(International Relations and Governance Brief 3)
River System Management:
A comparative analysis of cross-border freshwater allocation models,
drawing on Australia and Switzerland as major case studies.
Adrian Gepp
November 8 2004
Contents
Section A: Introductory Sections
page
4
A.1 General Introduction
page
4
A.2 Introduction to Freshwater and River Systems
page
5
A.2.1 Overview of freshwater, its importance and management
issues
page
5
A.2.2 Overview of the importance of river systems and their
management
page
8
page
10
page
10
page
16
page
22
A.3 Introduction to Main Case Studies
A.3.1 Overview of Australian Case Study
A.3.1.a Overview of Murray-Darling River System
A.3.1.b Water and River Management in Australia: with
particular reference to the MD River System
A.3.2 Introduction to the European Case Study
A.3.2.a Overview of the Danube and Rhine River
Systems, noting the significance of the Swiss Alps
A.3.2.b Overview of the unique views and attitudes
towards freshwater in Switzerland
A.3.3 Brief Comparison of Main Case Studies
Section B: Introduction to Cross-border River Systems
page 24
B.1 Cross-border river systems and their management issues
page
24
B.2 Theory applicable to cross-border river systems
page
25
Section C: Different Approaches to Cross-Border River
Freshwater Allocation
C.1 Market Model
page 28
page
28
C.1.1 Outline of the Market Model
page
28
C.1.2 Theoretical Advantages of the Model
page
29
C.1.3 Problems and Oversights with the Model
page
30
C.1.4 Freshwater Valuation in the Model
page
32
C.1.5 Water Trading in Australia
page
32
C.1.6 Influence of the Privatisation Trend
page
35
2
C.2 Customary Laws and Agreements Model
page
36
C.2.1 Outline of the Market Model
page
36
C.2.2 Advantages of the Model
page
37
C.2.3 Disadvantages of the Model
page
37
C.2.4 The Model in Australia
page
38
C.2.5 The Model in Switzerland
page
40
C.2.6 Stewardship Agreements: importance of encouraging
self-management
page
41
page
42
C.3.1 Brief Overview of the Environmental Economics Model
page
42
C.3.2 Brief Overview of the Market Based Incentives
page
44
C.3 Hybrid Models
Section D: Conclusions
page 46
D.1 General Freshwater and River System Management
page
46
D.2 Models of Cross-Border River Freshwater Allocation
page
47
D.2.1 The Market Model and its Hybrid Variations
page
47
D.2.2 Customary Laws and Agreements Model
page
48
D.2.3 Stewardship
page
49
page
50
D.3 An Alternative Hybrid Solution
References and Bibliography
page 52
3
Section A
A.1 General Introduction
Managing river systems that flow across borders is complex and multifaceted. The
issue encompasses theoretical and practical debates that, in some form, have
been present since the beginning of mankind, as they reflect human attitudes and
values. Diverse social factors influence people’s water use decisions such as
government policies and especially personal value systems. Therefore, to change
water use behaviour personal values must be influenced, which is inherently
difficult as in all change processes. This change process has added complexity
when applied to groups of people such as communities, states, and nations. The
reason for this is that group values are significantly harder to change than
individuals’ values1. Therefore getting people, especially groups of people with
different ideas and views, to cooperate and work together efficiently is
challenging.
Since water is an essential requirement for the survival of all living organisms,
nations, states, communities and individuals have had the entire human history
to develop beliefs, values and norms that govern the way they interact with, and
manage, both water and river systems. A common historical belief has been that
natural resources were present to be exploited and were resilient to any damage
(the fundamental of market based economics); furthermore, that there is a “right
to access and use water”. However, as major impacts from human development
are identified, environmental awareness is increasing from the realisation that our
natural resources can be damaged. Despite this increase in environmental
awareness, it is relatively new and is only slowly changing entrenched cultural
attitudes.
With increased awareness it has become apparent that rivers must have an
integrated management system to avoid individual sections being managed with
completely different goals. However, historically it has been easier for people to
manage the river as separate and disjoint segments at the expense of the river
system as a whole. The reason for this is that the decision-making groups along
rivers have established their own different value systems and interests. Thus, in
regard to the issue of water and rivers, it is noticeable that a large hurdle exists
between the current state, and effective and efficient integrated river-wide
management. This has been acknowledged by the UN through the Agenda 21,
resolution, in chapter 18, which refers to the need of an “integrated approach”
when dealing with freshwater issues2.
The vast majority of medium to large river systems pass through state or national
borders. Furthermore, what is often overlooked is that as the nature of rivers is
to transport water from one location to another, it means that every river system
passes through some type of border, even if it is a small village or local
community boundary. Therefore, a major difficulty with river management is that
all groups of people, regardless of their size and culture, will have slightly
different value systems regarding river-water due to differences in water access,
Amy Kenworthy-Uren and Michael Gundlach, “Organisational Behaviour” (Gold Coast: Bond
University School of Business, 2004), p213.
2
United Nations, Department of Economic and Social Affairs, Division of Sustainable Development,
“Agenda 21” (2003), chapter 18, paragraph 18.39
[Accessed October 2004 via Internet at
http://www.un.org/esa/sustdev/documents/agenda21/english/agenda21chapter18.htm].
1
4
demand, and dependence on the river’s resources 3. Obviously, there are greater
similarities between local communities than between different nations. Therefore,
the issue of cross-border river management, from small community rivers to
large international river systems, is extremely complicated. Consequently, finding
the most efficient, effective and equitable management model to guide the future
management of these rivers is beneficial from an economic and environmental
point of view.
This paper focuses on the complexities of cross border river system management
and different management models that can be applied. A brief introduction is
given to freshwater and river systems, their management and the main issues
involved, to provide a basis for analysis and to highlight the importance of the
topic. As a source of real-world data, this paper will draw from two different
regions of the world that are unique regarding their water and river systems,
namely Australia and Switzerland. The focus in Australia will be on Australia’s
longest and only major river system, the Murray-Darling, which has well
documented management, flow and quality problems that involve 5 (QLD, NSW,
ACT, VIC, and SA) of Australia’s 8 states and territories. As a comparative
example, the Rhine and Danube river systems, which traverse numerous
countries in Europe, will be discussed in particular reference to the water
abundant nation of Switzerland, because the Swiss Alps are a major water source
of both of these river systems.
The theoretical issues involved are extremely important, and a purely data-driven
analysis is not sufficient to derive accurate and useful conclusions. The theories
that are relevant to cross-border river management, along with case study data
and analysis, are applied to the two main practical model solutions currently
being adopted, which are the market model and the customary laws and
agreements model. In order to reach overall and case study conclusions, these
two models are then compared and contrasted, and two new hybrid alternatives,
known as environmental economics and market based incentives, are analysed.
A.2 Introduction to Freshwater and River Systems
A.2.1 Overview of freshwater, its importance and management
issues
Without water, the human race, and all other living organisms on this planet,
would cease to exist. Many powerful statements have been made about the
simple molecule that comprises two hydrogen atoms and one oxygen atom; for
example, water is the most vital substance to the human race4, water is a natural
wonder5, and the main purpose of water is to sustain life6. Whether or not the
gravity of these statements is excessive, it is a fact that all life on our planet
depends upon water7. The importance of water is further illustrated by it being
the first substance that space exploratory agencies look for on other planets, as
an indicator of past, current and future life.
Konrad Repgen, "The Hydro-politics of The Mekong River Basin: Regional Cooperation and
Environmental Security" in Non-Traditional Security Issues in Southeast Asia, ed. T.H. Tan and J.D.
Kenneth Boutin, p471 (Singapore: Select Publishing, 2001).
4
Water Policy International Ltd, “The Water Page: Water Basics” (2000/1)
[Accessed October 2004 via Internet at http://www.thewaterpage.com/waterbasics.htm].
5
Kozlov (chairman of the Russian Ecological Society). In: “Water: Source of Life on Earth”
International Affairs: A Russian Journal of World Politics, Diplomacy & International Relations, vol 49
(issue 6), p164.
6
Jane Matty, “A Universal Resource” Rocks & Minerals (May/June 2004), vol 79 (issue 3), p154.
7
United Nations, “Agenda 21” (2003), chapter 18, paragraph 18.2 [Accessed via Internet].
3
5
Freshwater8 is the type of water that is a necessity to the survival of the human
race. People can survive a month without food, but only five to seven days
without freshwater9. This is only one of the many important uses of freshwater,
which include:
 Assisting digestion and absorption of food
 Sustaining ecosystems
 Contributing to tourism and recreational activities
 Being an integral part of many industrial and agricultural processes
 Cleaning for sanitary and hygienic purposes
 Providing a means of transport (along rivers)
 Generating electric power: hydropower is the cheapest source of
electricity today10
The way that freshwater dominates human life is shown by the historical and
current population distribution; the world population distribution is dominated by
the availability of freshwater11. Furthermore, the distribution of agricultural and
industrial areas is also highly dependent on sources of freshwater.
Freshwater is scarce as well as being vital. Although about three quarters of the
Earth’s surface is covered by water, only about three percent 12 of this water is
freshwater that is suitable for drinking (ie. potable water), and less than two
thirds of the freshwater is accessible ground or surface water in a drinkable state
(not frozen)13. On the other hand, this also highlights that our solid water (ice) in
glaciers and ice caps is extremely important as water reserves. The diagram
below is from a water study in 2001 and is an illustration of water on Earth that
highlights the importance of freshwater as a resource.
This paper defines freshwater as water that contains less than 1,000 milligrams per litre of dissolved
solids. This is the most common definition of freshwater found in encyclopaedias, atlases and
dictionaries. It is also the definition found in the following article:
Ben Hanley and Joe Buchdahl, “Sustainable Development Information Pack: KS4 & A” (Manchester:
Manchester Metropolitan University, 2002), p91.
9
Water Policy International Ltd, “The Water Page: Water Basics” (2000/1) [Accessed via Internet].
10
Hans Loser, Manager of Elektrizitatswerk St.Moritz (Hydropower plant in the Swiss Alps) [Personal
Interview, August 2004]
11
Charles Fenner, “A Geography of South Australian and the Northern Territory” (Sydney: Whitcombe
and Thombs, 1958), p73.
12
Different studies claim slightly different figures, averaging about 2.5 to 3%:
UNESCO, “The makings of a water crisis” UNESCO Sources
Estimates freshwater is 2.5% of
(Nov 1996), Issue 84, p12
total water
Sandra Postel, “Dividing the Waters” MIT's Technology Review
Estimates freshwater to be
(Apr 1997), vol 100 (issue 3), p54.
approximately 2.5% of total water
Estimates freshwater is 3% of total
Jane Matty, “A Universal Resource” Rocks & Minerals, p154.
water
8
13
All three sources from footnote 9 agree with this figure.
6
Earth’s Water Resources
Graph not available due to digital copyright issues
(the source is available through the EBSCO database)
The major statistics shown in this graph where:
-Only 3% of the Earth’s water is freshwater, and
-2.1% is frozen freshwater
Source: Jane Matty, “A Universal Resource” in Rocks & Minerals (May/June 2004), p154
Due to the importance and scarcity of freshwater, the human race is dependant
on its effective management and use. This is made challenging because human
usage and demand for freshwater, predominantly from rivers and lakes, has
steadily increased over the centuries14. The demand for freshwater is also
increasing for uses other than human consumption. This increase in demand is
being driven by the current intensification of industry, agriculture (particularly
irrigated crops), freshwater-involved recreational activities and urban growth
(mainly lawns and gardens, but also showers, washing machines etc): it is
estimated that crop irrigation accounts for 90 percent of the use of freshwater
worldwide15. Moreover, poor management and inefficient use of freshwater bears
a high cost16. For example, an average sized bath holds between 150 and 200
litres of water, and one dripping tap can waste more than that in a day
(approximately 240 litres) 17. Considering the increasing demand, the humanly
uncontrollable supply (apart from costly desalination of saltwater), and the costs
of errors in the use and management of freshwater, it should be obvious that the
earth’s freshwater should be managed with extreme care and caution.
Freshwater is a shared natural resource that often does not fall where it is needed
most. Therefore, there are river and pipeline freshwater systems all over the
world that aid the division and distribution of this resource. The dilemma that
society faces is how to coordinate shared access to these river and pipeline
freshwater systems. There are many ways to coordinate this; however, none of
them have been proven, in theory or practise, to be the best alternative. Thus,
the decision making process regarding the shared use of freshwater is still
problematic. The core issues are whether it should be shared equitably between
all current human users, or the use should be driven by a specific factor, such as
market and money forces, the best interest of the current environment, or the
best interest of the future generations. There are many issues that flow from
these critical questions; the major concern is how to value freshwater. It is an
essential natural resource, which has multi-faceted usefulness, which is more
valuable than the additive value of its individual uses.
Thus far, the people of the world as a whole have not performed well in managing
freshwater. Recent estimates by the World Resources Institute, in collaboration
Water Policy International Ltd, “The Water Page: Water Basics” (2000/1) [Accessed via Internet].
Clair Hutchings, “Down to the last drop” Geographical (Aug 1997), vol 69 (issue 8), p23.
16
BELIAKOV, A. (chairman of the State Duma Committee on Natural Resources
and Nature Management). In: “Water: Source of Life on Earth” International Affairs: A Russian Journal
of World Politics, Diplomacy & International Relations, vol 49 (issue 6), p158.
17
Water Policy International Ltd, “The Water Page: Water Basics” (2000/1) [Accessed via Internet].
14
15
7
with the University of New Hampshire, state that “2.3 billion people live in river
basins under water stress”18. Currently, according to the UN report titled
‘Comprehensive Assessment of the Freshwater Resources of the World’,
approximately a third of the world's population (more than 2 billion people) suffer
from what the report describes as ‘moderate to high’ stress arising from their
water supply19. Furthermore, “the latest UN report on freshwater supplies
estimates that two-thirds of the world population will be affected by ‘severe water
stress’ by 2025”20. Although forecasts like these have a speculative component to
them, they do highlight that freshwater shortage is a real global problem. The
gravity of the freshwater problem, and the general under appreciation of this
important resource, has been outlined in the introductory sections of Chapter 18,
entitled ‘protection of the quality and supply of freshwater resources’, in the
United Nations Agenda 21 resolution21. The President of Tajikistan, in a UN
address, stated that the responsibility for preserving freshwater for future
generations needs to be divided between all nations22. This is true; however, in
addition to preserving water for the future, it is also necessary to divide the
responsibility for managing the current generation’s demand and distribution of
freshwater between all nations. Freshwater is so important that efficient and
effective approaches to the distribution and management of it (whether they are
novel or modified pre-existing processes) need to become an inalienable part of
every nation's transition to sustainable development.
It is also important to note that freshwater quantity issues, including flow, supply,
demand, and distribution, are not the only freshwater concerns. The issue of
water quality is also extremely important. However, studies on freshwater
quality, rather than quantity, are far more prevalent23 and most people agree on
the desired levels of water quality, because the current and required quality can
be more accurately measured scientifically than water flows. Thus, the concern
about quality has been identified as finding a method to improve it, which is a
difficult task. This paper will not focus on this issue (eg. river pollution and high
salinity), but will concentrate on managing the quantity issues of cross-border
river systems, which will be a huge step forward in improving the natural health
of the water contained in them.
A.2.2 Overview of the importance of river systems and their
management
Freshwater in river systems possesses qualities of both a renewable resource
such as solar power, and a non-renewable resource such as oil. Water is similar
to a renewable resource such as solar energy, as the rain will fall again like the
sun will shine again. However, water is only a renewable, or sustainable, resource
provided that the usage rate is slower than the natural rate of replacement 24. This
appears simple; however, the natural rate of replacement varies, even within a
small area. Therefore, the usage in each individual area should remain below the
Nels Johnson, Carmen Revenga and Jaime Echeverria, “Managing water for people and nature”
Science (Nov 2001), volume 292 (issue 5519), p1071.
19
United Nations. “Water: Is there hope?” UN Chronicle (1997), volume 34 (issue 2), p24. [accessed
via EBSCO database].
20
Hutchings, C. “Down to the last drop” Geographical, p23.
21
United Nations, “Agenda 21” (2003), chapter 18 [Accessed via Internet].
22
Emomali Rakhmonov (President of the Republic of Tajikistan). In: “Water: Source of Life on Earth”
International Affairs: A Russian Journal of World Politics, Diplomacy & International Relations, vol 49
(issue 6), p156.
23
An example of this is the huge number of reports that involve water quality produced by the United
Nations Economic Commission for Europe [access to all report via Internet at
http://www.unece.org/env/epr/studies/]
24
The natural rate of replacement is equivalent to the sum of the amount of rainfall and the amount
of snow converted to ice (obviously negligible or zero in countries such as Australia with low snow)
18
8
natural rate of replacement of that area. The ramification of this is that we are
not able to use excessive amounts of water from one catchment area and
minimal from another so that only overall usage is acceptable, which is a hard
constraint on river management. In the event that a river system was completely
drained, there are significant environmental and social impacts. For example, a
river system needs a base level25 of water (as a minimum flow requirement) to
ensure the health of dependant aquatic flora and fauna, as well as ensuring that
new rainfall will be collected and not soak into the soil, rendering it unavailable
for drinking. Therefore, for management purposes, freshwater should be treated
more like a non-renewable resource, because we can not afford to be without
fresh water for any period of time. The adage of this is that actions must be taken
before the problem occurs, as total depletion of freshwater would be disastrous
for this planet and the human race. This should be considered when making the
decision of whether to act now or later. Thus, we arrive at a major conundrum in
river management: if we get it wrong then the costs will be huge in the future,
but how probable is it that we are wrong; that is, what is the probability weighted
cost? This is the basis of a many of theoretical arguments, including the
precautionary principle, which will be discussed in more detail in section A.4.2.
Freshwater (rain) falls in different amounts in different locations, and river
systems are the main collectors for its redistribution. As freshwater often does
not fall where it is needed most, the management of river systems is a way of
controlling the distribution of freshwater. Thus, the people who manage river
systems have a huge impact on the amount of freshwater received by others in
different sites. In general, management is highly complex and challenging 26, and
consequently has attracted a lot of attention over the last few years from
governments, academia and industry. However, most of the outcomes and
recommendations that have arisen from this interest are only partially applicable
to the management of ambient goods (eg. freshwater) that constantly move. The
complexity in river management stems from the difficulty in establishing
ownership, responsibility and obligation to a shared or common resource that
travels through land27 without regard for its borders28.
There is little wonder why the word ‘rival’ is derived from the Latin word ‘rivalis’,
which means people who live on opposite banks of the river: throughout history
even extremely cordial neighbouring nations have found it difficult to achieve an
acceptable solution to managing their river systems 29. However, as yet, the use
of military force regarding freshwater access has been minimal; furthermore,
most researchers in the freshwater area agree that wars over freshwater issues
are unlikely. The two most stated reasons for this view are that freshwater
conflicts will only exacerbate pre-existing political tensions, or the costs of using
force will outweigh the potential gains from victory. 30 This has been the case for
the well-known Mekong River Basin, where the presence of the Mekong River
Commission is thought to make armed conflict unlikely31.
In general terms, there are two classifications of riparian land, upstream and
downstream. In this context, riparian land refers to land that is located on and
Note that this base-level required for waterways is not easily defined and is a topic with many
different views
26
Ricky Griffin, “Management” (Boston, USA: Houghton Mifflin Company, 1999), p8.
27
The term “land” used here refers to the legal meaning of real property with established ownership
28
Dellapenna and Joseph “Custom-built solutions for international disputes” UNESCO Courier (Feb
1999), vol 52 (issue 2), p34.
29
Dellapenna and Joseph (Ibid), p33.
30
Konrad Repgen, "The Hydro-politics of The Mekong River Basin: Regional Cooperation and
Environmental Security" in Non-Traditional Security Issues in Southeast Asia, p470.
31
Konrad Repgen, (Ibid), p477.
25
9
around32 the banks of a river. These classifications create two groups of riparian
landowners with completely different views. Upstream riparian landowners, who
are close to the source of a river’s water, seem to have an abundant supply of
water with a drought as their only potential problem. Moreover, the upstream
riparian landowners feel that they have an unrestricted right to use “their” river
water. On the other hand, downstream riparian landowners notice a fluctuating
river flow, which is highly dependant on upstream user patterns, not just the
natural supply. The downstream riparian landowners believe that they have a
fundamental right to access some of the water that enters the river at the source.
That is, downstream riparian landowners believe in the integrity of the river
upstream, insisting that others do no affect the river’s water flow 33. However, it is
ironic that downstream riparian landowners fight with upstream riparian
landowners for the fundamental right to part of the river water, but ignore those
rights of riparian landowners further downstream. Nevertheless, the difference in
the way upstream and downstream users of water in a river system view the river
is a large hurdle for all river management groups, such as communities,
industries, and governments.
Thailand’s Kong-Chi-Mun project on the Mekong River is a classic example of the
upstream and downstream conflict. The project was to divert up to 6,500 million
cubic meters a year from the Mekong mainstream, which would reduce the
annual runoff in that area by over 1,000 million cubic meters. Even with a project
this large, Thailand did not conduct a single study on the downstream impacts of
this project. Downstream riparian nations such as Laos and Vietnam were
extremely concerned about the potential drop in water flow during dry-seasons,
which may have had detrimental effects on river navigation activities34. The Thai
deputy foreign minister argued Thailand’s sovereign right to its share of the
Mekong stating that “if joining the committee [Mekong Committee] means the
loss of our sovereignty, we prefer to go it alone”35. Ironically, this statement
shows no consideration for downstream nation’s sovereign rights to use
freshwater from the Mekong. In addition, China, a country further upstream and
thus not affected by Thailand’s project, aided Thailand politically by attempting to
prevent other riparian countries from having the right to veto such a project.
These arguments resulted in Thailand and an upstream riparian group having a
stand-off against Vietnam and a downstream riparian group: with both parties
threatening to leave the committee if their views were not heard. This upstream
and downstream stand-off eventually resulted in intervention by the UN
Development Programme, which was successful in restoring cooperation between
the Mekong riparian nations. Hence, this case shows the reality and strength of
the opposing riparian views: the difference between the upstream view of
territorial sovereignty and downstream view of river integrity is a major source of
conflict between riparian nations.36
A.3 Introduction to main case studies
A.3.1 Overview of Australian Case Study
Australia is a unique country, especially regarding its freshwater situation.
Excluding Antarctica, Australia has the lowest natural replacement rate of
For the purpose of this paper, the word ‘around’ used here will be defined very broadly to include
communities, towns and cities in the area that directly use the water from that section of the river
33
Dellapenna and Joseph (Ibid), p36.
34
The Nation, “Water Plan May Hit Mekong Neighbours” August 2, 1994.
35
The Nation, “Strong Distrust Delays Cooperation in the Mekong,” March 27, 1992.
36
Konrad Repgen (Ibid), p478-479.
32
10
freshwater (ie. lowest cumulative rainfall) of any continent. Nevertheless,
Australia has one of the highest per capita consumption rates of freshwater in the
world.37 Based on this very general data, it is not surprising that freshwater is
such a prevalent issue to the people and governments within Australia.
A.3.1.a Overview of Murray-Darling River System
An overall view of the Murray-Darling River System
Figure not available due to digital copyright issues
(the source is available from the Murray Darling Basin Commission)
Other diagrams of the Murray-Darling River System are available on the
web; however, these are of a much lower quality and accuracy
Source: Murray Darling Basin Commission, “Corporate Plan”, 2001, cover page.
The Murray-Darling Basin (hereafter referred to as the MD Basin or MD River
System) is Australia’s only large scale river system, and consequently is a major
focus of interest for freshwater in Australia. The MD Basin covers an area of
1,058,800 square kilometres, which is approximately one seventh of the area of
Australia38. The basin drains from all of the Australian Capital Territory, and parts
Melbourne Water, “Australia –The driest Continent” (2004) [Accessed October 2004 via Internet at
http://conservewater.melbournewater.com.au/content/conserve/driest.htm]
38
Murray Darling Basin Commission, “Basin Statistics” [Accessed September 2004 via Internet at
http://www.mdbc.gov.au/naturalresources/basin_stats/statistics.htm].
37
11
of 4 states, namely Queensland, New South Wales, Victoria and South Australia39.
This means that the river system involves 6 different governments, i.e. the ACT
government, the 4 state governments and the commonwealth government. Each
of these governments has different levels of interest and concern about various
aspects of the MD Basin, because each state/territory has different demands on
the water supplied by the river system. In addition, the legislation and
administration regarding river systems and freshwater varies considerably across
states40.
The South Australian portion of the MD river system covers an area of about 70,
000 square kilometres41; it is the simplest to plan and manage as it only involves
one river, the River Murray, which only flows into SA and out into the sea. Other
states all contain multiple river systems, all with their own catchment areas; a
summary of the remaining states’ (and territory’s) rivers, which contribute to the
water flow in the MD river system, is presented below:
 From Victoria, the Mitta Mitta, Kiewa, Ovens, Broken, Goulborn,
Loddon and Avoca are the major contributing river systems
 From New South Wales, the Murrumbidgee, Lachlan and Darling are
the major rivers together with their tributaries42
 From Queensland (outflows into the MD river system but no inflows),
the two main tributaries of the MD river system, via the River Darling,
are the Macintyre and Dumaresq.
 From ACT: all the rivers are tributaries to the MD river system
The greatest single dependence upon the water from the River Murray occurs in
South Australia, where only two of the major cities have their own water supplies.
Adelaide, Port Pirie, Port Augusta, Whyalla and some associated towns are
dependent upon water that is piped from the River Murray. The dependence of
Adelaide alone is between 40 to 85%43, whereas the other localities that are in
drier areas are solely dependent upon the river pipeline apart from local water
tanks that are usually for domestic use. The urban and industrial dependence
upon this water, from one source, together with the cities/towns and irrigators
along the River Murray itself, demonstrates the critical level of interest that South
Australia has in its river supply. As the most downstream end user of the water
supply there is also a critical concern about its quality.
A.3.1.b Water and River Management in Australia: with particular
reference to the MD River System
While reservoir levels around Australia are monitored closely, the residual flow44
in a river is less noticed, unless there is not enough water to provide someone
with what they want. A clear example of this is the drought of 2002, which
affected Adelaide and the Gold Coast in a similar way. The map below, produced
by the Bureau of Meteorology, clearly shows that both the Adelaide and the Gold
Coast regions were in a period of low rainfall (freshwater) in the first 6-months of
2002.
The Integrated Natural Resource Management Group for the South Australian Murray Darling Basin,
“Integrated Natural Resource Management Plan for the South Australian Murray-Darling Basin”
(2004), p19.
40
Mike Young, Darla H MacDonald, Randy Stringer and Henning Bjornlund “Interstate Water Trading:
A Two Year Review. (Draft Final Report)” Adelaide, South Australia: CSIRO Land and Water, Policy and
Economic Research Unit (PERU), 2000, pp34-37.
41
“Integrated Natural Resource Management Plan for the South Australian Murray-Darling Basin”
(IBID).
42
In this context, the word ‘tributaries’ is defined as rivers that flow into (contribute) to another river.
43
Darla H McDonald, “The Economics of Water: Taking Full Account of First Use, Reuse, and Return to
the Environment” (Adelaide, South Australia: CSIRO Land and Water, Policy and Economic Research
Unit (PERU), 2004), p24.
44
In this context, the term ‘residual flow’ refers to the amount of water flow that continues to flow
down a river after freshwater consumption/usage processes.
39
12
Figure not available due to digital copyright issues
(refer to first figure in the webpage source)
This figure showed the rainfall deficiency areas in Australia
for the 7 month period of 1 December 2001 to 30 June 2002
Source: Bureau of Meteorology, Drought Statement (July 3 2002) [Accessed on October 2004 at
http://www.bom.gov.au/announcements/media_releases/climate/drought/20020703.shtml]
Although the majority of the MD River System is not in the rainfall deficiency
area, Adelaide and the MD River system in close proximity to Adelaide (red
section to the East of Adelaide on the above map) is in a ‘Severe Deficiency’
rainfall state. Similarly, the Gold Coast (immediately below Brisbane on the map
above) and the surrounding areas were under ‘Severe Deficiency’ of rainfall
during the same period. However, water restrictions on the Gold Coast were
invoked before those in Adelaide. The main reason presented is that Adelaide
receives its water through a pipeline to the River Murray, and from personal
experience people think that this pipeline provides an unlimited supply. This
difference between the perception of stationary (reservoirs) and moving water
resources (rivers) is something that needs to be addressed.
The historical, or cultural, view of Australians45 towards the use of freshwater
from river systems is one of personal ownership with stereotypically upstream
attitudes. The past attitude is displayed by the widely expressed viewpoint ‘when
water flows onto my land, it is mine and I should be able to use it as I please’.
The lack of environmental or shared resource concerns in this phrase is worth
noting. An extreme example of this approach is the dam that was constructed on
the well publicised Cubbie Station. A dam that contains the same amount of
water as in Sydney Harbour was constructed on one of the tributary rivers to the
45
Referring to the post-English settlement period only
13
MD River System in Queensland46. Obviously, this has huge positive effects for
the dam’s owners and their cotton crop, with the consequence of considerably
less flow for downstream riparian landowners. Moreover, the most downstream
state, South Australia, possesses both upstream views, as well as the obvious
downstream attitudes. Overall, South Australians have typical downstream views
when dealing with upstream interstate suppliers; that is, arguing for the supply of
water in their segment of the river system to be kept above a certain level for
their own use. However, ironically, within the state, the same problems occur as
they adopt upstream attitudes and people do not consider those further
downstream. These attitudes are most evident in cities where there is a greater
focus from urban users on maintaining or increasing their water supply rather
than using it efficiently.
Since the 1960s, all areas of the MD River System, have been subject to a
continued expansion of agricultural irrigation47. The extensive clearance of
riparian land has created dryland salinity problems; that is, salts rising to the
surface and draining into rivers. Dryland salinity problems, particularly within the
MD River System, along with prolonged and frequent droughts and large scale
projects such as the dam at Cubbie Station, have forced Australians, and their
governments, to become more aware of these conditions, and the importance of
the MD River System and its management. The National Action Plan for Salinity
and Water Quality 1999 (continually being updated), endorsed by Council of
Australian Governments (COAG) was formulated to coordinate activities across
states to improve the salinity and overall quality of freshwater in Australia,
particularly in the MD River System48. Agreements such as this National Action
Plan, and general public views, are a positive sign of changing attitudes towards
water and rivers in Australia. The existence of COAG, and national policies and
plans is a sign that the governments within Australia are realising both the
benefits and necessity of working together. The new structure of the MurrayDarling Basin Commission is a practical example that illustrates, at least in
theory, that all involved governments are working together to aid this
independent commission to improve overall management of the river system. The
current structure is shown below:
Tony Eastley, “Cubbie Station cotton irrigation blamed for Darling River damage” AM on ABC Local
Radio, June 24, 2004 [Transcript assessed October 2004 via Internet at
http://www.abc.net.au/am/content/2004/s1139216.htm]
47
Murray Darling Basin Commission, “Irrigation: An historical overview” [Accessed October 2004 via
Internet at http://www.mdbc.gov.au/education/encyclopedia/irrigation/irrigation.htm].
48
Australian Government: departments of Agriculture, Fisheries and Forestry and the Environment
and Heritage, “About the National Action Plan for Salinity and Water Quality” (2004) [Accessed
October 2004 via Internet at http://www.napswq.gov.au/about-nap.html].
46
14
Figure not available to digital copyright issues
(the source is available from the Murray Darling Basin Commission)
This figure is only available from the MDBC
Source: Murray Darling Basin Commission, “Corporate Plan”, 2001, p5.
The importance of this structure is the fact that individual communities’ (through
the community advisory committee), and all participating governments views’
flow through to an overall independent commission, which also has a supporting
Commission Office to coordinate and facilitate its work. In addition, the Ministerial
Council is designed to ensure “effective, efficient and sustainable use of the
freshwater, and authorise measures to achieve this”49. The success of this new
structure is still somewhat unknown, as no formal documents analysing the
implementation of this new structure have been released. However, there have
been some positive signs: it seems that the independence of the commission is
being maintained, and the commission is receiving more money to improve the
health of the river system50. The general manager of the Marina Association of
Australia, who has regular dealings with the commission, stated that the
commission “has extensive representation from government and the agricultural
sectors but has far less from the leisure, boating, tourism and recreation
Murray Darling Basin Commission, “Corporate Plan”, 2001, p4.
Murray Darling Basin Ministerial Council “The Living Murray: A Discussion Paper on Restoring the
Health of the River Murray”, (Canberra, Australia, 2002), chapter 6, p25-29.
49
50
15
industries that are significant in the Murray-Darling Basin”51. Therefore for the
sake of equity, the Commission, Council and Committee, need to correctly
represent all sectors (and all geographical segments in those sectors) relating to
the MD River System, especially the non-consumption use sectors. Although
governments are beginning to work together and realise the need for cooperation
and integrated policies, the problems with the MD River System are still far from
being fixed. The danger is that positive short-term results may cause
governments to lower the issue’s priority, so that in the long-term there will be
less improvement. This is typical of short term budgeting and profit focussing
when environmental issues need long term commitment.
A.3.2 Introduction to the European Case Study
A.3.2.a Overview of the Danube and Rhine River Systems, noting the
significance of the Swiss Alps
Switzerland and particularly its Alps, are extremely important regarding
freshwater issues. The Swiss Alps play a key role in providing freshwater to a
large number of Europeans through the Danube and Rhine river systems.
Rhine River System
Figure not available due to copyright issues
(the original figure is available from the website source)
Adapted from “Rhine River” accessed at http://www.rollintl.com/roll/rhine.htm
The Rhine, flowing almost 1320km52 in a generally north-westerly direction,
begins in the Alps of Switzerland and later forms the boundary between
Switzerland and Lichtenstein, then between Switzerland and Austria, Switzerland
and Germany, France and Germany, and then flows through Germany and finally
through the Netherlands to the North Sea at Rotterdam.
Glenn Jones, General Manager of the Marina Association of Australia [Personal Interview, October
2004].
52
Anton Earle, “The Water Page: The Rhine River” (Water Policy International Ltd, 2000/1)
[Accessed October 2004 via Internet at http://www.thewaterpage.com/rhine_main.htm].
51
16
Danube River System
Figure not available due to copyright issues
(the original figure is available from the website source)
Adapted from “The Danube River” accessed at http://www.danube-research.com/Danube.html53
The Danube flows about 2850km54 in a predominantly easterly direction; it is
Europe’s second largest river, with a watershed area that spreads over seventeen
countries55. The river system originates in the Black Forest Mountains of Austria,
near the border to Switzerland. The Danube then flows through Germany, back
through Eastern Austria, then through Hungary, and onto Croatia, Romania and
into the Black Sea via Bulgaria. The River Inn originates in the Swiss Alps and is
mainly supplied by glacial melt. It is therefore a major glacial tributary of the
early stages of the Danube (via Vienna in Austria).
About 2400km of the Danube is navigable with an estimated 10,000 ships using it
annually56, while the Rhine has been described as the busiest waterway in the
world57. The year round large water flow in these two river systems and the
extensive riparian development that has and continues to occur, contributes to
both rivers’ past and present economic significance as international waterways.
Consequently, there has been a long history of international negotiations in an
attempt to achieve “equitable” use, predominantly for navigation and trade via
the river systems (distinguishing from trade of the water within the river
systems). For the Rhine, an agreement was established in 1831 that introduced
free navigation rights to the riparian states, but imposed a small tariff on foreign
ships (the tariff was abolished in 1868 and all navigation was made free).
Similarly, for the Danube efforts to establish international control began
approximately 150 years ago in 1856. The declaration of ‘The Peace of Paris’, on
March 30,1856 declared that navigation of the river was free to all nations,
subject to international control by the European Commission 58.
Through reasonably high rainfall, huge river systems, and huge freshwater
reserves in the form of glaciers, Switzerland in particular, like many European
countries has never faced a significant shortage of freshwater. The country has
always had sufficient freshwater to fulfil all of its agricultural, industrial, and
human use needs; for example, all the power stations in Switzerland generate
electricity by hydropower using freshwater from lakes and rivers 59. However, the
glaciers within the Swiss Alps, the most significant freshwater reserve for
Switzerland and one of the most important for the rest of Europe, are decreasing
As per note on the source website: Please note that since February 2003 "Yugoslavia" above should
now read "Serbia and Montenegro"
54
Danube Research Commission, “The River Danube” (2004) [Accessed October 2004 via Internet at
http://www.danube-research.com/Danube.html].
55
Dellapenna and Joseph “Custom-built solutions for international disputes” UNESCO Courier, p36.
56
BBC News Online, “Danube opens for shipping”, November 29, 2001.
57
Anton Earle, “The Water Page: The Rhine River” (2004) [Accessed via Internet].
58
The Encyclopaedia Britannica (1937), “Inland Water Transport”, volume 12, p364.
59
Hans Loser, Manager of Elektrizitatswerk St.Moritz [Personal Interview]
53
17
in surface area and total volume at the fastest rate ever measured. The decline
started at the end of the last quasi-ice age in 1850, and since then, on average,
Swiss glaciers have lost 40% of their total volume. A major source of the River
Inn, the Morteratsch and Pers glacier has also been shown to recede on average
16.4m per year since 1850.60
Overall Glacier Situation in Switzerland
Table not available to digital copyright issues
(the German source may be available from the Swiss Government Commission)
The sum of all glacier volumes presented in the table are:
465km2 (1850), 280km2 (mid 1990s), which is a 40% or 185km2 decrease
Specific Case Study (from Bernina Area) –Morteratsch and Pers Glacier
Figure not available due to digital copyright issues
(the German source may be available from the Swiss Government Commission)
This figure shows the decrease in size of the
Morteratsch and Pers Glacier from 1850 to 1990
Swiss Government, “Gletscherlehrpfad Morteratsch” (1993) [Accessed through, and translated by
Beat Lusher (from German to English), Forrester for the Swiss Government in Semadan in the Swiss
Alps].
60
18
Figure not available due to digital copyright issues
(the German source may be available from the Swiss Government Commission)
This figure shows the predicted (smaller) size of the
Morteratsch and Pers Glacier in 2035
Figure not available due to digital copyright issues
(the German source may be available from the Swiss Government Commission)
This figure shows the predicted (smaller) size of the
Morteratsch and Pers Glacier in 2065
Source for all above data: Swiss Government, “Gletscherlehrpfad Morteratsch” (Ibid)
It can be clearly seen that these circumstances are of extreme importance to
freshwater management, including river management, because glaciers are the
main source of freshwater in summer: the sun melts the glaciers into potable
freshwater. Thus, if glaciers are depleted the supply of freshwater will
significantly reduce and dramatically impact on the river flows, as the only
remaining freshwater source left in Switzerland will be rainfall.
The predictions pictured above are based upon the premise that the trend
between 1850 and 1993 will continue into the future. This view and future
predicted, decline in glacier volume is predominantly based upon the continuance
19
of global warming61. Whether the cause of this glacial retreat is global warming, a
simple long-term environmental trend or something entirely different is not a
matter that will be discussed in this paper. However, this data was given as an
expert scientific prediction to highlight the fact that there is a real possibility that
the freshwater reserves in the Swiss Alps may not be permanent. The research
suggests that over the next century many of the smaller glaciers will disappear,
and large glaciers (such as the Morteratsch and Pers Glacier) will be significantly
depleted62. Although official figures were not known, a researcher in glacier
studies noted that Switzerland’s freshwater was predominantly (over 50%)
supplied by glacial melt, especially in the warmer seasons (over 75%) 63.
Therefore, due to the reliance on glacial melt as a freshwater source and the
current decline in glacial area, there is a real possibility that Switzerland, and
subsequently the rest of downstream Europe, could face the situation of
freshwater shortages in the near to medium term future. Thus, there is an
obvious need for Switzerland and downstream countries to incorporate the
possibility of decreasing freshwater volumes into their short and long term
management plans.
A.3.2.b Overview of the unique views and attitudes towards freshwater
in Switzerland
Individuals in society can not own freshwater that occurs on, or flows through,
their property; individuals in society can not own freshwater. These statements
are absolutely correct under Swiss freshwater policy. Individuals possess a small
subset of the rights of ownership, which include the rights to 64:
1. Purchase freshwater for personal use on their property. This includes
activities such as giving water to visiting friends to drink, but not running
a pipeline from your property to the neighbour’s to supply them with
water.
2. Use freshwater for ordinary activities that occur on your property. This
includes activities such as drinking or supplying cattle with freshwater
from a dam on, or river that passes through, your property 65.
As a hypothetical example, if a landowner obtains permission to dig and search
for underground freshwater and succeeds in finding a plentiful source, they only
possess the 2nd right above. Thus, they may not sell, gift, or store (beyond
enough for ordinary use on their property) any of the water they have found. The
residual freshwater (ie. the water remaining after the amount the landowner has
used) from the water the landowner discovered is controlled by the community 66
in which the landowner resides.
Although communities, states and the country of Switzerland itself have more
rights than individuals, they are not able to own freshwater. These bodies have
an extended set of rights over those of individuals; the additions are: the right to
sell freshwater to those individuals within their control, and to other communities,
states and nations67. However, their rights to sell freshwater to other groups is
restricted to stationary freshwater. Thus, using the example of river systems, an
upstream riparian community is not able to sell the freshwater from a river to
Christine Rothenbuhler, Research (PhD) student at Academia Engadina (Research Institute in the
Swiss Alps), Institute of Tourism and Landscape [Personal Interview, August 2004].
62
Swiss Government, “Gletscherlehrpfad Morteratsch” (Ibid)
63
Christine Rothenbuhler (Ibid)
64
Patrick Peduetti, Water Manager, Community of Celerina (within the Swiss Alps) [Personal
Interview, August 2004].
65
There are a few constraints: notification of community authorities of any freshwater use from a
river, and approval of all community and state authorities through which the river passes to create a
lake or dam supplied by the river.
66
In special cases, it may be the state or the nation as a whole; nevertheless, the same principles
apply
67
Patrick Peduetti (Ibid)
61
20
downstream riparian communities as they have a natural right to the residual
freshwater (ie. the amount of freshwater in the river after the amount that
upstream communities use). In addition, all riparian communities must not use
more water than needed for the customary activities of that community unless all
downstream communities agree that the use will still allow them enough water
for their ordinary activities68. Although, this is open to interpretation, it does
make upstream communities consider the impacts of their freshwater use on
downstream users; furthermore, it has proven to be very successful in
Switzerland, probably due to their community based freshwater ideals.
Switzerland has stated they are committed to improving the world’s freshwater
situation by developing freshwater partnerships with other countries, including
but not limited to members of the European Union69. According to the Swiss
Government’s environmental and economic bodies, and consistent with the
freshwater ideals above, the main priority in Switzerland is to ensure that all
segments of the population have access to freshwater70. Therefore, it follows that
firms that use water for purposes such as hydroelectricity are not the main
priority. Thus, it is more difficult for such firms to access freshwater as more
regulations apply. For hydropower stations to access freshwater from a river or
lake, they must get approval from the community where the station is located
and where the desired freshwater source is located, as well as every community
that has tributary lakes or rivers and in addition the state and national
government. Furthermore, this approval is not free, it will be granted at a cost
that varies depending upon how large and how far upstream, the tributary
extends71. It should also be noted that firms must attain approval from the entire
chain of tributaries whether they are privately or publicly owned. In Switzerland,
publicly owned firms such as hydropower stations are run independently as if
they were private, with the same profit maximisation goals72. However, as you
would expect it is easier to get the approval if the firm is community owned
(public), because of political reasons. In addition, to these expensive set-up
costs, any infrastructure relating to the freshwater (pipes, turbines etc.) that is
built by the company becomes community/publicly owned at the end of the
agreement (usually 80 years in Switzerland for hydroelectric power plants) unless
a new agreement is negotiated73. The reasoning behind this is that freshwater is
viewed as a community good; thus, infrastructure relating to it should be
community property unless it is being used for the benefit of that community.
Similar to its approach to forests and other environmental resources, Switzerland
adopts a “Thinking globally, acting locally” approach to freshwater
management74. Instead of establishing national control over freshwater due to its
importance, Switzerland has set up subsidiary freshwater management bodies
within communities75. All quantity related issues are handled on a community
basis, while quality assurance is the role of state governments76. Unlike other
unsuccessful delegated responsibility structures, Switzerland has fully empowered
its communities and holds them fully responsible for freshwater management
Patrick Peduetti (Ibid) and Hans Loser (Ibid)
Swiss Agency for Development and Cooperation (SEC) and State Secretariat for Economic Affairs
(seco), “Switzerland’s International Cooperation: Annual Report”, 2003, p9.
70
Swiss Agency for the Environment, Forests and Landscape (SAEFL), Swiss Agency for Development
and Cooperation (SEC) and State Secretariat for Economic Affairs (seco), “Blue Gold”, Environment for
Europe: Water in Focus, 2003, p9.
71
Patrick Peduetti (Ibid)
72
Hans Lose (Ibid)
73
Patrick Peduetti (Ibid) and Hans Loser (Ibid)
74
Swiss Agency for the Environment, Forests and Landscape (SAEFL), “The situation in 2003” (2003),
p12.
75
Patrick Peduetti (Ibid)
76
Beat Lusher, Forrester for the Swiss Government in Semadan, Swiss Alps [Personal Interview
August 2004]
68
69
21
within their community, as well as any downstream implications caused by their
management. Thus, Switzerland’s freshwater control structure is an example of
localised and institutionalised control that gives real accountability to the local
bodies.
A.3.3 Brief Comparison of Main Case Studies
From an initial viewpoint, there seems to be little benefit from analysing case
studies that occur in two entirely different regions of the world as the situations
and circumstances appear to be so different that no reasonable conclusions can
be drawn. However, finding efficient and effective solutions to extreme cases is
often the most difficult task. Even though these cases seem different, they do
possess similarities and useful conclusions can be drawn from them.
Switzerland, like most countries within the European Union, has no current
problem (ie. shortage) of freshwater supply, and consequently with river system
flows. Furthermore, Switzerland has no previous experiences with freshwater
supply problems. Contrastingly, Australia has faced many freshwater shortages
and has seen this resource depleted and river flow significantly reduced.
Australia is the driest continent in the world with freshwater supply problems in
many areas, especially with the flow of the MD River System. The main similarity
between Switzerland and Australia is in the area of planning for the future. It
appears that Switzerland’s problem-free run with freshwater may end, and
Australia has certainly not found any miracle cure for its freshwater shortage.
Australia is undoubtedly aware of the continuing problem, but the concern is
whether Switzerland will plan for their potential problems before or after they
become realised. Currently, at least on the state and community level,
Switzerland has no contingency plans for shortages in freshwater, but they have
expressed verbally that they will be developed in the near future 77. Overall, both
countries now need to develop contingency plans for future freshwater shortages.
However, something that may prove important in the future is the fact that
Australia is an island country, which means it has a huge coastline. Currently in
Western Australia (Perth) and recently in Sydney there is testing of the economic
viability of desalinating sea water into more useful freshwater using large
industrial plants78. While this process is not yet economically viable (due to high
energy costs), it is important to consider that it may become so in the near future
and provide a new source of water that is not available to most major European
cities.
The major difference, both historically and today, between the Murray-Darling
River System and the Danube and Rhine River Systems is the dramatic difference
in water flow. The flow of the Murray-Darling varies enormously compared to
these two European river systems, in which the flow is somewhat constant due to
their rain supply in winter and glacial melt supply from the Swiss Alps in the
summer. There are however a few similarities between the rivers system. Similar
to the trade access provided by the Rhine and Danube River Systems in Europe,
the Murray-Darling River System was recognised for its economic significance to
access the inland pastoral properties in Australia. In 1856, approximately 30
years after the discovery of these rivers and their tributaries in Australia, a
conference was held in Melbourne to discuss the Murray-Darling River system79.
This meeting between representatives from New South Wales, Victoria and South
Australia undoubtedly involved the first cross-border agreement in Australia, even
Patrick Peduetti (Ibid)
Geoff Gallop (Western Australian Premier), “Perth Seawater Desalination Project” 2004 [Media
Release -accessed September 2004 via Internet at
http://www.watercorporation.com.au/media/media_detail.cfm?id=165].
79
The Encyclopaedia Britannica (1937), “Inland Water Transport”, volume 12, p364.
77
78
22
though the states were not officially combined until Federation in 1901.
Coincidentally, a meeting to manage the Danube by an international committee
also occurred in 185680, and the first Rhine River agreement occurred at almost
the same time that Charles Sturt was exploring the Darling and Murray Rivers.
These early meetings in both parts of the world were caused by economic
stimulus, as river systems were the main form of transport. In Australia, railways
replaced river transport as the main form of transport in the 1880s 81. There are
still cross-border agreements for navigation in Europe, but the Australian focus is
now on freshwater supply and quality issues as is demonstrated by the
importance that the Australian Government is placing on the National Action Plan
for Salinity and Water Quality Plan82. However, meetings that should have been
caused by environmental stimulus and the need for integrated management did
not occur this early.
Stereotypically, Australians are interested in getting the greatest personal benefit
from the freshwater to which they have access; that is, to treat freshwater like a
purely economic good. Conversely, the Swiss are interested in giving as many
people as possible access to the benefits of freshwater; that is, treating it like a
shared resource with social aspects, not simply as an economic good. It may be
argued that individual Swiss people view freshwater very similarly to Australians;
that is, as an economic good. However, at the community level the Swiss
recognise freshwater as having a social aspect in addition to its economic aspect.
Switzerland, relative to Australia, seems to have a much more equitable and
successful value system regarding freshwater, which is somewhat surprising
considering that Australia is the country with freshwater problems. A possible
reason for this may be that Switzerland is historically a more ‘green’ and
environmentally-friendly country than Australia: in Switzerland, the “Greens may
not be strong as a political party, but the Swiss themselves are highly greenminded”83. However, it must be remembered that due to its huge glacial
reserves, Switzerland’s freshwater system has never really had a test such as a
significant decrease in the natural supply of freshwater; thus, the Swiss system
has not been proven to be superior in times of freshwater scarcity. One
advantage that Australia does have over Switzerland and all other nations in the
European Union is that the freshwater problems are becoming well known, early
in its history, to the average Australian. The ramification of this is that
Australian’s attitudes and values regarding freshwater are and should be more
open to new ideas, change and potential solutions that may be adopted by other
parts of the world if these answers are successful.
The Encyclopaedia Britannica (Ibid), p364.
Bryce Fraser (ed) “The Macquarie Book of Events” (NSW, Australia: Macquarie Library, 1983), p97.
82
Australian Government, “About the National Action Plan for Salinity and Water Quality” (2004)
[Accessed via Internet].
83
The Economist, “Greens Grow Up” (August 1999), vol 352 (issue 8131), p37.
80
81
23
Section B: Introduction to Cross-border River Systems
B.1 Cross-border river systems and their management issues
There are almost three hundred large and significant river systems that flow
through at least two nations, and their importance has been recognised by the
United Nations in Chapter 18 of Agenda 2184. Furthermore, the significance of
Agenda 21 was confirmed at the World Summit on Sustainable Development in
2002, when the full implementation of Agenda 21 and the Programme for Further
Implementation of Agenda 21 were strongly reaffirmed85. The inherently difficult
nature of river system management is well known: cross-border86, also known as
transboundary, river system management is an added complexity to standard
river system management. It is argued, and this author’s view, that cross-border
river systems are usually of higher importance than other shorter river systems
that do not cross state or national borders, because they are a larger supplier
(larger volume of flow) to more people (longer in length), and consequently there
is a greater human dependence on them. Therefore, there are greater benefits
from the ‘good’ management of cross-border river systems over other river
systems, and conversely worse implications for bad management. That is, crossborder river management is a classic financial maxim of higher risk for a
possibility of higher return. Following the over-arching financial principle, which
states that when dealing with high risk-return investments (in this case a
freshwater resource), there should be a greater frequency and detail of
monitoring, and a complete understanding of the underlying investment should
be gained before making an investment decision. This theory is extremely
applicable, except for the fact that the investment decision can not be delayed
until a complete understanding of the cross-border river system and its human
and non-human dependants are known. The application of this financial theory
indicates the importance of obtaining a complete understanding, which suggests
that caution (the closest thing to not investing) should take place until this is
achieved. Thus, this financial theory tends to support the idea of the
precautionary principle, contradictory to the traditional financial method of
discounting cash flows (discussed more below in Theory Section).
Accompanying the increased risk and return with cross-border river management
there is increased complexity87; the upstream/downstream rivalry is particularly
apparent with cross-border river system88. In addition, there is generally a lower
tendency to cooperate with people from other states and countries. Thus far, the
world has not dealt with this added complexity very effectively. For example,
where the Rhine borders Lichtenstein and Switzerland, according to international
law both countries have the right to half the main flow of water and any
secondary flows on their respective sides of the main flow89. Thus, in theory they
could work together and stop all downstream flow of the Rhine River and sell the
freshwater to other countries. Hence, this rule does not factor in the likely
United Nations, “Agenda 21” (2003), chapter 18, paragraph 18.4 [Accessed via Internet].
United Nations, Department of Economic and Social Affairs, Division of Sustainable Development,
“Agenda 21 (Overview)” (2003) [Accessed October 2004 via Internet at
http://www.un.org/esa/sustdev/documents/agenda21/index.htm].
86
From now on the term border will be used to describe national and state borders only; thus, a
cross-border river system will refer to a river system that crosses a state or national border
87
Water Policy International Ltd, “The Water Page: International Water” (2000/1)
[Accessed September 2004 via Internet at http://www.thewaterpage.com/internationalwater.htm].
88
Konrad Repgen, "The Hydro-politics of The Mekong River Basin: Regional Cooperation and
Environmental Security" in Non-Traditional Security Issues in Southeast Asia, p468.
89
Danilov-Danilyan (Director of the Russian Academy of Sciences Institute of Water-Related Problems
and corresponding member of the Russian Academy of Sciences). In: “Water: Source of Life on Earth”
International Affairs: A Russian Journal of World Politics, Diplomacy & International Relations, vol 49
(issue 6), p163.
84
85
24
consequences of such a great intake of freshwater, and is simply not adequate to
ensure equitable supply to downstream users (and future generations). Even the
UN have not made their priorities clear: chapter 18 in Agenda 2190 states that
cooperating amongst transboundary river freshwater users may be beneficial.
Almost all cross-border river systems around the world have realised the
importance of cross-border cooperation for economic and environmental reasons.
River freshwater availability is not only a problem for downstream riparians where
there may be a shortage but can also be a problem for upstream riparians with
an abundance of water. International destabilisation is inevitable if some regions
become severely short of freshwater and others have an abundance 91, particularly
where there is no method to move some of the water from the abundant regions
to the needy regions. Thus, the regions with an abundance of water would also be
negatively impacted by this destabilisation, so all river freshwater user groups
need to realise that they will benefit from equitable, efficient and effective crossborder river management.
B.2 Theory applicable to cross-border river systems
There are certain goods that many people have access to and are not formally
owned, such as ocean fisheries and the atmosphere; these goods are known as
common resources or shared goods92. Freshwater can be considered as a quasicommon good because even when ownership is sometimes formally defined, river
freshwater is most definitely a shared resource. The theory of the commons, as
stated by Garrett Hardin in a famous article entitled ‘The Tragedy of the
Commons’, related to the common resource of river freshwater is that it is in the
interest of all individuals to use and exploit the resource; however, it is not in the
interest of anyone for all individuals to exploit and totally deplete the resource 93.
Thus, it is necessary to establish a balance between individual liberty to use the
freshwater and collective responsibility to maintain freshwater resources.
The issue then arises regarding the sharing, or allocating, of the river freshwater
to ensure a balance between individual rights and the common responsibility of
maintenance of supply. This involves determining whether freshwater should be
treated as a public or private good. As a public good, there are no clear
ownership rights and once the freshwater is supplied (by rain or glacial melt),
then all people should have access to the freshwater like they do to the air we
breathe94. This absolute right would cause significant problems as the individual
right to consume could dominate and the resource would be depleted. The reason
for this is that the underlying assumption of a public good is that use by one
person does not affect the use by another person. This appears true for two
people taking water from a large river system, but every person who removes
some freshwater from the river reduces the amount available for the next user.
This is where the ‘polluter pays’ principle applies, which is the cornerstone of
many environmental policies, and the majority of those of the EU 95. The principle
states that the ‘polluter’ should bear the true cost of the damages that are caused
by their actions96. When applied to river freshwater, the major pollution act could
be considered as decreasing the river flow, and the true cost of this decrease in
river flow needs to be passed back to the person who decreased the river flow,
United Nations, “Agenda 21” (Ibid).
Danilov-Danilyan In: “Water: Source of Life on Earth” (Ibid).
92
Mark Diesendorf and Clive Hamilton, “Human Ecology, Human Economy: Ideas for an Ecologically
Sustainable Future” (Sydney: Allen and Unwin, 1997), p332.
93
Mark Diesendorf and Clive Hamilton, (Ibid), p41.
94
Mark Diesendorf and Clive Hamilton, (Ibid), p41.
95
Environment CustomWire “EU reaches agreement on "polluters-pay" law” (Feb 2004).
96
Karma Ockenden, “Billing Fields” Utility Week (Feb 2004), vol 21 (issue 9), p18.
90
91
25
i.e. the consumer or user. The reasoning behind this is that unless the full cost of
the damages is born by the damager then there will not be adequate deterrence
from future damage causing activities. This implies we need to charge people to
consume river freshwater and introduces a case for treating river freshwater as a
private good, where firms sell the right to use it to other people. However,
treating river freshwater as a private good requires establishing ownership rights,
which is difficult due to the opposing upstream and downstream views (more
details given in previous section).
Traditional economic planning recognises the time value of money, which has two
equivalent facets:
 Discounting the value of future outcomes (the further into the future,
the heavier the discount), because of the uncertainty and lower current
relevance97
 Amplifying the value of current money in the future (the further into
the future, the larger the amplification), because of the increase in
value of holding that money due to interest
Investing in river management now will decrease uncertain costs in the future;
that is, it will reap benefits in the future. Moreover, if investment is not made in
river management then this money will grow in value until such time as the
future costs are certain and they can be paid for then. Hence, since the costs of
not implementing good river management now will only produce costs in the
future, according to traditional economic planning then it is best to wait until
these costs are realised, and earn interest on the money in the mean time.
However, the precautionary principle has been developed to counter this type of
thinking. According to the Australian Intergovernmental Agreement on the
Environment definition of this principle, “lack of full scientific certainty” is not a
valid reason for “postponing measures to prevent environmental degradation”98.
The reason for this is that the maximum cost of poor river management now is
irreversible, such as freshwater shortages in the future which no amount of
money can fix. Thus, consistent with financial theory for managing risky
investments (the environment is considered risky because of our little knowledge
of our effects upon it), caution should prevail until it is known how much
freshwater can be taken out of river systems without permanent damage. Hence,
the onus of proof is left with those who wish to take no action in the present to
prove that their lack of action will not cause any permanent damage now or in the
future.
The application of the precautionary principle or the traditional economic
discounting method depends largely upon attitudes towards inter and intra
generational equity. The precautionary principle tends toward the application of
inter-generational equity. The Australian Intergovernmental Agreement on the
Environment states that the “present generation should ensure that the health,
diversity and productivity of the environment is maintained or enhanced for the
benefit of future generations”99. That is, the current generation providing future
generations with a biosphere and sum capital resources that are as good as or
better than what they received from the previous generation. The term ‘sum
capital resources’ does not rule out trading the existence of one resource for
another, which involves the complexities of comparing the value of resources. In
addition to the obvious complexities of making value comparisons across all
known resources, this decision also needs to be made from a futuristic view point
(ie. future generations), which makes the comparison virtually impossible100.
Mark Diesendorf and
Mark Diesendorf and
99
Mark Diesendorf and
100
Impossible to attain
97
98
Clive Hamilton, (Ibid), p54-56.
Clive Hamilton, (Ibid), p77.
Clive Hamilton, (Ibid), p76.
accurate results
26
Therefore, instead of applying the theory overall and making value comparisons
across various resources, it is important to apply the theory to each resource,
such as freshwater, individually. Hence, the ‘sum capital resources’ will still
remain constant or increase, and no future value judgements based on
speculation need to be made.
There is another part of inter-generational equity that needs to be elaborated;
that is, how many generations into the future do we need to provide for. This
issue is closely related to agency theory. The theoretical debate is whether the
current generation are agents for future generations (the ‘principal’ in the agency
relationship)101. However, the anomaly in this debate is that the agents actually
have more power than the principles, and remedies can never be sought from the
agents by the principles at a later date. This imbalance in power seems to
suggest that the current generation does have a moral and equitable duty
towards future generations; however, the next generation must take some
responsibility for providing for generations that follow them. Thus, the best that
the current generation can do is to provide as good as or better freshwater
resources for the future, along with the tools to maintain or even improve them.
Intra-generational, or social, equity is also an important consideration 102: the
duty to future generations must be balanced with providing for those currently in
need. Thus, in terms of river freshwater, we must supply freshwater to those
furthest downstream (effectively the riparian landowners with the poorest supply
in terms of river freshwater), as well as providing for future generations.
Mark Diesendorf and Clive Hamilton, (Ibid), p76.
A K Shiva Kumar, “Poverty and Human Development in India: Getting Priorities Right” (UNDP,
Occasional Paper 30, 1999) [Accessed September 2004 via Internet at
http://www.undp.org.in/report/PHDI.htm].
101
102
27
Section C: Different Approaches to Cross-Border
River Freshwater Allocation
There are two main solutions that have been identified and implemented, neither
with considerable superiority. The two models are the market model and the
customary laws and agreements model, which will be analysed both in theory and
practice with reference to the case studies. These models attempt to solve the
problem of allocating cross-border river freshwater equitably, effectively and
efficiently; thus, they will be analysed from an economic (human user) and
environmental perspective with reference to the theoretical issues discussed in
the previous section. In addition, a hybrid model, known as environmental
economics, is the most recently proposed solution. The basis of this new hybrid
model will also be briefly discussed.
C.1 Market Model
C.1.1 Outline of the Market Model
The market model for managing cross-border freshwater river systems is based
on the basic economic principles of supply and demand. The model recognises
that water does not always fall in the places of most need or use; therefore, the
concept is to set up a trading system whereby groups with net excess water can
sell freshwater to groups with a net demand for freshwater 103. Thus, suppliers
and demanders can be identified and represented economically by supply and
demand curves on a Price-Quantity graph. Basic economic theory tells us that the
supply curve is upward sloping (law of supply), because the higher the price the
more freshwater suppliers will want to sell; in opposition, the demand curve is
downward sloping (law of demand), because the higher the price the less
freshwater demanders will want to purchase104. Market equilibrium is created
where these two curves meet, as shown below:
Dellapenna and Joseph, “Custom-built solutions for international disputes” p34.
Stonecash, Gans, King, Mankiw “Principles of Macroeconomics” (Victoria, Australia: Nelson
Australia, 1999 (2nd edition)), p65, 73.
103
104
28
Thus, an equilibrium point is established and the market price for freshwater is
set where the demand equals the supply. The established market price will then
guide demanders/purchasers to buy the amount of freshwater they are willing to
pay for at that particular price (determined by their own personal utility function),
which should theoretically equal the amount that suppliers wish to supply at that
price level. The total amount purchased is then equal to the equilibrium quantity;
furthermore, as the supply is equal with demand at this point; theoretically, the
freshwater is being allocated efficiently. It should also be noted that the theory of
the market model states that changes in the forces of demand or supply cause
the corresponding curve on the above diagram to shift. This shift will then cause
a change in equilibrium, and a new market price and quantity will occur. The two
possible shifts (left, right) of each curve (supply, demand) in the above diagram
are depicted below105:
Shift Left:
Shift Right:
a move left on the quantity axis,
a move right on the quantity
which represents a decrease
axis, which represents an
increase
Demand
Supply
 Equilibrium quantity decreases
 Equilibrium quantity increases
Demand momentarily drops
Demand momentarily rises
below supply; therefore the
above supply; therefore the
market adjusts:
market adjusts:
 Equilibrium price decreases
 Equilibrium price increases
 Equilibrium quantity decreases
 Equilibrium quantity increases
Supply momentarily drops below
Supply momentarily rises above
demand; therefore the market
demand; therefore the market
adjusts:
adjusts:
 Equilibrium price increases
 Equilibrium price decrease
C.1.2 Theoretical Advantages of the Model
The market approach to freshwater allocation inherently decentralises decision
making. This means that the interaction between suppliers and demanders
decides how the freshwater is allocated. Having a huge number of suppliers and
demanders allocating resources may seem a chaotic method; however, markets
have proven to be remarkably successful in allocating purely economic goods 106,
i.e. goods other than a mobile natural resource such as freshwater. The
theoretical advantage of markets is that they are efficient 107: everyone buys and
sells at a single price that makes demanders desire the same amount of
freshwater that suppliers desire to sell.
A follow-on theoretical advantage from market efficiency is how efficient markets
deal with scarcity of the freshwater resource. As the scarcity of freshwater from
rivers increases it is obvious that the supply is decreasing, which will cause the
supply curve to shift to the left. Referring to a ‘Supply – Shift Left’ in the table
105
106
107
Stonecash, Gans, King, Mankiw (Ibid), pp69-72,76-83.
Stonecash, Gans, King, Mankiw (Ibid), p9.
Dellapenna and Joseph (Ibid), p34.
29
above, it can be seen that a decrease in supply will cause the equilibrium price to
increase. That is, as the supply of freshwater decreases the prices will continually
increase until the new equilibrium price and quantity sold/purchased are reached
(excess of demand removed). Therefore, theoretically under the market model,
there will never be a shortage of freshwater, because as the scarcity of
freshwater increases so will the price. This increased price should then make
demanders purchase less freshwater and move to substitute resources or goods
that now appear cheaper due to the increased cost of freshwater. However,
freshwater does not have a real substitute; thus, the impact of reduced supply
and increased cost may be increased environmental awareness and efficiency of
freshwater use (indirect decrease in demand).
Freshwater is a costly resource under the market model; that is, there is
monetary encouragement for the efficient use of freshwater. Therefore, there is
less likelihood of wasting our freshwater resources. Freshwater-rich (upstream
riparians) groups will be encouraged not to waste the resource as they can make
revenue from the freshwater they do not use by selling it in the freshwater
market. Moreover, theoretically, groups in need of freshwater (downstream
riparians) will not be as likely to waste freshwater, as they have paid a significant
amount of money for that amount of freshwater108.
Overall, assuming that the problems in setting up an efficient freshwater market
can be overcome, then a freshwater market is an excellent solution of the
allocation of freshwater (such as freshwater from cross-border river systems).
Disputes should be readily resolved by a legal system, as ownership rights would
have been established when the market was formed, and compensation will be
given to those who have their property, in this case freshwater, infringed upon 109.
Thus, theoretically, a freshwater market model ensures peace and efficient
allocation of the natural resource, freshwater. The added advantage of a
freshwater market solution is its simplicity: a great deal of understanding is not
required to establish the freshwater market. The reason is, in theory, the efficient
allocation of freshwater is due to the balance between suppliers costs and profit
preferences, and the demanders future expectation and personal preferences.
C.1.3 Problems and Oversights with the Model
There are two main theoretical problems that will generally apply to a freshwater
market solution for cross-border river management. These are externality and
market power problems, which are not catered for in the market model 110. The
externality problem with freshwater is that the choices of the purchaser affect
more than just themselves and the seller. For example, over purchasing may
mean that there is not enough water to allow recreational fishing in the river. The
market power problem involves having the supply dominated by one (monopoly)
or a few collaborating (oligopoly) firms. This means that these firms can raise
prices as they see fit and there is no competition to force them down. This
problem is made worse in the case of a freshwater market as there is usually only
one supplier of water (either government or specific private company), and it is
not easy for rival firms to join the market without government approval
(incredibly unlikely to be granted in cases of a monopolistic government). In
addition, a portion of the demand for freshwater is inelastic (vertical demand
curve in previous diagram), because a certain level of freshwater is needed for
survival. According to market theory, if the price rises then people will substitute
108
109
110
Dellapenna and Joseph (Ibid), p34.
Dellapenna and Joseph (Ibid), p34.
Stonecash, Gans, King, Mankiw “Principles of Macroeconomics”, p11.
30
relatively cheaper goods; however, in the case of inelastic demand the quantity
will remain the same as the price increases111. Thus, a monopolistic supplier can
exploit (for short-term profit gain) the fact that there will always be a certain
level of demand no matter how high the price is set.
In general, the market model has several assumptions that do not hold for the
ambient natural resource of freshwater. The major violation is the assumption
that ownership rights must be clearly determined before a market can be
established; very few genuine water markets have existed in the past, because of
this hurdle112. Establishing these ownership rights is inherently difficult because of
established views and the difference between upstream and downstream
attitudes (discussed in section A.2.2). People will not pay for something that they
view to be their own, and unless clear ownership rights are established a market
model will never succeed. Resources like coal are easily traded between
countries, but selling a part of the contents (water volume) of a river to another
country would not be so easy. Another important assumption that is violated is
that everyone makes rational choices based on a full understanding of the
impacts of their choices. This assumption is obviously not upheld as experts are
now only discovering the full impacts of human development on our freshwater
resources in river systems. Therefore, the majority of the consumer market for
freshwater does not appreciate the full impacts of their decisions relating to
freshwater, although their knowledge is increasing all the time with new findings
being published and freshwater issues being covered more frequently by the
media.
The critical impacts that our choices have on the environment suggests that the
world is more than free market economics. The goals of markets are to reward
those groups that produce the goods that others are willing to pay for and to
provide these to the people who are willing to pay the most for them (does not
always equal the people most in need)113. Thus, it does not include the concept of
equity, or any social need aspect. This is the reason systems such as social
welfare exist to cater for the people without enough money to purchase the
essentials at market prices. As the environment is a common good it is not owned
by anyone and does not have any money; therefore, it can not look after its own
needs in a market situation. Hence, cross-border river systems can not ensure
that there will be enough freshwater remaining in the river to maintain river
health, because the river systems can not purchase the amount of freshwater
needed to keep them healthy.
The counter argument is that governments and environmental groups will
purchase the freshwater needed to keep river systems in good condition if it is
such an important issue. However, the problem with this view is whether
environmental groups and government departments receive enough funding, or
have a large enough budget, to purchase sufficient freshwater on behalf of river
systems. If industrial and personal users are willing to pay more than
environmental groups can afford then the environment will not be fairly
represented in the market114. According to the enactment of the SA Native
Vegetation Act (1991), which applies to vegetation clearance and its impacts on
freshwater as an integral part of the environment, “environmental degradation is
not due to the inadequately defined property rights but rather due to the
Stonecash, Gans, King, Mankiw “Principles of Macroeconomics”, p90-98.
Dellapenna and Joseph (Ibid), p34.
113
Stonecash, Gans, King, Mankiw “Principles of Macroeconomics”, p11.
114
Allan Amos, New South Wales Department of Natural Resources [Personal Interview, October
2004].
111
112
31
inadequately enforced rights of the public to community owned property” 115. The
meaning of this is that the degradation of our cross-border rivers systems is not
so much a function of incorrectly defined ownership rights, but the fact that there
is not enough money or controls representing the river systems in the market.
Thus, under the market model, the environmental interest of the river systems is
only cared for when environmental departments and community groups have
enough money to purchase the amount of freshwater needed for sustainability of
the river systems. Therefore, the need for monetary inflows to the environmental
groups is required, such as through environmental levees placed upon river
freshwater users.
C.1.4 Freshwater Valuation in the Model
Imbedded within the market approach to cross-border river management is
valuing the water that flows down these river systems. However, before valuing
water we should consider whether we should, and how accurately we can value
shared resources such as freshwater in river systems. If we attach a value to
freshwater, then we are assuming that if the price was higher we would not
purchase as much freshwater and forego some. However, realistically, some
users require freshwater no matter what the price. Nevertheless, assuming that
valuing water is moral, how accurately can the market price water? Many people
believe that freshwater is endless in supply and are naïve to all its uses; in
addition, governments often subsidise freshwater. Therefore theoretically, it
would seem that the market will undervalue water as the demanders are not fully
aware of its true value. At present, the price of water in Australia and in most
other developed countries is relatively low116 and not an indicator of freshwater’s
true cost. This means that the polluter pays principle (discussed earlier) is being
violated. Consequently, the amount of freshwater being bought is not sustainable,
because people are not being charged enough to maintain the quantity of
freshwater remaining in the environment above the level needed for the river
systems and lakes to remain healthy. An example of the consequences of
undervaluing water is the ‘whitegoods’ market in Australia. It would appear
freshwater is under-valued and under-priced, as people are still willing to
purchase high-water usage dishwashers and top-loader washing machines
despite a progressive increase in advertising that front-loader washing machines
use significantly less water than top-loaders. This suggests that prices and the
profit margins are still not low enough, e.g. on top-loaders, to encourage
manufacturers to solely produce more water-efficient whitegoods. Thus,
freshwater from river systems and lakes is being depleted, because of low
freshwater valuation.
C.1.5 Water Trading in Australia
As rivers transport water from one place to another, there is the opportunity to
trade the freshwater within the rivers without any transport costs. An initial pilot
trial for the MD River System, involving trading between NSW, VIC and SA
commenced in 1998117; that is, a trial of a market based approach to the
management of the MD River System. This trial was mainly due to economic
reasons, although the declining state of the River Murray was a secondary
consideration. The Australian Bureau of Agricultural and Resource Economics
South Australian Government, “Native Vegetation Act”, Adelaide: 1991 [Accessed October 2004 via
Internet at http://www.austlii.edu.au/au/legis/sa/consol_act/nva1991194/].
116
Organisation of Economic Cooperation and Development (OECD), “The Price of Water in OECD
Countries” (1999).
117
Murray Darling Basin Commission, “The Pilot Interstate Water Trading Project” (2004) [Accessed
September 2004 via Internet at
http://www.mdbc.gov.au/naturalresources/watertrade/pilot_watertrade.htm].
115
32
estimated that widespread use of water trading in the MD River System would
increase output by approximately $48 million annually118. Basically, all states
meet and allocate a certain amount of water to each state, and then each state
allocates its water to user groups within that state. Following the organisation of
ownership rights, user groups are able to trade freely (up to a maximum number
of trades) with each other in a freshwater market. A requirement of the pilot
program was a review every two years: the first two-year review (completed
December 2000) has been released to the public. Overall, the first review was
positive and stated that inter-state trading arrangements were improving119.
However, it also identified a number of political and economic issues, which are
discussed in detail below:
 The value of freshwater use in the Murray-Darling Basin was increased by
interstate trading, because 99% of water being traded was not being
previously used by the seller120. This means that the market model is
increasing the efficiency of freshwater allocations along the MD River
System. However, it could also be a result of initial licences or allocations
being too large. Improvements in the allocation have been made
progressively by each state at different rates: allocation was firstly based
on the land area regardless of the land use, this approach then changed to
a volumetric measure (generally related to the historical land use), and
now the allocation process is regulated as a percentage (determined by
volumetric measure) of the available supply, which varies from both year
to year and at different sites along the MD River System. This last change
is very important as it now incorporates the supply aspect into the market,
so that the market can react to natural changes in supply.
 Interstate trading agreements are needed to keep the markets working
efficiently by regulating and negotiating the tradeable volumes at the
political level121. This is a very important finding, as it shows that the
people commissioning the trial do not have faith in the internal workings of
the market to be able to maintain the level of flow needed in the River to
sustain the river’s health and supply. This is a choice that has been made
consistent with the precautionary principle, especially considering the huge
possible variations in freshwater supply in Australia, caused by changing
rainfall pattern and new industry development such as the proliferation of
irrigation requirements for grapes in recent years. These high level
political agreements to administer the river freshwater market have used a
priority of allocation that aids in determining supply quotas. Human use
needs, through city and town allocations are always first, followed by
environmental considerations (currently contentious issues about how
much freshwater the River System needs to sustain itself), and then
industry and agricultural considerations.
 “All states need to improve mechanisms for regulation and enforcement”
122
. This conclusion implies that there is a need for government or
community backing to support and help enforce the market model; that is,
self regulation by the market is not enough to ensure efficiency. For
example, the fines administered in South Australia for using more than an
allocated amount of water from the River Murray are less than the cost of
purchasing water from other water traders 123, and thus the pricing of the
fines undermines the market and an arbitrage opportunity is created.
Murray Darling Basin Commission, “Water Trading: Benefits of Water Trading” (2004) [Accessed
September 2004 via Internet at
http://www.mdbc.gov.au/naturalresources/watertrade/watertrade.htm].
119
Young, MacDonald, Stringer and Hennig “Interstate Water Trading: A Two Year Review. (Draft
Final Report)”, p2.
120
“Interstate Water Trading: A Two Year Review. (Draft Final Report)” (Ibid), p22.
121
“Interstate Water Trading: A Two Year Review. (Draft Final Report)” (Ibid), p2.
122
“Interstate Water Trading: A Two Year Review. (Draft Final Report)” (Ibid), p5.
123
“Interstate Water Trading: A Two Year Review. (Draft Final Report)” (Ibid), p5.
118
33


There is an inconsistency in pricing and charging between states, which
indicates the market is not fully integrated and operating effectively 124.
Although this may simply be because the market is new and still evolving,
the more likely cause is the difficulty with pricing a resource such as
freshwater. The conclusion made by the COAG is that water prices need to
cover all operating costs, on-going maintenance costs, capital expenses
necessary for ongoing operation, and costs of water use to the
environment125. Furthermore, consistent with the polluter pays theory,
until water users recognize and pay for the real price of water both in the
city and country there will be these inconsistencies and there will be no
incentive for improved efficiency of use.
All parties have agreed that from a salinity and river health perspective, in
the long-run interstate trading can be expected to have a negative impact
on river salinity126. Therefore, government intervention in the river
freshwater market is necessary to ensure these salinity levels remain
within reasonable bounds. As for the overall environmental condition of
the water (taking into account water flow), it has not statistically deviated
since the water trading has been implemented. Thus, no overall
conclusions can be made regarding this market model’s implementation
effect on the health of the MD river system.
In addition, an important message for the Australian government came from
freshwater traders. It was noted that many landowner traders used their water
profits to finance more efficient irrigation techniques, which will further increase
their freshwater sales profits and have a positive effect on the river’s health. This
process of allocation of profits back into improving the use of freshwater is a
further requirement of the polluter pays principle. Once people are paying for the
true cost of the freshwater, some of this money must be reinvested back into
freshwater issues to ensure the sustainability of river freshwater and is occurring
via enforced environmental levees.
There is one concern that has been overlooked by current market rules.
Currently, in NSW and SA, it is not necessary to own land to purchase river
freshwater allocations127. This raises the possibility that a large investor could
buy-up all licences in an area, create a monopoly of supply and sell the
freshwater at a huge margin to the people with the most money. In this case, the
inelasticity of demand is being used as a mechanism to increase price, and
efficient allocation of freshwater will not occur, because ownership will transfer to
the user groups with the most money.
It is also important to note that a similar trading system will not work in
Switzerland without significant freshwater policy and attitude reform. Two
reasons for this are, the community-owned freshwater philosophy and their main
objective of freshwater allocation that, everyone has access rights to freshwater,
rather than the trading system’s objective to allocate freshwater in the most
efficient manner.
“Interstate Water Trading: A Two Year Review. (Draft Final Report)” (Ibid), p5.
John Langford and Chris Scriven, “Independent Review of Pricing Arrangements” (2001), section
2.3 [Accessed September 2004 via Internet at
http://www.mdbc.gov.au/river_murray/running_the_river/projects/rmw_IRPricing.html].
126
“Interstate Water Trading: A Two Year Review. (Draft Final Report)” (Ibid), p3-4.
127
“Interstate Water Trading: A Two Year Review. (Draft Final Report)” (Ibid), p3.
124
125
34
C.1.6 Influence of the Privatisation Trend
Privatisation regarding freshwater involves transferring some or all of the publicly
owned and managed waterways and control over them to private firms. It can be
simply just the operation of freshwater allocation, or it can be as complete as
handing over public rights of water to the private firms. There is a current global
trend towards privatisation of distribution and management of freshwater 128. It is
argued that without privatisation freshwater will be treated as a free public good
that everybody will deplete and nobody look after, but with privatisation there will
be a vested interest by firms to look after the freshwater resource. However,
firms operate to make a profit and are often short-term129, so the long-term
impacts on the environment will not necessarily be their main focus. Thus, there
is a loss of control problem with privatisation, whereby a vital resource
(freshwater) has left the control of the public to profit-driven private firms130.
Moreover, there is an added pressure on the government to ensure the financial
viability of the privatised freshwater firms, because they can not afford for these
firms to fail as freshwater is a necessity in society.
It can easily be seen that the trend of privatisation suggests a market based
approach to cross-border river management. This trend towards privatisation is
very risky and contradicts the precautionary principle, as the success of the
market approach to freshwater management has not been proven, and contains
many theoretical and practical faults: particularly in terms of environmental
responsibility and accountability. Nevertheless, global trends have significant
persuasive influence on individual nations’ decisions. Thus, if indeed privatisation
is inevitable then at the very least openness and transparency must be ensured
so that the effects of the privatisation, and consequently the efficiency and
effectiveness of applying the market model, can be closely monitored. One of the
major problems with privatisation is the use of long contracts that effectively
make the privatisation irreversible in the short term 131. Therefore for safety, in
accordance with the precautionary principle, there should also be provisions for
enacting future regulations or a public (government) buy-back and compensation
if the results of privatisation and application of the market model approach can
not improve water use, but damage the long-term outlook for freshwater.
C.2 Customary Laws and Agreements Model
C.2.1 Outline of the Market Model
The agreements, or customary laws, model 132 is based upon international law
that is slowly being developed using historically proven principles for sharing
goods and resources. Applying the model’s ethos to the solution to freshwater
scarcity and river freshwater allocation is not in creating freshwater markets, but
in consolidating the rules for sharing these resources, found in customary
international law, into agreements. Hence, this model is consistent with
freshwater being a common resource; in addition, due to the human element in
Peter Gleick, Gary Wolff, Elizabeth Chalecki and Rachel Reyes, “The New Economy of Water: The
Risks and Benefits of Globalization and Privatization of Fresh Water” (California, USA: Pacific Institute
for Studies in Development, Environment and Security, 2002), p1.
129
Annual losses, with possible future gains, are not usually chosen by managers because of the time
value of money effect in the traditional discounting method discussed previously
130
“The New Economy of Water: The Risks and Benefits of Globalization and Privatization of Fresh
Water” (IBID), p4.
131
“The New Economy of Water: The Risks and Benefits of Globalization and Privatization of Fresh
Water” (IBID), p5.
132
‘Agreements Model’ and ‘Customary Laws Model’ can be used interchangeably in most contexts
128
35
this model, compared to the market model, it tends more towards an
implementation of the precautionary principle rather than the traditional
economic approach.
A simple analogy is the most effective way to describe the idea behind the
customary laws model. Suppose a community had some shared land, which they
sowed with corn. This land was properly watered and maintained by members of
the community and the produce was shared between community members.
Suppose that over time a schedule developed where the fifteen families present
in the community took one week shifts (in a defined order) in watering, collecting
produce, and maintaining the land. In addition, the produce was divided up
according to the number of members in each family. Eventually, everyone in the
community would agree that the weekly-shift way of managing the land and the
produce allocation process was the only correct and equitable way to perform the
activities, even though there would be no specific time when this notion took
hold. Thus, at this point, anyone who does not perform their weekly-shift is
considered to be in the wrong, and if anyone takes more than their share of
produce per family member then they are considered to be thieves. Thus, we
have arrived at a point where the common resource is being managed effectively
and efficiently under the customary laws model.
Coming to agreement on the customary law is not always as simple as in the
above analogy. For complex issues such as cross-border river freshwater
allocation there is a more defined approach to resolving differences in opinion and
coming to a resolution, known as a customary law or agreement. Firstly, it is
recognised, with most nations’ agreement, that only riparian nations (river flows
through, or along a border of a nation) have any claim to the freshwater in that
river system, with the exception of any past agreements that state otherwise 133.
However, past this initial agreement the usual upstream and downstream
differences (discussed previously) start to take effect: upstream-riparian nations
make claims based on territorial sovereignty and other upstream views, while
downstream-riparians make claims based upon the obligation to maintain the
integrity of the river systems and other downstream views. These conflicting
views are then solved by a claim, counterclaim system, which is a cyclical process
until an agreement is made. The agreement comes about by applying the
principle of equitable utilisation. Equitable utilisation is based upon each riparian
nation recognising the right of all other riparian nations to use freshwater from
the common river system source; in conjunction with the notion that each
riparian nation has an obligation to use and manage the river system in a way
that will not ‘reasonably interfere’ with ‘similar uses’ of other downstream riparian
nations134. Under the application of this principle, the claim and counterclaim
system is resolved by allocating freshwater from the river, based on objective
standards such as historical patterns of land use and irrigation, as well as
objective factors such as the need for extra freshwater to grow populations and
economies.
Although it would seem logical that agreements pertaining to the use of
freshwater from cross-border river systems would date back centuries, and
consequently have been refined into a developed effective set of rules,
regulations, and processes, it is still an evolving model. The reason for this is the
importance of cross-border agreements which refer to the integrated
management and use of cross-border river systems as a whole, rather than
management and use of individual segments of the river system within a nation
or state. This has only recently been realised. Thus, there is not a highly refined
133
134
Dellapenna and Joseph (Ibid), p36.
Dellapenna and Joseph (Ibid), p36.
36
and effective set of agreements; however, they are slowly being developed and
refined into a set of river-wide agreements, based mainly upon historic customary
laws and results of previous agreements. Cross border agreements for other
purposes such as navigation would be easier to negotiate than for water supply
as they do not imply or contain issues of ownership.
C.2.2 Advantages of the Model
The customary laws model recognises the uniqueness of freshwater, and
consequently avoids the issue, and difficulties associated with, ownership rights
of this ambient resource. Furthermore, by recognising the uniqueness of the
freshwater resource, this model does not make any incorrect assumptions as the
market model does. Rather it sets down rules for sharing the water based on the
rights to use the water, rather than developing ownership rights. Assuming all
nations agree to the set of customary laws and agreements that lead to
equitable, efficient and effective management and use of the freshwater, the
customary laws model will lead to a utopian world regarding freshwater and river
systems. That is, the management and use of freshwater in cross-border river
management systems will be optimised. However, the best set of agreements will
always remain a mystery, and the process of getting nations and states to agree
and accept agreements is extremely political and difficult. The implementation of
the customary laws model relies on optimisation and continual improvement of
the set of agreements. If the set of agreements can be sufficiently optimised in
practise so that the outcomes of the agreements model are superior to other
models, then this is the model that should be implemented. Thus, it’s a question
of how effective, efficient and equitable are the agreements that can be made.
C.2.3 Disadvantages of the Model
Even though theoretically agreements should ensure cooperation without
disputes, there will always be disputes between groups with freshwater issues 135;
thus, this customary laws approach is very time and consequently, money
consuming. Furthermore, this process of turning customary laws into carefully
worded agreements that are agreed upon is very important in conflict resolution.
A major disadvantage of the customary laws model is that there is no equitable
way of enforcing customary laws; however, if these laws are set down on paper
and agreed upon then the dispute resolution process is significantly simplified.
Perhaps the most obvious and important disadvantage of this model is that it is
very vague and a large part is left up to individual case analysis and
interpretation, which does not ensure that a nation will receive its “fair” share of
freshwater. Thus, it is the informal nature of the model, which is its major
downfall. For example, in the Mekong case discussed earlier, had Cambodia
initially agreed to the water utilisation rules declaration that the Mekong
Committee drafted, then a project such as the Thailand Dam project would have
had to be passed by all riparian nations136. However, due to the informality of the
declaration the principles within it were not enforced. Hence, within the
agreements model there is a push towards clearly documenting (‘codifying’)
customary laws into signed agreements137. Although this does not cure the
unenforceability problem of the agreements model, the nature of signed written
documents makes the model much stronger and persuasive. In addition to this,
similarly to Australian contract legislation, incorporating conflict resolution and
Dellapenna and Joseph (Ibid), p36.
Konrad Repgen, "The Hydro-politics of The Mekong River Basin: Regional Cooperation and
Environmental Security" in Non-Traditional Security Issues in Southeast Asia, p478.
137
Dellapenna and Joseph (Ibid), p36.
135
136
37
enforceability systems into agreements will also increase the strength of the
agreements model.
While customary laws model enthusiasts will not admit it, the process of claim
and counter claim resulting in an agreement is actually similar to the laws of
demand and supply determining the market equilibrium. However, due to the
individual nature of the customary law resolution system it may be the more
equitable approach. Nevertheless, as significant monetary power can influence
and cause inefficiencies in the market model, significant political power can
influence and cause inequitable agreements in the customary laws model.
C.2.4 The Model in Australia
In Australia, the right to freshwater is embodied in the Commonwealth
Constitution. The Australian constitution at section 100 states “The
Commonwealth shall not, by any law or regulation of trade or commerce, abridge
the right of a State or of the residents therein to the reasonable use of the waters
of rivers for conservation or irrigation"138. As a result, the State governments,
although the Commonwealth has limited involvement, are the principle customary
law and agreement makers regarding freshwater in Australia. This divestment of
responsibility to the States has created a myriad and minefield of legislation
relating to the management and protection of freshwater and river systems. For
example, 12 pieces of Commonwealth legislation apply to freshwater in Australia
and NSW as an example has 60 extra pieces of State legislation 139.
Two major Commonwealth Government initiatives have driven the states towards
addressing the issues, and making reforms, related to freshwater: firstly, the
Council of Australian Government’s (COAG) National Water Reform Agenda
(1994) and secondly the National Action Plan for Water and Salinity with its
specific reference to the MD Basin. In addition, in the recognition of the
complexity of this river system, the Murray-Darling Basin Commission was
established to provide policy and broad management oversight for the 5
States/Territories that are involved, i.e. QLD, NSW, VIC, SA and ACT. The
Commonwealth Government also has significant participation in the Commission.
South Australia has taken a major step to both simplify and amalgamate different
legislation relating to water, soil and pests into a single ‘The Natural Resources
Management Bill’, which was passed by both Houses of Parliament in July
2004140. The Bill created a management structure to promote integrated
management141 that will replace the current system of more than 70 boards that
separately manage issues relating to freshwater, pest plants and animals, and
soil conservation. Furthermore, while a similar bill in other states has not been
passed yet, other states are set to follow South Australia under the current
Commonwealth Integrated Natural Resource Management funding initiatives.
Currently, in other states, the MD Basin freshwater management is being
undertaken individually for each tributary, based on the significance and issues
involved with that tributary. Therefore, we have plans such as the Goulborn-
Darla McDonald and Brenda Dyack, “Exploring the institutional impediments to conservation and
water reuse –national issues” (Adelaide, South Australia: CSIRO Land and Water, Policy and Economic
Research Unit (PERU), 2004), p8.
139
ABC National Radio, “The world today” 22 October 2004 [transcript available at
http://www.abc.net.au/worldtoday/indexes/2004/twt_archive_2004_Friday22October2004.htm].
140
South Australian Government, “National Resources Management Act” (2004) [Accessed October
2004 via Internet at http://www.austlii.edu.au/au/legis/sa/consol_act/nrma2004298/].
141
South Australian Government, the Department of Water, Land and Biodiversity Conservation,
“Natural Resources Management –National Resources Management Act 2004” (2004) [Accessed
October 2004 via Internet at http://www.dwlbc.sa.gov.au/nrm/legislation.html].
138
38
Broken River Catchment Plan, without any integrated interstate legislation. This
makes downstream management incredibly difficult, especially for South
Australia. There are no tributaries to the River Murray within South Australia;
thus, South Australian managers must carefully monitor all upstream
management plans as they all have significant impact on the Murray River and its
flow into South Australia. Ultimately a single integrated management plan is
needed to amalgamate the individual management plans currently being
developed in NSW and Victoria.
The outcomes of the agreements model implemented in Australia are limited.
Based on the data available it seems that overall, while there has been a
significant increase in the financial allocations for environmental flows in
freshwater resources, the agreements model in Australia has not been successful
in achieving its goals142. A recent publication in a national magazine supports this
view:
“While funds have been allocated, the physical water, and the mechanisms
by which it will be reallocated, are yet to be [clearly] identified” 143
The reason for the failure is not a flaw in the theory of the agreements model, nor
is it based upon different user groups within Australia refusing to cooperate. The
overarching institutional impediment to conservation of freshwater is a lack of
coordination of both policies and regulations that govern water conservation and
use. This problem is endemic to many areas of natural resource policy where local
governments, regional authorities, States and the Commonwealth all have roles
to play, responsibilities and overlapping concerns. Complicating the challenge to
coordinate policy and regulation is the problem of how best to facilitate flows of
information to ensure that policy, regulation and practice change with the
evolving state of knowledge. Recognizing the ambient nature of water, the
various layers of government in Australia, and the number of different relevant
agreements or laws, there is little wonder that achieving a coordinated approach
to water issues is a major problem in Australia. Hence, the reason the
agreements model has not succeeded in Australia, and within the MD River
System, is because there have been too many laws made, especially in
jurisdictions that only affect segments of the river and not the river system as a
whole. In response to this, Deputy Prime Minister Mr. John Anderson has raised
the suggestion that water should be viewed as a national issue for policy and
management144. This statement correctly recognizes the need for a simplified
overarching approach to overcome the current complexity.
C.2.5 The Model in Switzerland145
Possibly the oldest cross-border agreement in Europe is that relating to
navigation rights on the Rhine and Danube Rivers. These were originally
negotiated in the mid 19th century, and have been maintained to the current
day146. Such cross-border agreements that do not have issues of ownership and
consumption have proven to be much easier to negotiate and sustain. However,
cross-border agreements involving freshwater use have been much more difficult
to negotiate. The recent approval of the United Nations Convention on the ‘NonNavigational Uses of International Watercourses’ is a huge leap forward (note
that no outcomes on this agreement are available yet)147. Moreover, in
Murray Darling Basin Ministerial Council “The Living Murray: A Discussion Paper on Restoring the
Health of the River Murray”, (Canberra, Australia, 2002), chapter 6, p25-29.
143
Guy Webber, “Fair Price Focus in River’s Flow Plan” Grape Growers, January 2004, p8.
144
ABC National Radio, “The world today” 22 October 2004 [transcript available at
http://www.abc.net.au/worldtoday/indexes/2004/twt_archive_2004_Friday22October2004.htm].
145
This section uses many points made in the previous section A.3.2.b
146
The Encyclopaedia Britannica (1937), “Inland Water Transport”, volume 12, p364.
147
Dellapenna and Joseph (Ibid), p36.
142
39
Switzerland, the agreements model seems to have been very efficiently
implemented regarding allocation of river freshwater within its own borders.
Switzerland’s view of freshwater as a shared resource that individuals have little
control over, has lead to a customary laws and agreements model for freshwater
management. The community ownership and consideration of downstream users
has been well communicated by water authorities through their policies and
statements. Many of the efficiencies that the Switzerland system possesses are
derived from culturally-ingrained customary laws. While there has been no
specific legislation that requires consideration for the environment and
downstream users, Swiss communities always considered these two factors in
their river freshwater allocation plans148. Another encouraging customary law that
is present in Swiss communities is the separation of freshwater revenues. The
revenues associated with the supply of freshwater are isolated, so that they can
be reinvested to continue the sustainability of the freshwater infrastructure 149. For
example, the River Inn (tributary to the Danube) flows through a 1 kilometre
section of man-made river bed in the small village of Samaden in the Swiss Alps.
However, for the health of the river and protection against flooding they have
now found they must re-divert the river back to its original bed. This would seem
a costly project, and it will cost in the order of millions of dollars; however, this is
being easily paid for by the community and state governments with their revenue
from freshwater supply.
The agreements that must be set up with private firms are also an indication of
Switzerland’s priority to freshwater as a social good rather than an economic
good. The customary laws that have turned into legislation regarding indirect
uses of freshwater such as hydroelectricity have been extremely successful. While
the legal requirements are both onerous and expensive to get permission to
access the freshwater, the potential returns of the proposed business have far
exceeded the costs of this agreement model. Thus, they have been able to charge
a price high enough to encourage efficient use by large firms; however, low
enough not to put them out of business or discourage new firms from entering
the indirect freshwater use market.
Hence, the current situation in Switzerland is very healthy and it would seem
their implementation of the customary laws model has been very successful.
Nevertheless, the question remains how they would react to a dramatic decrease
in natural supply. Would communities still consider downstream users when it
requires taking steps to use less freshwater in their own communities? In
addition, as the scarcity of freshwater increases, will Swiss communities maintain
the strict rules and high costs on private firms to ensure that there is enough
money reinvested back into the sustainability of their freshwater resources?
Accurate answers to these questions will aid in definitively determining whether
the Swiss model can be transplanted elsewhere (an issue that will be discussed
further in the conclusions section).
C.2.6 Stewardship Agreements: importance of encouraging selfmanagement
Under the precautionary principle, inter-generational equity, and the duty of care
that everyone has to the environment, users have a responsibility to protect the
environment for the future. An environmental duty of care requires duty holders
and responsible persons to take all reasonable and practical steps to prevent
environmental harm arising from their activities. “The baseline principle is to
148
149
Patrick Peduetti (Ibid)
Patrick Peduetti (Ibid)
40
prevent harm to market and non-market values embodied in land and water
resources, and to encourage ongoing environmental improvement” 150. These
ideals can not be met through standard cross-border agreements, but rather
individual riparian landowners along the river and at its source need to be
encouraged to perform ‘environmentally-friendly’ activities. While large
companies have incentives and explicit duties to river systems that they influence
under international standards such as ISO (International Standards Organisation)
for care and protection of the environment, this concept for individual landowners
is reasonably new. Although forcing landowners to perform such activities with
similar standard to those as companies, it would be more beneficial to encourage
them with incentive agreements.
Recently farmers in western NSW have been paid by the Government to retain
and protect some areas of native vegetation151, which effectively reduces their
grazing area and hence their gross income. However, the amount of the payment
that they receive for the “stewardship” of the land allows them to sustain their
income and lifestyle. This success or failure of this agreement has not yet been
established, but the theory unanimously suggests that this will cause the farmers
to pay much more attention to the environmental needs of their land. This will
then be seen in larger scale environmental impacts, such as a decline in the
salinity of the MD River System. However, to highlight the lack of consistency
between states in Australia, Qld not only does not have a stewardship incentive
agreement but laws that almost encourage activities that will cause damage to
the environment, particularly rivers. Unlike other states, Queensland legislation
continues to allow ‘bunding’ of freshwater that is collected from rainfall. All the
water that occurs on a landowner’s property can be withheld behind walls, except
for the water that falls 20m either side of proclaimed streams or rivers152. This
piece of legislation significantly reduces the amount of downstream flow in rivers,
and permitted the dam at Cubbie Station to retain as much water as occurs in
Sydney Harbor. This retention alone has reduced the net flow down the Darling
River from 22 to 8%153.
There are currently no stewardship agreements in Switzerland154, nor does there
seem to be any need for them due to the ingrained consideration for others
regarding freshwater decisions. However, it has become apparent that there is a
need for stewardship compensation where it matters most, at freshwater sources.
As internal and external pressures mount, mountain communities in Switzerland
(the stewards for the vital glacial freshwater reserves in the Swiss Alps) are often
forced to sacrifice the integrity of the environment for necessary short-term
gain155. Although they are not damaging the environment on purpose, when faced
with a trade-off between standard of living and maintaining the Alps as a
freshwater reserve for other people and future generations, it is no wonder they
base their decisions on how their own standard of living is affected. Hence, there
is an environmental need to compensate the mountain communities for their
services in protecting the freshwater reserves so that these choices need not be
made. As identified by Switzerland’s policy advisors, the compensatory money
should be provided by revenues that are associated with the freshwater further
downstream, such as entrance fees to national parks, water use fees, fishing fees
M Young, T Shi and J Crosthwaite, “Duty of Care: An Instrument for Increasing the Effectiveness of
Catchment Management” (Melbourne: Victorian Government, department of Sustainability and
Environment, 2003), p3.
151
Allan Amos, New South Wales Department of Natural Resources [Personal Comment on October
2004].
152
Allan Amos (Ibid).
153
Allan Amos (Ibid).
154
Patrick Peduetti (Ibid).
155
B Messerli and J.D. Ives (editors) “Compensating the stewards of mountain resources” Mountains
of the World: Challenges for the 21st Century (Switzerland: Mountain Agenda, 1997), p27.
150
41
and so on156. However, what was not mentioned was the fact that the cost of the
compensation should be born by all downstream riparian users, not just those
within Switzerland’s national boundary. All countries that use the River Rhine or
Danube should be bearing some of the cost of the stewardship compensation,
since they are all part of the beneficiaries.
C.3 Hybrid Models
It has been demonstrated that neither the market model, nor the agreements
and customary laws model, are without flaws. Therefore, research has continued
in search of superior models: new research has produced adaptations of the
market model that attempt to address and solve some of its problems. The two
main new models are the environmental economics model and the extremely new
market based incentives model. Both of these models show great promise as
improvements over the market model by maintaining its advantages and reducing
its disadvantages. However, neither model has been fully implemented in practice
nor applied to cross-border river systems; thus, an outcomes-based analysis can
not be fully done on these models. Nevertheless, a brief analysis is presented
below to establish the future potential of these models.
C.3.1 Brief Overview of the Environmental Economics Model
One of the main identified problems with the market model is the undervaluing of
freshwater. This is the main issue environmental economics is attempting to
address. Environmental economics is actually a huge new branch of economics,
and its applicability to cross-border river freshwater allocation is just one, albeit
extremely important, application of this model. The environmental economics
model will now be analysed broadly using river freshwater examples to clarify its
application to river freshwater management.
The basic decision making framework for the market model is the traditional
discounting of cash flows method, whereby all economic costs and benefits
(confined to effects within the market) of a decision are discounted to the current
time. Then, a positive decision is made if the present value of benefits exceeds
the present value of the costs and vice-versa. Hence, this traditional cash flow
method is the basis for demanders and suppliers determining how much they
wish to purchase and supply at different prices; that is, determining their demand
and supply curves. Therefore, by determining the supply and demand curves, the
traditional discounting method determines the undervalued market price. On the
other hand, environmental economics extends beyond the traditional discounting
method, because it incorporates costs and benefits external to the market,
namely environmental effects. It identifies and attempts to place values on all
components of an environmental ‘good’, and thereby effectively includes
environmental ‘goods’ into the decision making process. Hence, according to the
theory, the market price should no longer undervalue freshwater and the polluter
pays principal should be satisfied.
Environmental economics attempts to value all components of environmental
‘goods’, by summing their use and non-use values. In the case of river
freshwater, it can be valued for its many use values, such as for drinking,
irrigation and industrial processes, as well as non-use values such as a beautiful
setting for a picnic (tourist aspect values) and an environment for aquatic flora
and fauna. The use values are already incorporated in the market model;
156
“Compensating the stewards of mountain resources” (Ibid).
42
however, the exclusion of the non-use values is believed to be the reason for the
undervaluing of the freshwater. Thus, environmental economics attempts to
incorporate these non-use values into the value of freshwater. The main non-use
values that the environmental economic model identifies are:
 The existence values are the benefits that people derive from the
knowledge that environmental resources exist. Knowing that there is a
pristine lake or clean river system generally makes people feel good,
and thus is of value to people.157
 The option values are the benefits that come from having the option,
or the right, to use (or even simply to protect in some cases) an
environmental resource in the future. Furthermore, it supports the
concept of sustainable use of resources, so that there is both use now
and an option for further use in the future.158
 The bequest values are derived from the benefit that current
generations obtain by preserving the environment for whatever uses
future generations may choose159. The basis for this is that without
considering the needs of the future then there will be no future, which
is something that is considered a loss (and not considered in the pure
market model). Consequently, there is value in ensuring a future and
preserving the environment. That is, the bequest value suggests there
is value associated with ensuring inter-generational equity and that
this value should be incorporated into environmental resource
valuations.
These values can not be determined by way of market prices, as markets for such
things as a river backed setting for a picnic do not exist. Nevertheless, a demand
for them appears to exist because people express their preferences through ‘nonmarket’ mechanisms such as the political process. Thus, environmental
economics has developed three techniques for determining these non-use values,
which are briefly discussed below.
 The contingent valuation technique creates a hypothetical market in
which people are asked by means of a survey what they are willing to
pay for, e.g. keeping the river clean and with a significant flow. The
amount that people are willing to pay is recorded as the economic
value of the ‘environmental’ good.160
 The travel cost method is used for determining most tourist related
non-use values. The non-use value of a river as a tourist destination is
determined by the average amount that people pay to go and see the
river; that is, all the costs associated with travelling to and from the
river is the river’s tourist value.161
 The hedonic price technique is a way of valuing an environmental good
by considering its impact on property prices. Assuming no other effects
on property prices, the value of a river can be shown by increased
property prices for land closest to a river. 162 Realistically, this
technique will yield very similar results to the travel cost method;
however, sometimes one technique is far more practical than the
other.
There are many problems with the above techniques, mainly related to statistical
issues: the hedonic price technique will be open to criticism regarding the fact
that property prices are affected by a wide number of factors thus making
Mark Diesendorf and Clive
Sustainable Future”, p42.
158
Mark Diesendorf and Clive
159
Mark Diesendorf and Clive
160
Mark Diesendorf and Clive
161
Mark Diesendorf and Clive
162
Mark Diesendorf and Clive
157
Hamilton, “Human Ecology, Human Economy: Ideas for an Ecologically
Hamilton,
Hamilton,
Hamilton,
Hamilton,
Hamilton,
(Ibid),
(Ibid),
(Ibid).
(Ibid).
(Ibid).
p42.
p42.
p42.
p42.
p42.
43
isolation of one factor very problematic; the travel cost method does not allow for
the river to be ‘on the way’ to somewhere else and therefore all the travel costs
can not be allocated to the value of the river; and the contingent valuation
technique is open to standard survey criticism relating to bias from the wording
used in the survey. In addition, all processes will rely on sampling, which can be
adversely affected by selection biases if proper statistical standards are not
followed. However, all the potential sources of problems for this environmental
economics example have been identified and the above processes have been, and
are continuing to be, tested and refined to remove these potential problems 163.
Nevertheless, all these processes still rely on observing or hypothesising about
people’s private market behaviour. Therefore, the market power, ownership, and
the market player’s (demanders and suppliers) lack of environmental knowledge,
especially of river freshwater problems, related to the market model still exist in
environmental economics. In addition, introducing and enforcing the more
accurate valuation of environmental resources to include their non-use values in a
self regulating market model may prove to be a future hurdle for the
environmental economics model.
C.3.2 Brief Overview of the Market Based Incentives
The area of market based incentives (MBIs) in economic research is very new. It
is attempting to achieve desired environmental outcomes within a market model
in a practical and efficient manner by changing the behaviour of consumers and
businesses164. It recognises that the world, especially for issues relating to river
freshwater, is more than can be represented in a pure market model. This new
approach assists environmental protection by adding incentives onto the market
model to encourage healthy use of environmental resources. However, the
success of MBIs will depend heavily on effective regulation and monitoring
procedures.
There are a number of MBI instruments that can be potentially employed on top
of the market model. In the case of river freshwater management the goal of the
MBIs would be to change the effective price of river freshwater to encourage
efficiency of water use in order to save and protect volumes of freshwater (this
may also have indirect effects of improving freshwater quality). The following
MBIs have been developed165 that can potentially apply to a freshwater market,
and would make people more aware of the importance of freshwater, its value,
their impact on it and result in the desired environmental outcomes 166:
 Tax those who pollute or deplete resources, which is based upon
the polluter pays principle
 Provide environmental rebates for those who act in a way as to aid
the sustainability of river systems
 Impose severe penalties on those who disregard the market rules
or any additional MBI rules
 Subsidise the use of freshwater for basic necessities
 Provide information to the main river freshwater users
 Provide an opportunity to gain offset credits for saving river
freshwater in one venture, so that more freshwater may be
accessed for a future venture
Mark Diesendorf and Clive Hamilton, (Ibid). p42.
Darla H Macdonald, “Improving the Catchment through Market Based Instruments Freshwater
Beach catchment” (Sydney: CSIRO Land and Water, Policy and Reform Unit, 2002), p1.
165
Darla H Macdonald, “Improving the Catchment through Market Based Instruments Freshwater
Beach catchment”, p(i).
166
Listed in reference to river system management
163
164
44
Hence, similar to the environmental economics model the MBIs address the
serious valuation problem with the market model: the MBIs try to solve the
problem by incorporating a ‘polluter pays tax system’. In addition to addressing
the valuation problem, the MBIs address additional market model problems. The
market parties’ lack of knowledge is addressed in this model, and it is argued that
the penalties, monetary discouragers, will aid in reducing the likelihood of market
failure through excessive market power of one or a few parties. This seems
plausible and likely as the penalties will not only financially discourage
monopolistic behaviour and an increase in public knowledge, but will put
additional social pressure on companies to act with consideration for the
environment. However, these MBIs are still very broad and have not been refined
as MBIs are a new area of research. Furthermore, the practical issues involved
with administering the MBIs have not been addressed as yet. Nevertheless, there
is no reason to discard this model at this stage. It is an extremely promising
addition to the market model as it addresses all the main problems with the
market model except for the ownership problem, which seems to be a hurdle that
will always be associated with a market model variation.
45
Section D: Conclusions
D.1 General Freshwater and River System Management
As freshwater is critical to the survival and development of the human race,
managing the freshwater that flows through river systems is an extremely
important task. Although water is extremely common on our planet, less than one
percent of that is potable freshwater. In addition to this, there are many
established views on river systems, some of which oppose each other:
particularly the absolute integrity of the river versus the absolute right to the
river’s freshwater on property adjacent a river. Furthermore, the supply of
freshwater is controlled by the climate, which the human race has not learnt to
manipulate. Thus, the vital task of managing river freshwater, especially large
cross-border river freshwater systems, in an effective, efficient and equitable way
has been shown to be incredibly difficult, because of a diverse rage of social,
economic and environmental factors.
There is no doubt that currently there is under-investment in freshwater issues,
and that they require more attention. Furthermore, there is no realistic danger of
over-investment in these freshwater issues, because the identified problems are
real with possible irreversible damaging consequences. Admittedly, there is a
theoretical level of over-investment in this one area; however, opposing views
that do not realise the benefits of investment now, due to their use of the
traditional discounting method, will not practically make the need for reaching
this significantly high level of over-investment a problem in the near to medium
future. Then again, there is a very realistic danger of investing in non-beneficial
projects and research, because the investment decision makers are often not well
versed in the freshwater area. Consequently, the most effective and efficient
investment can be overlooked. For example, an expensive part of the recent
analysis outsourced by the Murray Darling Commission, recorded the modification
level of riparian land along a large percentage of the MD River System 167. One
must ask what conclusions can be drawn from knowing the modification level of
riparian land without recording what caused the modification and whether it had a
positive or negative impact on the MD River System. Therefore, while the data is
somewhat useful in determining past activity levels along the MD River System,
the amount of money put towards the study could have been used more
efficiently, such as recording the causes and effects of this modification along a
slightly smaller percentage of the MD River System. Hence, the allocation of
funds towards freshwater issues is an important choice and should be made by
people who are involved with the overall management of freshwater resources.
River systems are managed the most effectively when they are treated as nonrenewable resources. Treating rivers as a renewable resource whereby each
segment is continually refilled by freshwater from upstream in the river system is
a naïve approach. It is naïve both in the sense that freshwater supply to the
entire river system changes depending on the weather and freshwater supply can
be significantly affected to that segment by upstream usage or developments
along the river (such as the building of dams). In contrast, the more effective
approach that is consistent with the precautionary principle is to manage the
entire river system as one huge dam. That is, manage it as a non-renewable
resource, but recognise that freshwater can be taken out and put back into the
dam. Thus, to keep the entire river system sustainable, there needs to be a
balance between removal and replacing the freshwater. Therefore, it becomes
Richard Norris, Peter Liston, Nerida Davies, Julie Coysh, Fiona Dyer, Simon Linke, Ian Prosser and
Bill Young, “Snapshot of the Murray-Darling Basin River Condition” (Report to the Murray Darling
Basin Commission, 2001), p10.
167
46
necessary that the uncontrollable freshwater supply to the river system is dealt
with by controllable removal of freshwater from the river system. Hence,
freshwater usage from river systems needs to be based on a variable related to
freshwater supply (rainfall or glacial melt) and not in absolute terms.
Freshwater from river systems is a shared or common good; therefore, the
success of a cross-border river system model is its ability to achieve compromises
between involved parties. The model must establish a compromise between
upstream and downstream views, while maintaining the river system
environment. That is, upstream and downstream users must be managed in an
equitable way to ensure intra-generational equity. In addition, this intragenerational equity must be adopted in a way that the real costs are borne by the
current generation (polluter pays) so that the sustainability of the river system is
ensured, which is inter-generational equity.
D.2 Models of Cross-Border River Freshwater Allocation
D.2.1 The Market Model and its Hybrid Variations
The problem of establishing ownership seems to be a complication that even the
new hybrid models have not been able to tackle. In addition to ownership issues,
there are significant theoretical and practical problems that have been identified,
such as undervaluing of freshwater, lack of environmental consideration and
market failure through market power. Thus, from a theoretical and practical
viewpoint, a purely market model solution to cross-border river freshwater
management is not optimal in achieving intra-generational or inter-generational
equity.
However, the market model has some important advantages over the agreements
model. The market model involves setting up a market for river freshwater, which
is an efficient and low-cost solution. Setting up a market involves little set-up
overheads and is theoretically self-regulating: all that must be done is set up the
market (ie. establish ownership or trading rights over freshwater) and regulate
the market to ensure market rules and regulations are adhered to. Thus, the
significant advantages of the market model have given rise to the idea of using
the pure market model as a basis for developing hybrid models that attempt to
harness its advantages while overcoming its disadvantages.
The hybrid models address (only MBIs deal with market failure issues) problems
with the market model and propose variations to it to provide potential solutions.
One or both of the hybrid models (environmental economics and/or market based
incentives) may turn out to be practical models that solve problems with the
market model (except ownership), whereby society will be forced to conserve
freshwater by efficient and equitable use. However, there still remains doubt
whether these new hybrid models will truly enforce the correct valuation of
freshwater, or will they solely increase its value closer to the true value without
actually reaching it, and therefore freshwater will remain undervalued even in
these hybrid models. Even if these hybrid models are not a practically optimal
solution, they will still be an improvement over the market model if they can be
successfully implemented.
With a general view of ensuring the sustainability of goods, society usually values
these goods at their replacement value. For example, people take out house
insurance to ensure the sustainability of the goods that are in the house against
external forces (eg. fire or theft). In this case, from an insurance point of view
that guarantees the sustainability of the goods, the goods that are in a house are
usually valued at their replacement cost, because that is what the insurance
company will agree to pay in the case of stolen or damaged goods. Relating this
47
to the theory of river systems, this replacement cost is a possible valuation
concept that could be applied to freshwater. That is, pricing freshwater at its
replacement cost could be a way to ensure that freshwater is not under-valued,
and consequently to avoid problems of not adhering to the polluter pays principle.
This replacement cost will be significantly higher than costs seen in Switzerland
and Australia today, as the most cost effective way to manufacture freshwater is
through desalination of salt water, which is still a very expensive process.
Therefore, according to the polluter pays principle, this high freshwater cost
should bring about a balance between current uses and saving for the future,
which ensures sustainability (ie. inter-generational equity). The shortcoming of
this new idea is that the price under the replacement valuation may prove too
high to create intra-generational equity, because people with fewer funds may
not be able to purchase enough water to survive. This may or may not prove to
be a problem, and even if it were, it may be solvable by government subsidies for
necessary uses of freshwater (MBI model). Thus, valuing water by its
replacement cost is a possible solution to the under-valuing of freshwater. These
issues should be researched more considering the increasing implementation of
market model variations through the international trend of privatisation of water.
Even if the replacement cost variation did prove to be too high to sustain intragenerational equity, raising the awareness of the replacement cost of freshwater
may cause changes in freshwater usage.
D.2.2 Customary Laws and Agreements Model
The argument against the market model and its hybrid variations is that
environmental goods (such as river systems) and economic goods can not be
reduced to a common measure, neither dollars nor anything else168. Therefore,
private market evaluations are not an appropriate decision making process.
Rather, social and political aspects should be incorporated into the decision
making process, in which the advantages and disadvantages of different courses
of action are compared informally. It is argued that this latter process will allow
all aspects of each alternative to be considered; their economic, the ecological
and the social impacts are all analysed with respect to their ethical and political
implications. Thus, these thoughts are indicative of a customary laws and
agreements approach that deals with freshwater as a complex shared resource.
The customary laws and agreements model is not effective in two main
circumstances: when cooperation can not be attained, and/or in the case when
the actions of parties do not adhere to past agreements and there is no way of
enforcing that agreement. When the cultural and social value system supports the
creating and following of agreements and customary laws, the customary laws
and agreements model has proven to be very successful. In Switzerland, the
cultural value system relating to freshwater makes consideration of the
downstream implications a social norm. This is a major reason for Switzerland’s
successful implementation of the agreements and customary laws model. From
the Switzerland case, it can be seen that a cultural value system that supports
consideration of other freshwater users not only promotes cooperation that
makes reaching agreements more likely, it also increases the likelihood that
parties will follow the agreement without strict enforcement through the existence
of large penalties.
It is also apparent that the customary laws and agreements model as
implemented in Switzerland will not be transportable to other countries unless
they have a cultural value system that supports consideration of downstream
freshwater users. In these situations, the process of obtaining cooperation and
establishing agreements will be far more difficult and time consuming. In
168
Clive Hamilton, “The Mystic Economist” (ACT, Australia: Willow Park Press, 1994), p63.
48
addition, there will be a need for conflict resolution and enforcement to be
included as part of an agreement, because without cultural values to ensure the
parties adhere to the agreement there is a high likelihood of the parties not
performing as agreed. The increased cost of incorporating conflict resolution and
enforcement (either positive rewards or negative punishments) into the
agreements is a time consuming process, but it will have large future benefits. It
will make it significantly cheaper to resolve future issues, and increase the chance
of maintaining cooperation and the agreement in the case of a party breaking the
agreement. Furthermore, it increases the chance of the model being effective and
creating intra-generational and inter-generational equity. Hence, under the
agreements model, it is necessary for cultures different from those in
Switzerland, to detail conflict resolution and enforcement systems in freshwater
agreements. In the future, this may also be required in cultures such as
Switzerland, because potential shortages in freshwater supply that have never
occurred previously may cause the break-down of current cultural views, and
consequently community support of the agreements model. Thus, incorporating
conflict resolution and enforcement is desirable in all agreement model
implementations.
Under the agreements model, environmental sustainability and equitable
allocation of freshwater are not certainties even when the model is successfully
implemented. In the successful case of Switzerland, there are currently no
customary laws, agreements or plans in existence for a case of shortages in
freshwater supply, which is a potential problem for Switzerland and the rest of
Europe. Therefore, it is important to thoroughly analyse the agreements that
have been made to date to identify agreements that should be made to ensure
ongoing success under this model. It is important that sets of agreements are
critiqued not only by all parties involved, but also by independent freshwater
specialists. Ensuring that the specialists are kept independent will be of dual
benefit to any agreement model. They will not only increase the quality of the
agreements that are made, but also they will provide a critique to ensure that
differences in the parties’ political power are identified and made transparent.
This should ensure that politics has not impacted significantly, or detrimentally,
on the parties involved or the environments.
D.2.3 Stewardship
Independent of the models above, the significance of stewardship remains.
Riparian groups, especially at the source, must be encouraged to do the right
thing regarding the freshwater resource they have partial control over. Whether
this duty of care concept be incorporated into the market model or the
agreements model, there must be some consideration for the power that
stewards have over our freshwater resources. The economic benefits need to
outweigh the short-term economic costs of stewardship so that all river system
users behave as stewards by taking actions that improve, or at least do not
deteriorate, the rivers. Upstream stewards have benefits for all downstream
users; therefore, all downstream users should bear the cost of encouraging
upstream users to act as stewards to ensure intra-generational and intergenerational equity.
49
D.3 An Alternative Hybrid Solution
Undoubtedly, there is a role for agreements within the river freshwater
management arena. Unlike a market approach, agreements can overcome those
ever present short term profit objectives that do not take fully into account future
implications, both environmental and other. Nevertheless, all hybrid model
research seems to use the market model as a basis. Although, I would argue
that, unlike the highly criticised market model, there is an inherent need for some
variation of the agreements model, and thus it should be the basis for any hybrid
model. Furthermore, the agreements model seems inherently attuned towards
handling the basic low level, ‘need’ freshwater requirements. Freshwater can be
categorised into two major uses, those which are required for current and
ongoing survival and others that are not so critical such as irrigation and use in
industrial processes, where usage can be varied. Essentially, the survival needs
are comprised of the freshwater needs of humankind, and the freshwater needs
of the environment (particularly river systems) that need to remain healthy and
sustainable. Almost all countries and states agree that these survival needs are
basic rights that should be fulfilled169 regardless of market efficiency issues; thus,
it seems logical to use an agreements model to ensure that these basic rights are
ensured. Moreover, as most people agree on these basic rights it should be
possible to get riparian nations and states to cooperate, and thus this usage
agreements model should function in practise.
It is much more difficult to attain cooperation and agreements that govern the
use of freshwater for non-essential purposes such as in agriculture. This is
because often the amount of freshwater will directly impact on the profit and
growth of industry sectors in specific areas. Thus, the agreements model is not as
logically applicable, and the problem presents itself better to a market based
solution. The market based solution (environmental economics or MBIs if they
prove to be successful) will then ensure that the residual freshwater after survival
needs will be allocated effectively to the most efficient users. Nevertheless, there
is still the need for an agreements model base similar to the Australian MD River
System Pilot Trading Agreements that set up initial trading rights (ie. to
overcome ownership issues in the market model) in the market. The small
application of the agreements model is much more likely to succeed as the
impacts of the agreement are not final and market forces can take over to ensure
efficient allocation of the freshwater resource. In addition, the agreements base
gives the market model a theoretically equitable starting point for the market.
The major criticisms of this approach will be the difficulty in determining what
level of freshwater usage is a survival need and where to draw the line between
need and want? The exact amount needed for humankind and river systems to
survive is an area of scientific research not covered by this paper; however, the
implications of the accuracy of this scientific research are very relevant. If the
level of freshwater needed for survival is understated then the basic rights to
freshwater (intra-generational equity) and environmental sustainability (intergenerational equity) will not be conserved. Conversely, if the survival level is
over-stated then people will under-value freshwater and usage inefficiencies will
occur. However, this problem will be solved by the market aspect of this
approach. Anybody assigned freshwater through a survival need still has the
opportunity to trade this freshwater in the market. Thus, there will be a monetary
encouragement to maintain usage efficiency, because, if the survival level is
over-stated then people will just sell their excess freshwater through the market.
Consequently, the likelihood of understating the survival needs can be reduced by
Although there is a lot of debate about what exactly is needed for humans and the environment to
survive
169
50
tending towards over-stating the survival needs, for which small errors will not
have adverse affects on the model as a whole.
Purist ecologists may argue that this model does not allow for the absolute
integrity of river systems, and indeed it does not explicitly acknowledge the
absolute integrity of the river; however, the model acknowledges the rights of the
river systems as an entity through adopting the principle of environmental
sustainability to ensure inter-generational equity. Inter-generational equity
(discussed in more detail previously in section B.2) encompasses the notion of
passing on a river system in the same or better condition to future generations.
Thus, as a consequence of ensuring inter-generational equity, the condition of the
river system is preserved; that is, a result of this model is that the integrity of the
river is preserved or enhanced. Hence, while the purist ecologists’ belief in the
integrity of the environment is not at the root of this model, yet their beliefs are
upheld under this model.
The approach of conceptually integrating the market model approach within the
agreements model makes use of the advantages of both. This approach also
allows the trend of privatisation to continue, but limits the power that the
privatised firms will have to the market aspect of this hybrid model. Furthermore,
the market model’s main problems of equity and environmental sustainability are
taken into consideration external to the market. Thus, the fundamental flaws of
the market model, associated with it not treating freshwater as a unique
resource, are no longer relevant. The enforceability of agreements will also
benefit from a more formal market model structure being added to the
agreements. In addition, the agreements aspect enables this approach to
recognise the basic need for freshwater and treat this vital resource with the
importance and uniqueness that is required. Furthermore, this is consistent with
the United Nations priorities for freshwater resources as set out in chapter18 of
Agenda 21170. Hence, the market aspect ensures efficient allocation of freshwater
resources for non-survival needs, while the agreements aspect ensures the intergenerational and intra-generational equity.
This agreements hybrid model (agreement model based) detailed above is a
proposed model that could be implemented in both Australia and Switzerland;
furthermore, it highlights the worth of a comparative study on extremely different
cases. The well-documented water supply issues with the Murray-Darling Basin
have significantly contributed to Australian academics, water experts,
environmentalists, industries, politicians and the community becoming more
aware of the vital importance of freshwater management. This is a national
concern that has arisen out of a national crisis; furthermore, only after the crisis
has Australia stated to solve and address its river and freshwater problems.
Therefore, it is hoped that a nation like Switzerland, with a current abundance of
freshwater, will not idly wait until freshwater supply reaches crisis point before it
incorporates solutions to potential future problems into its river and freshwater
management.
170
United Nations, “Agenda 21” (2003), chapter 18, paragraph 18.8 [Accessed via Internet].
51
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