The Environment Institute

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The Murray-Darling Basin

Mike Young Executive Director, The Environment Institute

The Environment Institute

Murray-Darling Basin

• Directly supports 3 million people • Feeds approximately 20 million people • Significant environmental values • 14% of Australia (size of Spain & France) • Australia’s three longest rivers • 40% Australia’s farmers • Agricultural exports earn $9b/year • Gross value of agricultural production $15b (40% Australia) • • Irrigation: $5.5b (15%) Home to 34 major Indigenous groups Life Impact The University of Adelaide

The Environment Institute

Flow generation

Life Impact The University of Adelaide

The Environment Institute Life Impact The University of Adelaide The Murray will have to solve its own problems

The Environment Institute Ecosystem Health Assessments 2004-07 Life Impact The University of Adelaide

The Environment Institute Historical Climate 2030 Median Climate 2030 Dry Extreme

Change?

Total Water

23,417

Water Use

11,327 (48%) 20,936 15,524 10,876 (52%) 8,962 (58%) (CSIRO Water Availability – 2008) Life Impact The University of Adelaide

The Environment Institute

Growth in Basin diversions

12 000 10 000 8 000 6 000 4 000 2 000 0 1930 1940 1950 1960 1970 1980 1990 2000 Life Impact The University of Adelaide 7

Land

Water Rights Reform & unbundling

Single Title to Land with a Water Licence Tradable Right Water Price National Competition Policy 1993/94 Plus Cap Entitlement Shares in Perpetuity Bank-like Allocations Use licences with limits & obligations National Water Initiative 2004 Life Impact The University of Adelaide

1 200 1 100 1 000 900 800 700 600 500 400 300 200 100 0

Murray-Darling Basin Water Entitlement Transfers - 1983/84 to 2003/04

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Scarcity and Trading

Murray-Darling Basin Water Entitlement Transfers - 1983/84 to 2003/04

1 200 1 100 1 000 900 800 700 600 500 400 300 200 100 0 Intrastate Temporary (GL) Intrastate Permanent (GL) Interstate Temporary (GL) Interstate Permanent (GL)

Water Reform Trading opened up

Intrastate Temporary (GL) Intrastate Permanent (GL) Interstate Temporary (GL) Interstate Permanent (GL)

Source: Murray Darling Basin Commission, 2007

Life Impact The University of Adelaide

The Environment Institute

Return to investment in entitlement systems & trading

Total returns - Median allocation and entitlement prices compared to capital growth, and the S&P ASX Accumulation Index Returns

50% 40% Annual Return - Median Annual Return - Capital Growth Annual Return - S&P ASX 30% 20% 10% 0%

5 Year Holding Period Ending

Life Impact The University of Adelaide

After Bjornlund & Rossini 2007

Flood water Water needed to

Environment with a

Environment

fully-specified share

Shared Water

Now buying back water for the MDB environment $3.1 billion

The Environment Institute

The Guide to the Plan

1. Conveyance to and through Mouth 9 in 10 yrs 2. Prepared to lose 25% of red gum forests 3. Most benefits from 3,000 GL to 4,000 GL local are within region where reduction occurs 4. States must comply with SDLs even if Commonwealth fails to buy enough water 5. Now have agreement to align by 2019

Life Impact The University of Adelaide

The Environment Institute • • • •

Guide principles and concepts

Hydrological integrity

– Most interception is included in the SDL algebra

Equitable risk sharing with Environment

– Conveyance reserve specified separately – Environment gets an entitlement for freshes and some overbank work

Maximum subsidiarity

– Uniform definition of SDL across the Basin built around a 114 year average less 3% allowance for adverse climate change – But CEWH takes a centralised view of the world ....

Robust planning as the “premier” control instrument

– Entitlement and allocation system sits under the plan – Could reverse this approach Life Impact The University of Adelaide

The Environment Institute

SDL proposals

Basin-wide

13,700 GL/y 13,700 GL/y 13,700 GL/y Current diversion SDL proposals Reduction 10,700 GL/y

3,000 GL/y

(22%) 27% 10,200 GL/y

3,500 GL/y

(26%) 32% 9,700 GL/y

4,000 GL/y

(29%) 37% % reduction in watercourse diversion component* Max reduction for an SDL area Max reduction in watercourse diversion component* 26% 40% 30 % 40 % 35% 45%

* If only this component is reduced

Life Impact The University of Adelaide 14

The Environment Institute • • •

The LTA SDL

Long Term – Hides climate change signal Average – Mean not mode or median Sustainable – Not defined as a limit Don’t compromise key environment or productive base • • Diversion – Not allocated – Not “used ” Limit • • Not a share of inflows Not a seasonal resource allocation Life Impact The University of Adelaide

The Environment Institute

“Take” not “net use”

environmentally sustainable level of take for a water resource means the level at which water can be taken from that water resource which, if exceeded, would compromise: (a) key environmental assets of the water resource; or (b) key ecosystem functions of the water resource; or (c) the productive base of the water resource; or (d) key environmental outcomes for the water resource.

• • Management of “take” not amount “allocated” for taking Little concept of optimal storage management Life Impact The University of Adelaide

The Environment Institute

Conveyance Reserve

• • •

Conveyance water is water in the River Murray System required to deliver water to meet critical human water needs as far downstream as Wellington in South Australia.

Not to barrages No requirement to have a minimum annual flow to the sea

Life Impact The University of Adelaide

The Environment Institute • • • • •

Elements of a way forward

A much more regional approach Commit to a fully specified “entitlement” system rather than a “planning” system – Define conveyance water needed throughout the system – Define the maximum amount that may be allocated in any irrigation season as the amount held when every “user” including interceptors has 100% allocation – Define a target portfolio of entitlements for the environment in each district Continue with a market-driven approach – buy entitlements at higher and less callous prices – Establish community development funds and place money in proportion to money spent on buy backs and scale of the buy back Establish regional environmental trusts to hold and manage entitlements. Move forward step by step, monitoring, adjusting learning as we go Life Impact The University of Adelaide

The Environment Institute • •

An adaptive approach to the definition of SDLs

For water body i and under the powers given to the Authority through section 23(2) (c), a register will be established to record the Sustainable Diversion Limit (SDL t,i ) that applies to that body at any point in time.

This register is designed to enable SDL’s to be increased as local communities, regional authorities and States find more efficient ways to deliver environmental objectives.

– All benefits flow to the region where innovative solutions are found.

– Adaptive management will always be possible.

• • •

SDL t,i = SDL 2012,i - Water entitlements purchased and transferred to the environmental water register + any increase in the SDL that the Authority determines can be made at no detriment to the attainment of environmental objectives because environmental works and measures are allowing the more efficient management of environmental water + any increase in the SDL that the Authority determines can be made at no detriment to the attainment of environmental objectives as a result of a policy change that has occurred

Under the arrangements proposed in the Guide the Basin Plan, once and an SDL is set, there is no incentive for anyone to invest in environmental works and measures. After 2012, the main way to adjust an SDL is to use the “compulsory acquisition like” arrangements set out in sections 75 and 76 of the Act. This adaptive approach set out above overcomes these these impediments and dramatically increases the opportunity to prepare a Basin Plan that will withstand the test of time.

Life Impact The University of Adelaide

The Environment Institute

Funding adjustment

• • •

$3.1b Buy back programs $5.8b Infrastructure upgrade $8.9b in Total

•

15,120 irrigators

•

$588,624 per irrigator

Life Impact The University of Adelaide

The Environment Institute

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