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MONITORING THE IMPACTS OF WATER TRADING SOME METHODS AND RESULTS FROM AN AUSTRALIAN WATER MARKET

Congress: 2008
Author(s): Bjornlund Henning


Keyword(s): water markets, water trading, monitoring, Australia, impact assessment
Article:
AbstractWater markets are introduced in many jurisdictions as a key economic instrument to facilitate a reallocation of existing water between competing users and to encourage water conservation. This is done to achieve two objectives, to: i) avoid or defer investments in supply infrastructure and thereby reduce the associated financial, political, social and environmental costs; and ii) reallocate exiting resources from inefficient low value users to efficient high value users. It is anticipated that this will reduce the socioeconomic impact of reallocating water away from existing users (irrigation) to meet increased demand from new or expanding users (the environment, recreation, and urban). However, the introduction of water trading has been widely opposed within irrigation communities and among environmental advocates. The community concern is associated with the social and community impact within the communities depending on irrigation as the economic engine to generate off-farm and on-farm jobs and council revenue as well as the impact on individual irrigators. The environmental concern is associated with the potential negative impact of trading water from one location to another and from one use to another. Proponents of water markets argue that the socioeconomic benefits from trading water into new areas and uses by far outweigh the potential cost of moving water out of existing areas and uses. In response increased reliance is placed on monitoring the impact of trading so that policies can be adapted over time to ensure environmentally, socially and economically sustainable or acceptable outcomes within the context of the wider catchment community. Australia has implemented aggressive policy reforms since the early 1990s. This reform process gained momentum in 2004 with a National Water Initiative. This calls for more efficient and sophisticated water markets based on an unbundling of the set of rights traditionally embedded in a water right, the creation of new secure water registers facilitating investor confidence and certainty, and the removal of barriers to trade. As part of this process, as well as of the process of developing water sharing plans to define environmental needs and share the water available for consumptive use between competing users, the monitoring of the socioeconomic and environmental impacts of trading and new allocation outcomes has been an integral requirement of implementing authorities. Much research has therefore gone into designing processes to regularly monitor and report on the impact of theses policies. This paper will report on the outcome of one of these research projects. We have surveyed traders annually from 2003-06 within the Goulburn-Murray Irrigation District in Victoria resulting in more than 1,200 returned questionnaires. A different approach was used each year including electronic questionnaires, questionnaires send to all traders and questionnaires send to a sample of traders to find the cheapest and fastest way of collecting data in a reliable manner. We also compare results from each of the three years as well as comparing these three years to the results from a similar survey conducted by the author in 2000 to try and establish a suitable time interval between each monitoring and reporting activity.
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