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Coupled externalities : water management in the context of irrigation- induced salinity in Australia

Congress: 2008
Author(s): Robert LIFRAN
Sophie Legras : legras@supagro.inra.fr Robert Lifran : lifran@supagro.inra.fr 2, place Pierre Viala FR-34060 Montpellier cedex 1

Keyword(s): : water markets, irrigation induced salinity, Australia, externalities, policy instruments, trading ratios, joint markets
AbstractIn this paper, the design policy instruments for the management of irrigation-induced salinity in Australia is addressed. Indeed, this setting exhibits complex interactions between the different features of the resource water. Quality, quantity of surface and ground-water interact in ways that produce coupled environmental externalities. It is then difficult to design efficient policy instruments to tackle all the issues at stake. Recourse to water markets has been widely proposed and accepted as an efficient means of managing scarce resources and environmental problems. In Australia, markets for diversion rights are now implemented, and some authors express concerns about the ability of these markets, as they are designed, to account for the externalities at stake, in particular the ones involved in irrigation-induced salinity. To accommodate these interacting issues, two approaches have been proposed : (1) to design trading ratios that account for the different contributions of sub- catchment to the generation of instream salinity; (2) to have recourse to markets for recharge rights to complement the existing markets for diversion rights. This papers compares both approaches with respect to both effectiveness and efficiency criteria. It provides some policy recommandation with respect to the use of alternative market designs.
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