: Assessing progress and moving - PowerPoint PPT Presentation

Rural water markets in Australia: Assessing progress and moving ahead Peter Gooday ABARES www.abares.gov.au

Water reform 1994 COAG Agreement 2004 National Water Initiative 2007 Water Act 2008- Water for the Future Basin Plan www.abares.gov.au

What is happening now? Basin Plan • Reduce consumptive diversions • Devise environmental watering plans • Reduce trade barriers and transaction costs Water for the Future • Water purchases and infrastructure investment easing the transition to SDLs • CEWH acquiring water for the environment www.abares.gov.au

Benefits of reform to date • Increased water trade www.abares.gov.au

Allocation trade as a proportion of irrigation diversions in the MDB www.abares.gov.au Source: MDBC 1997-2008, MDBA 2009-2011

Water prices and availability 1.00 600 Allocation prices (Murrumbidgee) 0.90 Total MDB allocation 500 0.80 Average annual allocation price ($ / ML) Series3 0.70 MDB Allocation percentage 400 0.60 0.50 300 0.40 200 0.30 0.20 100 0.10 0.00 0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 20010-11 www.abares.gov.au

Benefits of reform to date • Increased water trade • Water market provided incentives to conserve water www.abares.gov.au

Allocations and irrigated production www.abares.gov.au

Benefits of reform to date • Increased water trade • Water market provided incentives to conserve water • Carryover has improved flexibility and ability to manage water supply uncertainty www.abares.gov.au

Benefits of reform to date • Increased water trade • Water market provided incentives to conserve water • Carryover has improved flexibility and ability to manage water supply uncertainty • Problems? • Processing times for trades • 3 rd party impacts www.abares.gov.au

What remains to be done? • Further reduce trade barriers • Improve the definition of storage rights • Infrastructure and delivery charges www.abares.gov.au

High reliability shares in Victoria As at end of 2010-11 water year (30 June 2011) www.abares.gov.au

What remains to be done? • Further reduce trade barriers • Improve the definition of storage rights • Improve on ‘postage’ stamp pricing www.abares.gov.au

The next set of reforms • Operation of the CEWH in the market • Development of new products • Storage and carryover rights www.abares.gov.au

Environmental demand vs. Environmental water allocations www.abares.gov.au

The next set of reforms • Operation of the CEWH in the market • Development of new products • Storage and carryover rights www.abares.gov.au

Water property rights • Should reflect physical realities • Can help reduce costs: • in years of high environmental demand • and in extreme dry periods www.abares.gov.au

Capacity sharing • Unbundled rights: water, storage, delivery • Water users have much greater control • Implementation issues • initalisation • information burden www.abares.gov.au

Conclusions • Benefits from reform … still some to come • CEWH comes with some challenges • Further water property rights reform www.abares.gov.au

Science and economics for decision-makers www.abares.gov.au