The Environment Institute
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The Murray-Darling Basin
Mike Young
Executive Director, The Environment Institute
The Environment Institute
Murray-Darling Basin
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Directly supports 3 million people
Feeds approximately 20 million people
Significant environmental values
14% of Australia (size of Spain & France)
Australia’s three longest rivers
40% Australia’s farmers
Agricultural exports earn $9b/year
Gross value of agricultural production $15b (40% Australia)
• Irrigation: $5.5b (15%)
• Home to 34 major Indigenous groups
Life Impact The University of Adelaide
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Flow generation
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The Murray
will have
to solve its
own problems
Life Impact The University of Adelaide
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Ecosystem Health Assessments 2004-07
Life Impact The University of Adelaide
Change?
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Total Water
Water Use
Historical Climate
23,417
11,327 (48%)
2030 Median Climate
20,936
10,876 (52%)
2030 Dry Extreme
15,524
8,962 (58%)
(CSIRO Water Availability – 2008)
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Growth in Basin diversions
12,000
10,000
GL/year
8,000
6,000
4,000
2,000
0
1930
1940
1950
1960
1970
1980
1990
2000
Life Impact The University of Adelaide
7
Water
Rights
The Environment
Institute
Reform & unbundling
Single Title
to
Land with a
Water Licence
Water
Land
Tradable Right
Entitlement
Shares
in Perpetuity
Bank-like
Allocations
Price
National
Competition
Policy
1993/94
Plus Cap
Use licences
with limits &
obligations
Life Impact The University of Adelaide
National
Water
Initiative
2004
Scarcity and Trading
Murray-Darling Basin Water Entitlement Transfers - 1983/84 to 2003/04
1 200
Intrastate
Intrastate
Interstate
Interstate
1 100
1 000
Transfer Volume (GL)
900
Temporary (GL)
Permanent (GL)
Temporary (GL)
Permanent (GL)
Water Reform
Trading opened up
800
700
Intrastate
Intrastate
Interstate
Interstate
600
500
400
300
100
2003/04
2002/03
2001/02
2000/01
1999/00
1998/99
1997/98
1996/97
1995/96
1994/95
1993/94
1992/93
1991/92
1990/91
1989/90
1988/89
1987/88
1986/87
1985/86
1984/85
0
1983/84
2003/04
2002/03
200
2001/02
2000/01
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Source: Murray Darling Basin Commission, 2007
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Temp
Perma
Temp
Perma
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Return to investment in entitlement
systems & trading
Total returns - Median allocation and entitlement prices compared to capital
growth, and the S&P ASX Accumulation Index Returns
50%
Annual Return - Capital Growth
40%
Annual Return - S&P ASX
30%
20%
10%
Jul-09
Mar-09
Jul-08
No v-08
Mar-08
Jul-07
No v-07
Mar-07
Jul-06
No v-06
Mar-06
No v-05
Jul-05
Mar-05
Jul-04
No v-04
Mar-04
Jul-03
No v-03
Mar-03
Jul-02
No v-02
Mar-02
No v-01
Jul-01
Mar-01
Jul-00
No v-00
Mar-00
Jul-99
No v-99
Mar-99
Jul-98
0%
No v-98
Annualised Return
Annual Return - Median
5 Year Holding Period Ending
After Bjornlund & Rossini 2007
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A robust sharing system
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Flood water
Volume of water available
Entitlements
Entitlements
Environment
with a
Environment
fully-specified
share
Water needed to
ensure
conveyance
Life Impact The University of Adelaide
Shared Water
Now buying
back water for
the MDB
environment
$3.1 billion
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The Guide to the Plan
1. Conveyance to and through Mouth 9 in 10 yrs
2. Prepared to lose 25% of red gum forests
3. Most benefits from 3,000 GL to 4,000 GL local
are within region where reduction occurs
4. States must comply with SDLs even if
Commonwealth fails to buy enough water
5. Now have agreement to align by 2019
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Guide principles and concepts
• Hydrological integrity
– Most interception is included in the SDL algebra
• Equitable risk sharing with Environment
– Conveyance reserve specified separately
– Environment gets an entitlement for freshes and some overbank work
• Maximum subsidiarity
– Uniform definition of SDL across the Basin built around a 114 year
average less 3% allowance for adverse climate change
– But CEWH takes a centralised view of the world ....
• Robust planning as the “premier” control instrument
– Entitlement and allocation system sits under the plan
– Could reverse this approach
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SDL proposals
Basin-wide
Current diversion
limits
Surface water:
13,700 GL/y
13,700 GL/y
13,700 GL/y
SDL proposals
10,700 GL/y
10,200 GL/y
9,700 GL/y
3,000 GL/y
(22%)
3,500 GL/y
(26%)
4,000 GL/y
(29%)
Reduction
% reduction in
watercourse
diversion
component*
27%
32%
37%
Max reduction for an
SDL area
26%
30 %
35%
Max reduction in
watercourse
diversion
component*
40%
40 %
45%
* If only this component is reduced
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The LTA SDL
• Long Term
– Hides climate change signal
• Average
– Mean not mode or median
• Sustainable
– Not defined as a limit
Don’t compromise key environment or productive base
• Diversion
– Not allocated
– Not “used”
• Limit
• Not a share of inflows
• Not a seasonal resource allocation
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“Take” not “net use”
environmentally sustainable level of take for a water
resource means the level at which water can be taken from
that water resource which, if exceeded, would
compromise:
(a) key environmental assets of the water resource; or
(b) key ecosystem functions of the water resource; or
(c) the productive base of the water resource; or
(d) key environmental outcomes for the water resource.
• Management of “take” not amount “allocated” for taking
• Little concept of optimal storage management
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Conveyance Reserve
• Conveyance water is water in the River
Murray System required to deliver water to
meet critical human water needs as far
downstream as Wellington in South Australia.
• Not to barrages
• No requirement to have a minimum annual
flow to the sea
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Elements of a way forward
• A much more regional approach
• Commit to a fully specified “entitlement” system rather than a “planning”
system
– Define conveyance water needed throughout the system
– Define the maximum amount that may be allocated in any irrigation season as
the amount held when every “user” including interceptors has 100%
allocation
– Define a target portfolio of entitlements for the environment in each district
• Continue with a market-driven approach
– buy entitlements at higher and less callous prices
– Establish community development funds and place money in proportion to
money spent on buy backs and scale of the buy back
• Establish regional environmental trusts to hold and manage entitlements.
• Move forward step by step, monitoring, adjusting learning as we go
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An adaptive approach to the definition of SDLs
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For water body i and under the powers given to the Authority through section 23(2) (c), a register
will be established to record the Sustainable Diversion Limit (SDL t,i) that applies to that body at any
point in time.
This register is designed to enable SDL’s to be increased as local communities, regional authorities
and States find more efficient ways to deliver environmental objectives.
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–
SDL t,i
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All benefits flow to the region where innovative solutions are found.
Adaptive management will always be possible.
= SDL 2012,i
- Water entitlements
purchased and
transferred to the
environmental water
register
+ any increase in the SDL that the
Authority determines can be made at
no detriment to the attainment of
environmental objectives because
environmental works and measures
are allowing the more efficient
management of environmental water
+ any increase in the SDL that the
Authority determines can be made at
no detriment to the attainment of
environmental objectives as a result
of a policy change that has occurred
Under the arrangements proposed in the Guide the Basin Plan, once and an SDL is set, there is no
incentive for anyone to invest in environmental works and measures.
After 2012, the main way to adjust an SDL is to use the “compulsory acquisition like” arrangements
set out in sections 75 and 76 of the Act.
This adaptive approach set out above overcomes these these impediments and dramatically
increases the opportunity to prepare a Basin Plan that will withstand the test of time.
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Funding adjustment
• $3.1b Buy back programs
• $5.8b Infrastructure upgrade
• $8.9b in Total
• 15,120 irrigators
• $588,624 per irrigator
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