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Water markets in the Murray-Darling Basin
... Moreover, the theoretical system is then further studied and improved for the water price formulation of multi-source and dual water supply systems, considering both social and economic principles [29][30][31][32][33]. In this study, the methodology of the equilibrium water price system is discussed in Section 2, the basic equations and parameters used in the cooperative game model are shown in Section 3, and a typical Chinese city is selected as a case study in Section 4. Further, the advantages of the equilibrium water price used in dual water supply systems are calculated and analyzed in detail [31][32][33][34]. ...
... Because of the differences between multiple water sources and their scarcity, both the allocation method and the corresponding price system will be affected. A reasonable water price relationship among different water sources is critical to ensuring the best allocation of multiple water resources [28][29][30][31][32][33][34][35][36]. In order to promote the implementation of the multiple water source allocation method, a number of factors are included in this study, such as the users' willingness to pay and the demand for the total water amount. ...
... Additionally, an Arrow-Debreu model with a strong anchoring in Say's law and Keynes' principle is also introduced in this study, which argues that output cannot run ahead of income or expenditure. Both of them became the basic and fundamental theory of cooperative game technology in most of the previous research [34][35][36][37]. ...
In this study, the theory of equilibrium water prices is constructed and practiced based on previous research on cooperative game technology and the water price system. The equilibrium water price utilized in this study emphasized solving the unbalanced and unsustainable water supply system, including the reclaimed water resources and the current water price used in numerous Chinese cities. Safety, affordability, and sustainability become the key factors of the equilibrium water price system, which is operated and analyzed in a typical city in southeastern China. The cooperative game model of equilibrium water price is solved by game technology, considering various factors such as the price strategy, the water supply quantity, and the local water demand. The practical application shows that the theoretical system can effectively solve the problem of water price formation mechanisms after the unified allocation of different types of water resources. It not only enhances the enthusiasm and initiative of the public in the utilization of reclaimed water, but also plays an important role in the rational utilization of multiple water resources for different purposes by introducing a reasonable water price ratio and local water resource allocation.
... Water markets are generally operated for permanent or temporary water rights transfers, such as in Australia and China [Wheeler et al., 2014;Grafton and Horne, 2014;Xu et al., 2016]. In temporary water rights trading, the more common kind [Bjornlund , 2003], a lease for a volume of allocated water is provided for only one season or year. ...
... This creates a need for the ability to optimize trade matching and price setting in double auction water markets with physical and institutional constraints [Zaman et al., 2009;Erfani et al., 2014]. Despite efforts to remove these constraints or mitigate their impacts [Turral et al., 2005;Grafton and Horne, 2014], a technical tool is still needed to assist the operation of these double auction water markets. After all, entirely removing these constraints is difficult and costly while improving the performance of existing water markets is imperative. ...
... Several pilot water markets have been established over the last few years in Hebei and Gansu provinces [Mi et al., 2008;Zhang et al., 2008;Wang et al., 2009;Speed , 2009a, b]. Water rights in these areas are similar to those in Australia; they comprise (1) permanent water entitlements that provide an ongoing share of a consumptive pool in terms of annual mean, and (2) temporary water allocations, which are the water volumes assigned to a water entitlement in a given water season within a specified water availability [Zheng et al., 2011;Grafton and Horne, 2014]. Water entitlements and allocations are all tradable, corresponding to permanent and temporary rights trading, respectively. ...
Key Points. • A two-phase model is proposed for identifying optimal trades in water markets with physical or institutional constraints. • Three objective functions for different managerial purposes are compared. • Expanding a channel system's tradable range can increase social welfare, but its marginal value is diminishing. Abstract. Delivery in water markets is generally operated by agencies through channel systems, which imposes physical and institutional market constraints. Many water markets allow water users to post selling and buying requests on a board. However, water users may not be able to choose efficiently when the information (including the constraints) becomes complex. This study proposes an innovative two-phase model to address this problem based on practical experience in China. The first phase seeks and determines the optimal assignment that maximizes the incremental improvement of the system's social welfare according to the bids and asks in the water market. The second phase sets appropriate prices under constraints. Applying this model to China's Xiying Irrigation District shows that it can improve social welfare more than the current "pool exchange" method can. Within the second phase, we evaluate three objective functions (minimum variance, threshold-based balance, and two-sided balance), which represent different managerial goals. The threshold-based balance function should be preferred by most users, while the two-sided balance should be preferred by players who post extreme prices.
... The marked labels on the map show the sources of irrigation in the water market regions and several studies in the bracket. Six studies in south-western Australia are from the regions with both surface and groundwater access (Wheeler et al., 2014a(Wheeler et al., , 2014bGrafton et al., 2014;Wheeler and Garrick, 2020;Debaere et al., 2014;Bjornlund and McKay, 2002) and two cases studied the regions with only surface water availability (Brooks and Harris, 2008;Hadjigeorgalis, 2008). In the western USA, all four studies report both surface and groundwater availability (Debaere et al., 2014;Thompson et al., 2009;Bjornlund and McKay, 2002;Howitt, 1994). ...
... In some regions, farmers sell the water rights far below the value of the marginal product of water, keeping land fallow and clearing their debt from sales (Howitt, 1994). On the other hand, buyers tend to save money by investing in effective technologies (Howitt, 1994;Hearne and Easter, 1997;Grafton and Horne, 2014;Manjunatha et al., 2016). Most of the studies in Australia find that a higher price during the drought period results in effective water conservation technologies and higher water productivity among buyers. ...
... Although an increase in irrigation water productivity is recorded in most of the studies, it is also noted that there are several bottlenecks in this case. High transaction cost, lack of infrastructure, lack of complete information, and barriers to inter-sectoral or inter-regional trade paralyze the efficient allocation of water (Howitt, 1994;Brooks and Harris, 2008;Wheeler et al., 2014b;Grafton and Horne, 2014). ...
The water markets as an institution for water demand and supply management has been extensively documented both theoretically and empirically. The application of successful water market models of developed economies in developing economies has also gained much attention of the researchers and policy makers globally. However, the studies in different regions have stated a number of arguments both in favour and against the water markets as an economic instrument for water use efficiency and equity, particularly in the irrigation sector. The present study conducts a systematic review and meta-analysis for identifying different ways in which the water markets impact irrigation water-use in different regions and analyse the various factors of water markets that impact irrigation water-use efficiency and equity. The results show that all the studies that confirm the trade-off between water-use efficiency and equity are based on markets with inter-sectoral trade, specifically formal markets. Only about 27% of the reviewed studies found that both the objectives of equity and efficiency can be achieved simultaneously with water trading. The impact of water markets on efficiency depends on five factors viz. soft infrastructure/institutional governance, hard infrastructure, physical water scarcity, reliability/Trust in the water market system, and social acceptance. The difference in the very nature of the buyers and sellers in the formal and informal markets largely explains the difference in the functioning of the respective markets. Thus, this study highlights the range of factors behind the heterogeneity in the results of the reviewed studies on the given theme that can support the policy makers in framing the customized water trading policies.
... Aird 1956;Taylor 1959;Campbell 1964;Haigh 1964;Davidson 1969Davidson , 1976Munro 1970; see also Powell 1988, Seddon 1999, Connell 2007, Musgrave 2008 and Webster 2017 for more recent assessments) and if the abundance of contemporary literature on the topic, including a recent royal commission in South Australia (Walker 2019), is any guide, this divisiveness shows no sign of abating (e.g. Crase 2010; Crase et al. 2011;Grafton and Horne 2014;Williams 2017;. ...
... By way of comparison, irrigators expressed concern when prices exceeded A$200 ML À1 at the beginning of the irrigation season in 2015 (Long 2015). The average price for water allocation trades in the southern Murray-Darling Basin was less than A$600 ML À1 in every year from 2008-2012 inclusive, and in 2010-2012 was less than A$100 ML À1 throughout the entire irrigation season (Grafton and Horne 2014, fig. 2). ...
Historical ecology documents environmental change with scientific precepts, commonly by using statistical analyses of numerical data to test specific hypotheses. It is usually undertaken by ecologists. An alternative approach to understanding the natural world, undertaken instead by historians, geographers, sociologists, resource economists or literary critics, is environmental history. It attempts to explain in cultural terms why and how environmental change takes place. This essay outlines 10 case studies that show how rivers have affected perceptions and attitudes of the Australian community over the past 200+ years. They examine the influence at two contrasting scales, namely, the collective and the personal, by investigating the role that rivers had in the colonisation of Australia by the British in 1788, the establishment of capital cities, perceptions of and attitudes to the environment informed by explorers’ accounts of their journeys through inland Australia, the push for closer settlement by harnessing the country’s rivers for navigation and irrigation, anxiety about defence and national security, and the solastalgia occasioned by chronic environmental degradation. Historical ecology and environmental history are complementary intellectual approaches, and increased collaboration across the two disciplines should yield many benefits to historians, to ecologists, and to the conservation of Australian rivers more widely.
... Water markets are increasingly being used around the world as a way to reallocate water to more efficient use (Chong and Sunding, 2006;Grafton and Horne, 2014;Zekri and Easter, 2007). In particular, water markets in Australia have developed to a high level of maturity, having been in existence for over thirty years in some areas (Wheeler et al., 2014a). ...
... Water markets in the MDB were first established formally within irrigation districts from the 1980s onwards and, over time, trade has been permitted in terms of actual water entitlements and then across districts (MDBA, 2010). The 1990s saw continual fundamental water reforms, upon which all current major water policy and institutions evolved, including the unbundling of land and water entitlements (Grafton and Horne, 2014;Young, 2014). One of the reasons given for the success and adoption of water markets is because of the considerable institutional, governance and property right development that has gone into establishing conditions for water markets. ...
Although participation in water markets is widespread among irrigators in the Murray-Darling Basin of Australia, there has been a lack of study on the dynamics of water markets, in particular price and volume dynamics, volatility and spillovers. Questions have also been raised regarding the impact on markets from governments buying back permanent water from consumptive use to return to environmental use. VARX-BEKK-GARCH time-series regression was used to model the water market dynamics of monthly permanent and temporary water market trade from 1997 to 2017 in one of the largest water markets in the Murray-Darling Basin, the Goulburn-Murray Irrigation District. Results suggest that the temporary market was more volatile than the permanent market, while persistency in volatility only exists in permanent markets. Unidirectional transmission spillovers exists in both markets from prices to volumes. The main drivers of temporary water prices were water scarcity related, while permanent prices were most significantly influenced by previous permanent water prices and current temporary water market prices. A statistically significant negative impact on temporary volume-traded from government water recovery (e.g. a 1% increase in water recovery resulted in a 0.14% reduction in water volume-traded) was found, but no significant impact from government recovery was found on temporary water prices, nor on permanent market prices and volumes. However, government water recovery increased the volatility of temporary market prices and volumes, signaling potential increased issues of risk and uncertainty for irrigators engaging in temporary water markets.
... Considering the increasing evidence that the southwest U.S. is expected to become warmer and drier in the future (USGCRP et al., 2014), it is important to consider climate change-induced uncertainties in long-term water resources planning. Similarly, in other places across the worldlike Chile, some parts of Australia, and south Africa-water rights are also allocated based on the prior appropriation doctrine, and the open water evaporation rate is relatively high (Donoso, 2018;Godden, 2005;Grafton & Horne, 2014). Therefore, our modeling framework-which includes both a WRAP based on prior appropriation doctrine, and a fully distributed hydrological model with an advanced reservoir evaporation module-is broadly applicable, and can provide best available estimates of projected future surface water availability at a local scale. ...
Climate change and increasing water demand due to population growth pose serious threats to surface water availability. The biggest challenge in addressing these threats is the gap between climate science and water management practices. Local water planning often lacks the integration of climate change information, especially with regard to its impacts on surface water storage and evaporation as well as the associated uncertainties. Using Texas as an example, state and regional water planning relies on the use of reservoir “Firm Yield” (FY)—an important metric that quantifies surface water availability. However, this existing planning methodology does not account for the impacts of climate change on future inflows and on reservoir evaporation. To bridge this knowledge gap, an integrated climate-hydrology-management (CHM) modeling framework was developed, which is generally applicable to river basins with geographical, hydrological, and water right settings similar to those in Texas. The framework leverages the advantages of two modeling approaches—the Distributed Hydrology Soil Vegetation Model (DHSVM), and WAM. Additionally, the Double Bias Correction Constructed Analogues (DBCCA) method is utilized to downscale and incorporate Coupled Model Intercomparison Project Phase 6 (CMIP6) GCMs. Finally, the DHSVM simulated naturalized streamflow and reservoir evaporation rate are input to WAM to simulate reservoir FY. A new term—“Ratio of Firm Yield” (RFY)—is created to compare how much FY changes under different climate scenarios. The results indicate that climate change has a significant impact on surface water availability by increasing reservoir evaporation, altering the seasonal pattern of naturalized streamflow, and reducing FY.
... Water markets exist for both surface and groundwater, and formal property rights to access and use water are tradable in a few countries, such as Australia, the United States and Spain, among others (Wheeler and Garrick, 2020). One of the world's most developed water markets is in Australia's Murray-Darling Basin, which has two types of water rights: (1) water entitlements, an ongoing property right to access a share of water from a consumptive pool; and (2) water allocations, physical volumes of water allocated each irrigation season to a water entitlement (Grafton and Horne, 2014;Wheeler et al 2023). ...
... The OECD (2015) defines allocation regimes as determining 'who is able to use water resources, how, when and where'. A narrower meaning of the term 'allocation' in Australia refers to annual water allocations arising from a specific entitlement (see Grafton and Horne 2014). The term 'annual water allocation' is used when this is the meaning. ...
How water resources are defined, both conceptually and legally, is central to their efficient and equitable allocation. With climate change introducing significant uncertainties to water resources management, flexible allocation frameworks are needed that can adapt to changing conditions. This paper explores options for climate-adaptive water allocation in Australia’s Murray Darling Basin. The 2026 revision of the Basin Plan may provide significant opportunities for proactive climate risk mitigation, but this depends on rigorous evaluation of policy options. The Water Act requires that the Plan’s revisions use the best available science to inform strategies that minimise the impact of climate risks. The Act also enables the use of ratios and formulas as alternatives to using long-term averages as the basis of the Plan. However, there have been limited investigations into using these alternatives. Achieving more adaptive policies depends on rigorously assessing climate risk management options. Given the far-reaching consequences of climate change, rigorous investigations are needed into reforms to the established approaches to water resources planning and to existing water entitlements and allocation regimes. At minimum, this means reassessing the total resource pool and all subsidiary targets and investigating allocation frameworks that equitably share risks between extractive users and the environment.
... By increasing the gains from sales, farmers with low water productivity would be motivated by TWRP to sell their temporary water rights to farmers with higher water productivity, thereby enhancing the regional water productivity (Li et al. 2019). Moreover, the increased gains may encourage low water productivity farmers to adopt water-saving technology and improve individual water productivity (Fang and Zhang 2020;Grafton and Horne 2014;Rosegrant and Binswanger 1994). Therefore, the main function of TWRS lies in maximizing the benefits of existing water rather than reducing the total water consumption of a region like the PWRS. ...
Water productivity promotion is critical for achieving a balance maintaining the livelihood of large poor agricultural population and protecting ecological water in developing countries in arid and semiarid regions, and government financial payments play a significant role in this process. According to different water rights, government financial payment can be categorized as permanent water right payment and temporary water right payment, whereas the impacts of the two policies and their interrelationship are still unclear. This study aimed to explore the impacts of the two water right payments on the balance between agricultural and ecological interests in developing countries in arid and semiarid areas. Taking the Hami Prefecture in east Xinjiang, China, as the case study area, an agent-based model was developed to simulate farmers' decisions and agricultural and ecological results under different policy conditions. Results showed that the temporary water right payment is useful in promoting water right trade but hard to drive technology adoption individually or protect agriculture economic profit. The single permanent water right payment is better under the crop production preference and ecology preference, whereas the proper combination of the two financial payment policies could reinforce each other and cost less fiscal expenditure if the government prefers a balance between agricultural production and ecology interests.
... Despite all criticism, the water market is one of the most practical ways for water reallocation (Grafton and Horne 2014) and has widely been adopted in the last decade (Seidl et al., 2020). However, the efficiency of water markets and managing its adverse effects depend heavily on institutional arrangement and market structure (Erfani et al., 2015;Wheeler et al., 2017;Aghaie et al., 2020). ...
Water trade has been recognized as a tool to improve water efficiency and reduce negative impacts of water scarcity. However, water trade success depends on regional settings, institutional framework, trade mechanism and water consumer behavior. This research presents an agent based approach to simulate the behavior of farmers towards the local water market formation policy and measures its feedback in the hydrological-agricultural-economic system. Accordingly, the farmers in each region were represented as an agricultural agent while the environment with which farmers interact was partitioned into three parts: physical environment, economic environment and social environment. The behavior of agricultural agents was simulated based on linked mathematical programming and a multi-objective optimization model, coupled with Borda count method to resolve conflicts among agents. To evaluate the proposed method in a case study in central Iran, namely Najafabad hydrological unit, 16 scenarios, including black market scenario, were developed and further simulated. The results showed that the equilibrium water price was strongly influenced by water supply and demand in the system. The average equilibrium price under normal condition was equal to 3 cents per cubic meter. This is while if permits were to be reduced in accordance with aquifer recovery policy (both reducing supply and increasing demand), the average equilibrium price increased by about 3.5 cents. Conversely, following the scenario of imposing fines (penalties) for over-exploitation (increasing supply and reducing demand), the equilibrium price dropped to 2.5 cents.
... State law prohibits water transfers that would have an unreasonable impact on fish, wildlife, or other in-stream uses (Rosegrant et al. 1995). In Victoria, Australia, clear trading rules provide the upper limitation percentage of total water volume that can be transferred out of the irrigation area; this approach reduces the negative effects on business activities and on the quality of public services in areas from which water is being transferred (Grafton and Horne 2014). Environment water entitlement holders were set up in Australia to protect the environment in the water market system (Commonwealth Environmental Water Holder and Heritage 2013). ...
A water market is an effective way to increase water-use benefits. A preliminary market for irrigation water trading among villages has emerged in the arid area of northwestern China since 2008. This study conducts a quantitative evaluation of the water market at the Xiying irrigation district of the Shiyang River Basin in western China. Network analysis method is employed to assess trading activity and market centrality. The characters of case water market are compared with that of the United States and Australia to discuss the foundations and barriers for developing a mature water market in China. Results show that the case water market in China is undeveloped and is highly regulated by local government although water transactions continuously occur among villages for years. Insufficient incentives and high transaction cost are the key barriers in further developing the market. The indicators proposed in this study for market network analysis are useful for quantitatively evaluating the characters of a water rights market. The lessons derived from the assessment can guide water market development in China and other countries.
... The Murray-Darling Basin (MDB), Australia, can be considered a globally significant example of large-scale water sharing (Grafton and Horne, 2014;Horne, 2020). The MDB's water is shared as part of a complex set of arrangements and institutions that have led to the establishment of the Murray-Darling Basin Authority (MDBA) and the Murray-Darling Basin Plan (MDBP). ...
Growing agricultural water demand is dramatically affecting the implementation of, and compliance with, water sharing plans in regions such as the Murray-Darling Basin (MDB). Problems can arise from water theft, poor resourcing or questionable actions from stakeholders. Recent actions from MDB governments have resulted in improved regulation, although more is required in a technical, governance and cultural space to create a comprehensive and transparent management framework. This is pivotal in improving overall trust in water regulators. We discuss an integrated water resource management approach for improved water regulation, involving the implementation of remote sensing technologies to complement metering, coupled with a focus on a stronger compliance culture in a range of stakeholder groups and regulatory changes that allow quicker adoption of unbiased best practice science and technology.
... The supply of available freshwater resources has become a challenging problem in many parts of the world with ever-growing demands and climate change. Water rights trading, as an effective way for water resources management, is widely practiced across the world, such as in the United States (Chang and Griffin, 1992;Colby et al., 1993), in Austria (Grafton and Horne, 2014;Lin et al., 2012), in Chile (Bauer, 2010;Hearne and Easter, 1997), in Africa (Nieuwoudt and Armitage, 2004) and in China (Xu et al., 2018;Yang et al., 2012). The water rights trading provides a mechanism to transfer water from lower-value use to higher-value use through cross-sectorial trading, bringing significant gains in economic efficiency to all relevant sectors (Bauer, 2016). ...
Water rights trading is commonly used as a means of water resources reallocation between different water use sectors or between different end-users within the same sector. No studies, however, were reported on water rights trading from residential water use to other sectors. The primary reasons include the ambiguous definition of residents’ water rights and lack of real-time information about water consumption. This study presents a domestic-industrial water permits trading framework for urban water demand management. The framework is applied to the case study of Dalian demonstrating its feasibility theoretically and technologically from the perspective of the whole city and typical demonstration areas. The finding obtained shows that the tradable water volume accounts for 13.72% of the total residential water use, brings a profit of 91.05 million yuan to the residents, and saves 56.67 million yuan of water resources costs for industry users. The increase in water prices for consumption through tiered pricing can raise the tradable volume to 16.10%. Furthermore, a trading platform based on WeChat is developed to completely materialize the entire water permits trading process according to the real-time water consumption data collected from smart water meters. This study shows that the water permits trading between urban domestic-industrial sectors is an effective means of redistributing urban water resources to improve economic benefits while ensuring urban water supply security.
... It is also reflected in the response from the Commonwealth environmental water holder to an inquiry from the interim inspector-general of the Murray-Darling Basin regarding the impact of lower inflows on basin state shares under the Basin Plan (CEWO, 2020;Keelty, 2020). Evidence from past studies (Grafton et al., 2014) confirms that during the Millennium drought, the environmental water delivery declined by four times compared with the diversion for consumptive uses. This is the case even though the legislated right to access water is the same for both these uses (Byron, 2017;CEWO, 2018;Horne et al., 2017;Mount et al., 2016). ...
Water supply authorities (WSAs) can influence the behaviour of water users and are influential actors in water governance. Despite this, their decision-making processes and the details of their interactions with other water users are seldom explored empirically in water management research. We undertook an exploratory qualitative study using semi-structured interviews and purposive sampling with WSA officials across different institutions in south-eastern Australia. Thematic analysis revealed different water allocation decision-making phases and key factors influencing each phase. The findings highlight that the decisions made by WSAs are not only based on predefined rules, but are affected by many factors.
... Step one: enabling institutions. Defining the total resource pool available for consumptive use and hydrological factors of use; and evaluating Zarour and Isaac, 1993;Becker and Zeitouni, 1998;Bjornlund and McKay, 2000;Bate, 2002;Bjornlund, 2003;Vasquez, 2008;Grafton et al., 2011;Akram, 2013;Kirsch and Maxwell, 2015;Grafton et al., 2016;Prieto, 2016;Wheeler et al., 2017;Petterini, 2018 Water market performance Qualitative and quantitative McCarl et al., 1999;Neuman and Chapman, 1999;Mahan et al., 2002;Newlin et al., 2002;Zekri and Easter, 2005;Pujol et al., 2006;Bauer, 2010;Culp et al., 2014;Grafton and Horne, 2014;Wheeler, 2014;Wheeler et al., 2014;Bauer, 2015;Leonard et al., 2019 Privatisation and marketisation of the water sector Qualitative Glennon, 2004;Borzutzky and Madden, 2013;Glennon, 2015;Grafton et al., 2016 Water market policy evaluation Qualitative and quantitative Rosegrant et al., 1995;Brennan, 2006;van Heerden et al., 2008;Garrick and Aylward, 2012;Garrick et al., 2013;Jamshidi et al., 2016 Water demand and price analysis Quantitative Zarnikau, 1994;Saleth and Dinar, 2001;Ipe and Bhagwat, 2002;Yoskowitz, 2002;Garcia et al., 2005;Gulyani et al., 2005;Zilberman and Schoengold, 2005;Pullen and Colby, 2008;Wheeler et al., 2008a;Zuo et al., 2019: Schwabe et al., 2020 Farmers' willingness to pay for water or participate in water market Quantitative Saleth and Dinar, 2001;Ranjan and Shogren, 2006;Giannoccaro et al., 2015;Venkatachalam, 2015;Jaghdani and Brümmer, 2016;Wheeler et al., 2009Wheeler et al., , 2010 Human behaviour in water markets Quantitative (experimental) Lefebvre et al., 2012;Broadbent et al., 2014;Hansen et al., 2014;Nauges et al., 2016 Institutional arrangements and transaction costs Qualitative and quantitative Howitt, 1994;Shatanawi and Al-Jayousi, 1995;Nieuwoudt, 2000;Carey et al., 2002;Hadjigeorgalis and Lillywhite, 2004;Zhang et al., 2009;Zhao et al., 2013;Erfani et al., 2014;Breviglieri et al., 2018;Loch et al., 2018 Case studies: ...
... Water markets take both demand-side and supply-side measurements into account to increase water use efficiency and to handle drought-like situations. Australia has set up the biggest water market in the world, which is being used extensively to transfer water amongst users in the Murray-Darling Basin (Quiggin et al., 2010;Grafton et al., 2014). Similarly, water markets are also operational in Colorado and California, USA. ...
Global climate change has effected the snow covers and precipitation patterns leading to unreliable surface water availability for agricultural usage. Many studies suggest that demand based surface water management instead of supply based management may significantly mitigate the problem of supply-side fluctuations. Such management schemes have now been brought to the forefront due to the recent advances in information and communication technologies (ICTs). In the absence of a demand based water distribution mechanism in the Indus basin irrigation network, inequity and unreliability feature prominently. This research contributes to addressing these problems by proposing a demand-driven allocation scheme for surface water coupled with an auction-based pricing mechanism. We compare the proposed scheme with the currently practiced water distribution mechanism in IBIS (Indus Basin Irrigation system) by conducting a pilot study whose site is located in central Punjab, Pakistan. Our simulations suggest that under certain realistic assumptions, the proposed mechanism leads to a more efficient allocation of surface water, resulting in lower exploitation of groundwater resources and potentially higher agricultural yield due to improved water availability.
... Dessa forma, a concepção da cobrança pelo uso de recursos hídricos tem como base a sua característica de bem público (ANA, 2014;Matsushita;Granado, 2017;Horne;. Assim, o valor econômico da água é reconhecido, incluindo a regulação do seu uso para a manutenção do equilíbrio entre as demandas e as disponibilidades hídricas, de forma que a cobrança se refere à utilização da água bruta e não deve ser confundida com os valores pagos pelo tratamento da água aos prestadores de serviços de saneamento (ANA, 2014; Grafton et al., 2020;Chan, 2009;Hall et al., 2017). ...
Em vários países o preço da água pode e melhorou quantitativa e qualitativamente a distribuição deste recurso. O preço adequado e bem utilizado levou a uma melhor sustentabilidade e conservação da água por meio de regulamentos prescritivos, incluindo até o racionamento de água. O uso de preços para gerenciar a demanda de água é mais econômico do que a implementação de programas de conservação sem preços. No Brasil, através de instrumentos legais, é prevista a cobrança pelo uso dos recursos hídricos, sinalizando pela necessidade do reconhecimento do valor econômico da água associado ao seu uso, ao desenvolvimento sustentável mediante aos desafios da escassez hídrica futura. Para que a cobrança pelo uso da água não se torne um mero mecanismo de arrecadação pública, e devido também, a inexistência de estudos que investiguem e expressem de forma clara os objetivos e finalidades da cobrança em Minas Gerais, esta pesquisa se fez necessária. Desta forma, este trabalho objetivou investigar e avaliar a cobrança pelo uso da água e sua eficácia na melhoria do Índice de Qualidade da Água (IQA) estabelecida pelo órgão gestor. Em Minas Gerais, de 91,67% das Unidades de Planejamento e Gestão de Recursos Hídricos (UPGRHs), onde existe a cobrança instituída, não se constatou uma tendência na melhoria do IQA. Apenas 36,36% das bacias estaduais que cobram pelo uso da água melhoraram os níveis de IQA, enquanto 63,63% pioraram ou não tiveram variação significativa. Charging Effectiveness for the Use of Water Resources conditioned to the Water Quality Index: Case Study, Minas Gerais, Brazil A B S T R A C TIn several countries the price of water can and has improved quantitatively and qualitatively the distribution of the resource. The appropriate and well-used price has led to better sustainability and conservation of water through prescriptive regulations, including even water rationing. Using prices to manage water demand is more economical than implementing price-free conservation programs. In Brazil, through legal instruments, charging for the use of water resources is foreseen, signaling mainly the need to recognize the economic value of water associated with its use, sustainable development through the challenges of future water scarcity. So that, charging for the use of water does not become a mere mechanism for public collection, and also due to the lack of studies that investigate and clearly express the objectives and purposes of charging in Minas Gerais state, this research was necessary. Thus, this study aimed to investigate and evaluate the charge for water use and its effectiveness in improving the Water Quality Index (WQI) established by the managing body. In Minas Gerais, of 91.67% of the Water Resources Planning and Management Units (UPGRHs), where the collection is in place, there was no trend in improving the IQA. Only 36.36% of the state basins that charge for the use of water improved the levels of IQA, while 63.63% worsened or had no significant variation.Keywords: Water scarcity. Water availability. Water Value.
... In response to rising water scarcity, water markets have been advocated as effective tools to support efficient use of limited freshwater resources by enabling reallocation of water rights from low to high valued uses (Delorit and Block, 2018;Easter et al., 1999;Endo et al., 2018;Griffin, 1998;Marston and Cai, 2016;Raffensperger et al., 2009;Turral et al., 2005;Zhao et al., 2013). In the past decades, water markets have been implemented in many countries in the world, such as Australia (Brennan, 2006;Gao et al., 2013;Grafton and Horne, 2014;Qureshi et al., 2009), the United States (Griffin and Boadu, 1992;Howe and Goemans, 2003;Yoskowitz, 1999), Chile (Hadjigeorgalis, 2008a;Hearne and Easter, 1997), South Africa (Matchaya et al., 2019) and China Xu et al., 2016;Yang et al., 2012;Zheng et al., 2012). ...
Water markets are considered as effective mechanisms to support efficient use of limited water resources and to increase crop production in agricultural systems. This study presents an agent-based modeling (ABM) framework to explore the performance of an agricultural water market under the joint influence of water permit allocation and farmers’ behaviors. The ABM employs a power law function to simulate water permit distribution among farmers for any given level of inequality measured by the Gini coefficient. Farmers’ irrigation behavior (i.e., sensitivity to soil dryness) and bidding behaviors (i.e., degree of rent seeking and learning rate coefficient) are explicitly incorporated into the ABM to represent farmers’ decision-making in a water market based on double auction. Through a set of scenario analyses in a study area in Texas, we find that the water market performance to increase basin-level crop production is constrained by a joint effect of, especially the complex and non-linear interplay between the inequality of water permit allocation, farmers’ behaviors, and hydrological conditions. The potential market performance is higher when water permits are more unequally distributed. The relative market performance is higher when the inequality of water allocation is at a moderate level. The modeling results can advance our understanding of the key contributing factors in market transactions, and provide policy implications to assess the comparative advantage between institutional development and farmers’ behavioral change for improving market performance. This study also provides model implications for future research to draw more robust conclusions about market benefits in the real world.
... A sua perspectiva como recurso natural limitado transformou os comportamentos para o uso mais eficiente, tendo como base instrumentos de comando e controle aliados à instrumentos econômicos para a preservação e o uso racional (ANA, 2014;Belem, 2008;Olmstead;Stanins, 2009.). Dessa forma, a concepção da cobrança pelo uso de recursos hídricos tem como base a sua característica de bem público (ANA, 2014;Matsushita;Granado, 2017;Horne;. Assim, o valor econômico da água é reconhecido, incluindo a regulação do seu uso para a manutenção do equilíbrio entre as demandas e as disponibilidades hídricas, de forma que a cobrança se refere à utilização da água bruta e não deve ser confundida com os valores pagos pelo tratamento da água aos prestadores de serviços de saneamento (ANA, 2014;Grafton et al., 2020;Chan, 2009;Hall et al., 2017). ...
Em vários países o preço da água pode e melhorou quantitativa e qualitativamente a distribuição deste recurso. O preço adequado e bem utilizado levou a uma melhor sustentabilidade e conservação da água por meio de regulamentos prescritivos, incluindo até o racionamento de água. O uso de preços para gerenciar a demanda de água é mais econômico do que a implementação de programas de conservação sem preços. No Brasil, através de instrumentos legais, é prevista a cobrança pelo uso dos recursos hídricos, sinalizando pela necessidade do reconhecimento do valor econômico da água associado ao seu uso, ao desenvolvimento sustentável mediante aos desafios da escassez hídrica futura. Para que a cobrança pelo uso da água não se torne um mero mecanismo de arrecadação pública, e devido também, a inexistência de estudos que investiguem e expressem de forma clara os objetivos e finalidades da cobrança em Minas Gerais, esta pesquisa se fez necessária. Desta forma, este trabalho objetivou investigar e avaliar a cobrança pelo uso da água e sua eficácia na melhoria do Índice de Qualidade da Água (IQA) estabelecida pelo órgão gestor. Em Minas Gerais, de 91,67% das Unidades de Planejamento e Gestão de Recursos Hídricos (UPGRHs), onde existe a cobrança instituída, não se constatou uma tendência na melhoria do IQA. Apenas 36,36% das bacias estaduais que cobram pelo uso da água melhoraram os níveis de IQA, enquanto 63,63% pioraram ou não tiveram variação significativa.
... Put in simple terms, Australia's federal government began changing laws in 1988 to limit state authority over water use and trading, thereby allowing for trans-boundary markets in permanent rights ("entitlements") and temporary flows ("allocations"). These markets reduced water scarcity and benefitted farmers who were the primary users of surface waters, but there are still many controversies regarding water use and management in the basin, e.g., overpaying to protect environmental flows, inefficient regulation of trades, inadequate environmental protections, excess spending on technology that failed to deliver conservation, and so on [28,39,2,54,27]. ...
Water scarcity turns into shortage when water supplies are mismatched with user demands. After clarifying the different social and private uses of water, I explain how to use prices to allocate treated (“utility”) water among municipal and industrial users and untreated (“raw”) water among irrigators. Assuming institutional capacity, successful management of water scarcity requires prices that constrain total demand and revenues that cover the cost of reliable supply. Public acceptance of effective water pricing requires that policies protect the poor and the environment, i.e., policies that prioritize “social water” over water competitively allocated among economic uses.
... As Berbel et al. (2015) note, the consequences of rebound effects depend greatly on prevailing policy frameworks. In the presence of an effective 'cap and trade' water market system (as largely prevails in the sMDB, see Grafton et al. 2011;Debaere et al. 2014;Grafton and Horne 2014;Hughes, Gupta and Rathakumar 2016) the main expected outcome of rebound effects is higher water prices. These higher water prices could have a range of effects on irrigation farmers and regional economies across the sMDB. ...
On‐farm irrigation infrastructure programs have become an important method of recovering water for the environment in the Australian Murray–Darling Basin (MDB). These programs offer farmers funding to upgrade infrastructure in return for a portion of their water rights. This study measures the effects of Australian Government on‐farm infrastructure programs in the southern MDB between 2009–2010 and 2016–2017, particularly the On‐Farm Irrigation Efficiency Program. A novel dataset is constructed combining program administrative data with farm survey data. This data is used to derive econometric estimates on the effects of these programs on various measures of farm productivity, profitability and water demand. On‐farm programs are found to have positive effects for participants in terms of higher farm productivity and profitability. However, the study also finds a Jevon's paradox outcome, where farm demand for water is significantly higher post‐upgrade.
... There are around 30,000 wetlands within these floodplains, of which 16 are listed under the Ramsar Convention onWetlands of International Importance. Most of the Basin's area is naturally semi-arid, and it is one of the world's most variable river basins in terms of stream flows and precipitation(Grafton & Horne, 2014).The watercourses and wetlands of the Basin SES are a source of history, lore and succour for around 70,000 Aboriginal people (Australian Conservation Foundation, 2014). ...
This chapter explores how insights from Resilience Thinking (RT) can better inform efforts to reform water policies in directions required for sustainable development. The focus is on the Murray-Darling Basin (MDB) in Australia, and particularly on reforms seeking to achieve environmentally sustainable water use. We find that the reform process remains dominated by a conventional, command-and-control, management approach that asserts predictability yet repeatedly delivers uncertainty in its place. In contrast, the approach favoured in the RT tradition for water policy reform in the MDB would involve adaptive co-management. This approach would avoid those surprises arising from the conventional approach's misguided confidence in the predictability and controllability of the reform process, while being fit-for-purpose in dealing with the irreducible uncertainty of outcomes from intervening in the Basin's complex social-ecological dynamics. An RT perspective highlights that shifting to adaptive co-management of the reform process would require transformation of existing governance arrangements that evolved in support of the conventional management approach. The MDB experience suggests that it is possible for such transformation to emerge through the cross-level dynamics associated with the resilience approach's concept of panarchy. Local-level entrepreneurship by NGOs (as bridging organisations) in environmental water management has in this case established a foundation from which transformative governance of the Basin's sustainability-driven water reform agenda continues to evolve. We conclude that RT can make important contributions to understanding how longstanding challenges in reforming water policy for sustainable development might effectively be overcome.
... Crises like drought and pandemics trigger innovation and technological and institutional change Adaptation to a crisis softens its blow and enhances future resilience. Droughts have led to the increased use of water conservation technologies (ward 2014), to increased reliance on water trading throughout the world, especially in Australia (Grafton et al., 2014), as well as the monitoring and regulation of groundwater in California (Aladjem and Sunding, 2015). The pandemic is triggering quick modifications to food processing practices to protect against the spread of the virus and future diseases. ...
Individually, both droughts and pandemics cause disruptions to global food supply chains. The 21st century has seen the frequent occurrence of both natural and human disasters, including droughts and pandemics. Together their impacts can be compounded, leading to severe economic stress and malnutrition, particularly in developing countries. Understanding how droughts and pandemics interact, and identifying appropriate policies to address them together and separately, is important for maintaining a robust global food supply. Herein we assess the impacts of each of these disasters in the context of food and agriculture, and then discuss their compounded effect. We discuss the implications for policy, and suggest opportunities for future research.
... agricultural subsidies), dietary changes and technological advances across sectors (e.g. the food and energy sectors) will shape the comparative advantage of an economic entity to use water. Water markets and tradable water permits are thus optimisation options to encourage such shifts as they create incentives for water to be moved to higher-value uses, i.e. a shift towards labor intensive and higher valued crops such as vegetables, or from agricultural to industrial water use (Grafton and Horne, 2014). ...
The water planetary boundary (PB) has attracted wide academic attention but empirical water footprint research that accommodates local biophysical boundaries remains scarce. Here we develop two novel quantitative footprint indicators, the water exceedance footprint and the surplus water footprint. The first measures the amount of excessive water withdrawal (exceeded amount of water withdrawn against local water PBs) and the latter evaluates the potential of surplus water (amount of surplus water available within local water PBs) that can be sustainably utilised. We quantify the extent to which demand for goods and services in Chinese provinces and cities are driving excessive withdrawal of local and global water resources. We investigate both territorial and consumption-based water withdrawal deficit and surplus against local water withdrawal PBs. We also trace how PB-exceeded water and surplus water are appropriated for producing certain commodities. In 2015, China's domestic water exceedance reaches 101 km³ while the total water exceedance footprint is 92 km³. We find that 47% of domestic excessive water withdrawal is associated with interprovincial trade. Exceeded water transfers were dominated by agricultural trade from the drier North to the wetter South. A revised virtual water trade network informed by exceedance and surplus water footprint metrics could help address sustainability concerns that arise from the trade of water-intensive commodities. Our findings highlight that policy targets need to accommodate PB exceedance of both direct and virtual water use.
... Finally, it is also worth noting that in addition to the above-mentioned short-term advantages, it has been observed that security-differentiated water rights offer a series of long-term benefits. The improvement in the reliability of supply for higher priority right holders enables them to invest in irrigation infrastructure and to transition towards higher added-value farming systems [76,77]. In this sense, it should also be pointed out that high-priority rights can facilitate investments since they act as capital assets that can be held as collateral to secure bank loans [37]. ...
Water is becoming an increasingly scarce resource worldwide, suggesting that water rationing methods should be revised to improve water allocation efficiency, especially during cyclical scarcity events (droughts). The proportional rule is the most widely used rationing method to allocate water in cases of water scarcity. However, this method fails to achieve Pareto-efficient allocation arrangements. Economic theory and international experience demonstrate that implementing security-differentiated water rights could improve allocative efficiency during cyclical scarcity periods. Moreover, it has been proven that this kind of priority rights regime is an efficient instrument to share risks related to water supply reliability, and can thus be considered as an adaptation measure to climate change. This evidence has enabled the development of an operational proposal for the implementation of security-differentiated water rights in the irrigation sector in Spain, as an alternative to the current rights based on the proportional rule. This proposal draws on the Australian case study, which is the most successful experience worldwide. Nevertheless, the insights obtained from the analysis performed and the proposal for reforming the water rights regime are applicable to any country with a mature water economy.
... The methods used to recover water were based on both economic efficiency and political palatability (Horne et al. 2011). There has been criticism of the efficiency of the water recovery methods adopted by the Australian Government, including the negative economic impacts of recovering water through irrigation efficiency upgrades rather than through purchasing directly through the water market (e.g., Grafton and Horne, 2014;Qureshi et al. 2011). While the focus of the recovery programme was on the most efficient and politically palatable way to recover water, the recovery target is a surrogate for how much water is required to achieve particular environmental outcomes. ...
Environmental policy is often implemented using market instruments. In some cases, including carbon taxing, the links
between financial products and the environmental objectives, are transparent. In other cases, including water markets, the
links are less transparent. In Australia’s Murray–Darling Basin (MDB), financial water products are known as ‘entitlements’,
and are similar to traditional financial products, such as shares. The Australian water market includes ‘Low Security’
entitlements, which are similar to ‘sub-prime’ mortgage bonds because they are unlikely to yield an amount equal to their
financial worth. Nearly half the water purchased under the Murray–Darling Basin Plan for environmental purposes is ‘Low
Security’. We suggest that the current portfolio of water held by the Australian Government for environmental purposes
reflects the mortgage market in the lead-up to the global financial crisis. Banks assumed that the future value of the mortgage
market would reflect past trends. Similarly, it is assumed that the future value of water products will reflect past trends,
without considering climate change. Historic records of allocations to ‘Low Security’ entitlements in the MDB suggest that,
in the context of climate change, the Basin Plan water portfolio may fall short of the target annual average yield of 2075 GL
by 511 GL. We recommend adopting finance sector methods including ‘hedging’ ‘Low Security’ entitlements by purchasing
an additional 322–2755 GL of ‘Low Security’, or 160–511 GL of ‘High Security’ entitlements. Securing reliable
environmental water is a global problem. Finance economics present opportunities for increasing the reliability of
environmental flows.
... Water trading, a market-based approach, has been increasingly adopted to alleviate water shortage problems (Wheeler et al., 2014). Many research works have demonstrated that implementing watertrading mechanism can improve water-use efficiency and economic benefit, since water resources are reallocated from lower-to highervalued user (Turral et al., 2005;Doyle et al., 2014;Grafton and Horne, 2014;Xu et al., 2018). Particularly in arid and/or semi-arid regions, precious water resources can be released through trading scheme to relieve food crisis and recover endangered ecosystem (Zeng et al., 2016). ...
Issues of water scarcity, food crisis, and ecological degradation pose great challenges to the sustainable development of Central Asia. In this study, a bi-level chance-constrained programming (BCCP) method is developed for planning water-food-ecology (WFE) nexus system of the Amu Darya River basin, where the efficiency of water-trading mechanism and the impact of uncertain water-availability are examined. This is the first attempt for planning WFE nexus system by incorporating chance-constrained programming (CCP) within a bi-level optimization framework. BCCP can reflect the risk of violating probabilistic constraint under uncertainty as well as balance the tradeoff between two-level decision makers in the WFE nexus system. Under trading scheme, multiple scenarios in association with different food demand, ecological-water requirement, and water availability are examined. Major findings are: (i) compared with that under non-trading, system benefits would increase [3.9, 20.4]% under trading scenarios, disclosing that water trading is an effective mechanism for the study basin; (ii) when food demand increases 10.5%, water allocated to ecological use would decrease [0.9, 2.7]% under all scenarios, revealing that agriculture can squeeze ecological water; (iii) both system benefit and water allocation would increase with p level, implying there is a tradeoff between system benefit and system-failure risk. These findings can gain insight into the interaction between two-level stakeholders and objectives as well as provide decision support for WFE nexus synergetic management.
... Less is known, however, about the performance of economic instruments for managing water. Previous literature has focused on the gains from surface water transfers, suggesting that there exist large benefits from the reallocation of water from lowvalue to high-value users (Vaux and Howitt 1984;Howitt 1994;Hearne and Easter 1997;Sunding et al. 2002;Jenkins et al. 2004;Peterson et al. 2004;Grafton and Horne 2014;Grafton, Horne, and Wheeler 2016). However, these conclusions are often drawn from programming models that rely upon strong assumptions regarding competition, information, and the availability of substitutes and have yet to be empirically corroborated. ...
This article models and estimates the efficiency gains from using market‐based instruments relative to command and control to manage groundwater. A theoretical model of an imperfectly competitive groundwater market is developed to show how the magnitude and distribution of the gains from trade change as market structure varies. Market structure is a key consideration because future groundwater markets will likely feature geographic limitations to trade, large agricultural players, and a legal environment that is conducive to forming cartel‐like coalitions. Application of the model to a groundwater‐dependent agricultural region in southern California shows the existence of large gains from trade, despite the potential for market power, with benefits up to 36% greater than that under command and control. Distributional impacts, however, can be sizable even for small degrees of market power. Simulations that vary market conditions show that results likely generalize to other groundwater basins.
... For example, a high security entitlement is meant to yield, on average, a full allocation in 90-95 out of 100 years (Zuo et al., 2016). MDB water markets seek to allocate water to its highest and best use, and have historically provided significant economic and drought adaptation benefits (Grafton and Horne, 2014b;Kirby et al., 2015). Yet a number of rights, such as water use licences, are still tied to land-ownership and not fully unbundled. ...
Australia’s sophisticated and advanced water market legislation has allowed direct investment by non-landholder stakeholders in water ownership, which over time has increased the volume of water entitlements owned by government, non-governmental organisations and non-landholder investors (e.g. superannuation companies, trade speculators). The growing market value of Australian water entitlements, driven by increased water scarcity and international commodity prices, has meant that water is now one of the most valuable assets owned by many irrigators. However, to date, there is no standard practise of financial water valuation and accounting, nor is there an understanding of the most common methods used by various stakeholders. We report information from 63 in-depth expert interviews with bankers, environmental water holders, financial investors/agri-corporates, property evaluators and water brokers in the Murray-Darling Basin to establish the current practices employed. The most common valuation methods used current market prices based on water register and water broker data. Water entitlements were valued with historical cost or fair value water accounting, depending on the stakeholder. However, given the lack of standardised methodology, evaluator discretion and fast moving (or thin) markets can lead to considerable divergence in water valuation values. Recommendations are made for the need for greater transparency and standardised water valuation methods.
... The NWI included the stated goal of implementing transparent and statutory-based water planning and liberalisation of water markets (Horne and Grafton, 2019). A further step in the development of water markets was the establishment of water entitlements which represent to their owners a permanent share of a consumer pool (Grafton and Horne, 2014) and are defined in specific volumes of water. These water entitlements are annually assigned a physical volume of water for extractive purposes called 'water allocations' that vary depending on the reliability of the underlying water entitlement, the levels of stored water, and the expected inflows to catchments . ...
Several independent findings about the current state of the environment and water management in the
Murray-Darling Basin were released in early 2019 by the South Australia Murray-Darling Basin Royal Commission,
the Australian Productivity Commission, and the Australian Academy of Science. We review these findings in relation to: an environmentally sustainable level of water diversions, as mandated in the Australian Water Act 2007; Sovereign Indigenous water rights and interests; the economics of water recovery to increase stream and river flows; and water governance. After reviewing the independent findings and the responses by government agencies, we propose the following actions to respond to post-truth: (1) instituting greater transparency in measurements of water use, consumption, storage and return flows and also of water values (market and non-market); (2) using deliberative democracy, engaging in more effective and inclusive participation in decision-making in terms of water planning and allocations, especially of those who have been long excluded such as the First Peoples of Australia; and (3) giving primacy to the environmental goals of the Water Act 2007 and supporting this through the establishment of an independent standing commission which reports to the Australian parliament and has audit and oversight powers in relation to land, water and the environment.
... Open tenders for on-market purchases ceased in 2016. These tenders had been the most cost-effective way of purchasing water for the environment (Grafton & Horne, 2014;Grafton et al., 2016;Zuo, Qiu, & Wheeler, 2019). Purchases under the buyback scheme virtually ceased in 2014 when the new conservative national government (which had promulgated the reforms in 2006-07 under different leadership) shifted focus from buy-backs to very expensive on-farm purchases and 'strategic purchases' (Australian Government, 2018). ...
Australia has husbanded its water resources to deliver laudable environmental and economic outcomes. But a close examination reveals some areas where decisions have resulted in poor outcomes and unsatisfactory use of public funds. This article examines some of these decisions through four case studies in which I suggest that current water infrastructure governance arrangements should be improved, through compelling politicians to place a greater focus on delivering value for money from infrastructure investments. Delivering higher-quality water services to remote indigenous communities should also be accorded a much higher priority.
... (Erfani et al., 2015;Grafton and Horne, 2014) . (Macal and North, 2005;Yang et al., 2011) . ...
Leading towards sustainable water use and optimal allocation of water resources, water banks are efficient institutions. Water banks facilitate the trade of surface water and groundwater and engender water security. This study develops a coupled agent-based groundwater model in NetLogo platform to assess economic and hydrologic impacts of water buyback programs in framework of a water bank institution. Rafsanjan Plain which faces serious problems due to water shortage, is selected as a case study where the developed model is applied. Results show that buyback programs can temporarily ameliorate the condition of the Rafsanjan Aquifer, but there is a need for some other measures, like cap-and-trade policy, in conjunction with buyback program. Because of the buyback program, the drawdown of aquifer's unit hydrograph reduces from 80 to 58 cm per year. Moreover, the water bank improves the economic situation of the area as it increases the farmers' net benefit by 6 percent.
Arsenic and Fluoride on the top of hazardous contaminants in water that has been exposed to root substantial effects in individuals through drinking water. It affects more than 200 million individuals spread over 50 countries and could enter the human body through the absorption of nutrient, drinking water system, inhalation, and dermic interaction. To ensure safety, it is critical not only to detect but also precisely quantify aqueous Arsenic and Fluoride. The urgent need is to develop a smart water quality testing systems that are capable of collecting real-time geolocated water quality data without the requirement for professional experience using. Synthesized nanoparticles and carbon quantum dots materials for a fluorometric detection and quick quantification of Arsenic and Fluoride in drinking water. The quantum dots mechanism has been completely defined, and the sensing mechanism has been systematically implemented. FTIR and XPS techniques are used for specific functional group determination and TEM for morphological and structural detection. Developed materials are extremely selective for Arsenic and Fluoride both, based on functional group selectivity. Synthetic Arsenic and Fluoride standards and water samples from impacted regions were used to test the sensing material’s consistency in performance. The proposed sensor detects Arsenic and Fluoride in common applications for non-expert users, especially in rural locations. The Artificial Intelligence is used for water quality monitoring.KeywordsCarbon quantum dotsFunctional group selectivityFluorometric detectionWater quality data
In a world of growing environmental risks and ecological scarcities, ensuring a safe Anthropocene for humankind is essential. Managing an increasingly "fragile" planet requires new thinking on markets, institutions and governance built on five principles: ending the underpricing of nature, fostering collective action, accepting absolute limits, attaining sustainability, and promoting inclusivity. Rethinking economics and policies in this way can help to overcome the global challenges posed by climate change, biodiversity loss, freshwater scarcity, and deteriorating marine and coastal habitats. It requires decoupling wealth creation from environmental degradation through business, policy and financial actions aimed at better stewardship of the biosphere. In this book, renowned environmental economist Edward Barbier offers a blueprint for a greener and more inclusive economy, and outlines the steps we must take now to build a post-COVID world that limits environmental threats while sustaining per capita welfare.
A set of thermal compressors (often referred to as adsorption beds) is employed in an adsorption heat pump (AHP) system to achieve the desired cooling, whereas electricity-driven compressors are used in a conventional vapor compression refrigeration system (VCRS). Although an AHP is much more environmentally friendly than VCRS, its massive size is one of the major hindrances towards its commercial application. The primary reason for this bulkiness is the huge amount of adsorbents that are being used in the adsorption beds. A remedy to this major flaw can be the use of composite adsorbents instead of loosely packed powders. Another colossal issue is the poor efficiency of this system which can be partially resolved by (i) proper selection of adsorbent, adsorbate, binder, thermal conductivity enhancer and optimizing their composition; (ii) applying optimum pressure in the consolidation process; (iii) determining the thermophysical properties of adsorbents to select the most suitable one, and (iv) ensuring efficient operation of the system by optimizing the duration of different recovery schemes. In this chapter, the synthesis technique to prepare silica gel-based high-quality consolidated adsorbents is demonstrated, a comparison of several thermophysical properties of the parent and composite adsorbents is presented, and finally, the system operation is investigated and optimized through simulation studies.
The pollution of water resources with different inorganic and organic pollutants and deterioration of drinkable water quality is pressing the need for the introduction of new and advanced material for water treatment technology. Nanomaterials are being very popular in water purification technology because of their excellent removal efficiency for a vast spectrum of pollutants via the adsorption process. Nowadays, carbon nanomaterials (carbon nanofiber, carbon nanotube, graphene, and its derivatives, etc.) have attracted great attention as adsorbents because of their extraordinary physicochemical properties for water treatment. This chapter explores the adsorption performance of carbon nanotube, carbon nanofiber, graphene, and its derivatives, etc., for organic dye, heavy metal, and pharmaceutical pollutants. It starts with the fundamental of the adsorption mechanism and isotherms. The chapter describes all the details on material from the synthesis process to the application and concisely states that adsorption performance can be improved by functionalization and modification of the pristine material. The current hurdle and prospects of the carbon nanomaterial also have been discussed. This chapter will contribute to a proper understanding of the implementation of carbon nanomaterials in the field of adsorption for environmental remediation and designing future experiments for water treatment.KeywordsAdsorptionCarbon nanotubeGrapheneOrganic dyeHeavy metal
Environmentally benign adsorption heat pump (AHP) and desalination (AD) systems have already attracted considerable attention for space cooling/heating and potable water production since they require no electricity and are driven by solar or waste heat. The adsorbent material is the key element of these adsorption systems. Highly porous carbon-based consolidated composites are very promising adsorbents. Specific heat capacity (cp) of adsorbent is one of the most significant thermophysical properties. It plays a vital role in predicting the performance of the systems accurately. However, the estimation of the cp of adsorbent materials is a demanding issue and has not been focused sufficiently yet. Therefore, this chapter will present the significance of specific heat capacity, detailed experimental procedure, and the cp of composites, as well as the parent materials at the operating temperature range of AHP and AD systems. Finally, all the experimental data are analyzed rigorously and correlated with the established equations of cp. The presented experimental cp data along with the fitted parameters are crucial in the design of AHP and AD systems.KeywordsActivated carbonAdsorption heat pumpCompositeSpecific heat capacity
When transboundary basins are developed in poor regions where freshwater resources are fully committed, it becomes important to design economically sustainable action plans to address existing poverty, especially in responding to mounting evidence of climate change and population growth. Increasing competition over shared water resources as well as climate water stress has attracted research efforts internationally addressing the benefits and costs of establishing water-sharing treaties. Despite this ongoing interest, few peer-reviewed works have investigated water development and use patterns that could produce economic gains for all parties from establishing transboundary water sharing agreements. This work develops an approach to address the gap by formulating and applying a basin-scale hydro-economic optimization model of West Africa’s Volta River Basin. The work analyzes the effects of a prospective multilateral water allocation and hydropower trade agreement on the size, sign, and distribution of basin-wide economic benefits. The model includes two new large storage reservoirs, five water use purposes, and two climate water supply scenarios with and without a water sharing treaty. From that, it assesses the net economic benefit-maximizing patterns of water use with and without the treaty. Results show a Pareto Improving outcome is achievable for all riparian countries from new storage capacity in the basin for which at least one country is better and none is worse off. This improvement is achievable with a multilateral water sharing treaty implemented with power trading among the six basin countries. Results indicate that all basin countries have the potential to secure significant economic gains from additional hydropower production with the treaty. Under its implementation, upstream countries would reduce agricultural water use in exchange for higher valued hydropower benefits under the climate-stressed low flow scenario. Despite potential benefits that are shareable from negotiation, practical implementation of such a treaty will require considerable diplomatic skill, patience and effort.
Transboundary Water Treaty Design for Poverty Reduction and Climate Adaptation
Managing scarce water resources has been central to the Murray–Darling Basin (MDB) regional development story. The article puts water into a broader context of key drivers in development in the MDB. In addition to water markets and water policy, key issues include climate change, the changing relative resilience and viability of urban centres, the role of government, the impact of technological change, underlying exogenously set commodity prices and exchange rates. All these factors have had a significant impact on development, some with little discussion but others, such as water, have been contested and bitterly fought over. The article also examines these drivers and how they might affect future development.
Purpose
Changes in the production of Australian cotton lint are expected to have a direct environmental impact, as well as indirect impacts related to co-product substitution and induced changes in crop production. The environmental consequences of a 50% expansion or contraction in production were compared to Australian cotton production’s current environmental footprint. Both were then assessed to investigate whether current impacts are suitable for predicting the environmental impact of a change in demand for cotton lint.
Methods
A consequential life cycle assessment (LCA) model of Australian cotton lint production (cradle-to-gin gate) was developed using plausible scenarios regarding domestic regions and technologies affected by changes in supply, with both expansion (additional cotton) and contraction (less cotton) being modelled. Modelling accounted for direct impacts from cotton production and indirect impacts associated with changes to cotton production, including co-product substitution and changes to related crops at regional and global scales. Impact categories assessed included climate change, fossil energy demand, freshwater consumption, water stress, marine and freshwater eutrophication, land occupation and land-use change.
Results and discussion
For both the expansion and contraction scenarios, the changes to climate change impacts (including iLUC) and water impacts were less than would be assumed from current production as determined using attributional LCA. However, the opposite was true for all other impact categories, indicating trade-offs across the impact categories. Climate change impacts under both scenarios were relatively minor because these were largely offset by iLUC. Similarly, under the contraction scenario, water impacts were dominated by indirect impacts associated with regional crops. A sensitivity analysis showed that the results were sufficiently robust to indicate the quantum of changes that could be expected.
Conclusions
A complex array of changes in technologies, production regions and related crops were required to model the environmental impacts of a gross change in cotton production. Australian cotton lint production provides an example of legislation constraining the direct water impacts of production, leading to a contrast between impacts estimated by attributional and consequential LCA. This model demonstrated that indirect products and processes are important contributors to the environmental impacts of Australian cotton lint.
Australia is a food-surplus country with much of its landmass located in arid or semi-arid areas subject to extreme variation in both precipitation and summer temperatures. The possible economic effects of climate change on water in relation to Australian agriculture are analysed by region and sector, including its possible impacts in Australia’s ‘food basket’, the Murray–Darling Basin, using precipitation and temperature data from 2011 to 2020. Three scenarios are evaluated that include: (1) the decade 2011–2020; (2) a ‘2030’ scenario in which farm productivity falls by 10% relative to the 2011–2020 scenario in five of the 10 growing seasons; and (3) a ‘2050’ scenario in which farm productivity falls by 20% relative to the 2011–2020 scenario in five of the 10 growing seasons. The welfare impacts, on a national basis, of the first scenario relative to a baseline without year-on-year seasonal variations is minus $35 billion in net present value terms. The welfare impact in the second scenario is minus $46 billion and minus $59 billion in the third scenario. The findings support the selection and implementation of particular adaptation pathways in response to climate change for Australian agriculture.
In the immediate future, accessible runoff of fresh water is unlikely to increase more than the demand forecasted. It will have an impact on economic growth as it may reduce the per capita income of countries and create water conflicts. Such global threat creates a policy conundrum of how to meet basic needs and maximise the benefits from water resources. This chapter investigates different economic instruments in alleviating water-related risks and dealt with associated impacts.
The Murray-Darling Basin is Australia’s largest river system spanning over a million square kilometres and supporting annual agricultural production in excess of $A24 billion. The market for trading in water entitlements linked to this resource seeks to ensure that water flows to its highest value use. The quality of the data produced for these markets is of paramount importance to all participants, whether it be irrigators assessing whether the price offered for their entitlement is fair or a water authority attempting to determine the impact of their intervention through buyback activity. In this paper, we highlight the problem of using median prices when reporting aggregate price levels. We demonstrate that a median-based price index reflects changes in the composition of entitlement sales each month in addition to any general change in aggregate prices. We employ the repeat-sales technique, historically used to construct house price indices, in the novel setting of water entitlement trading to overcome this distortion.
JEL Classification: Q25, G10
How natural resources are measured and bounded within a property right system can influence their development and productivity. This is especially true for surface water given its fluid, fungible, and stochastic nature. Two quantifications have emerged: The prior appropriation doctrine provides absolute quantities to water allocated based on first use while proportional water rights distribute a set percentage of total water to owners. While theoretical differences have been identified, empirical tests are scarce due to the endogenous choice of water rights. I identify and utilize a natural experiment where acequias (Hispanic-rooted irrigation ditches) developed in Territorial New Mexico are later divided by the formation of Colorado, exogenously compelling that subset to be subject to the priority system while those in New Mexico continue to practice proportional division. Drawing on a broad compilation of archival, administrative, satellite, hydrological, and survey data, I find priority rights curtail investment for later irrigators, but that the marginal product of water is generally lower under that right system. This research advances our understanding of how distinct property right systems affect resource development and use. The results can guide stakeholders devising or reforming rights to a resource, particularly ones with stochastic flows.
Groundwater resources in the world are experiencing significant reductions due to climate change and drought. Therefore, in order to make appropriate decisions by managers and planners, forecasting and studying the economic effects of drought is essential. Thus, the purpose of this study was to investigate the welfare effects of drought on groundwater beneficiaries. Accordingly, the present study investigated the economic effects of drought and its impact on the cultivation pattern of the southern Mahyar Plain and changes in social welfare in the 2016-2017 crop years, using the groundwater market approach. For this purpose, three approaches of regression estimation, positive mathematical programming, and dynamic programming were used. The results showed that in drought conditions, the area under barley and wheat cultivation increased and the area under corn decreased. Other results showed that the reduction of water supply due to drought would reduce the social welfare by 1020 million Rials (based on 2016 prices). Therefore, it is suggested that the amount of welfare lost by farmers due to water shortages should be a criterion for determining the amount of compensatory payments.
We deliver a public policy perspective on the dichotomies, dilemmas, and decisions of water pricing. First, the dichotomies between price and value, and costs, are defined to explain the paradox of water pricing: the price of water almost never equals its value and rarely covers its cost. Second, the dilemmas of water pricing are highlighted across efficiency and equity, objectives for water pricing, and the instruments available to decision-makers. Third, the challenges of decision-making are evaluated and illustrated in relation to water pricing. Fourth, an adaptive process is provided that includes participatory assessment of risks and options to guide water-pricing decision-making.
Arsenic (As) removal is of major significance because inorganic arsenic is highly toxic to all life forms, is a confirmed carcinogen, and is of significant environmental concern. As contamination in drinking water alone threatens more than 150 million people all over the world. Therefore, several conventional methods such as oxidation, coagulation, adsorption, etc., have been implemented for As removal, but due to their cost-maintenance limitations; there is a drive for advanced, low cost nanofiltration membrane-based technology. Thus, in order to address the increasing demand of fresh and drinking water, this review focuses on advanced nanofiltration (NF) strategy for As removal to safeguard water security. The review concentrates on different types of NF membranes, membrane fabrication processes, and their mechanism and efficiency of performance for removing As from contaminated water. The article provides an overview of the current status of polymer-, polymer composite-, and polymer nanocomposite-based NF membranes, to assess the status of nanomaterial-facilitated NF membranes and to incite progress in this area. Finally, future perspectives and future trends are highlighted.
Markets are designed to be an efficient policy mechanism to a deal with water scarcity, by enabling market participants to adjust their consumption in accordance with a flexible price signal. However, groundwater presents some challenges to the use of markets to achieve sustainable water use in that there are physical and policy constraints that may determine where markets operate. This chapter examines how the legal rights to use groundwater are managed throughout Australia through application of markets, the success or otherwise of this policy approach, and its capacity to adapt to future pressures on water availability as a consequence of climate change. We begin by outlining the principles underpinning groundwater markets across Australia. This includes key statistics, data and trends in relation to the history of groundwater trade. We then evaluate the experience of groundwater markets in practice, using Victoria as a case study in the Murray Darling Basin – this outlines how trade is administered by local authorities, possible influences on groundwater trade and markets, together with issues relating to physical connectivity between systems that can enable or stymie trade. We conclude by considering the future possibilities of markets as a tool for groundwater management.
Aims & Backgrounds: Water is considered as one of the main sources for development in Iran, especially in the margin of desert. The lack of water resources is one of the main limiting factors in the life of a society and the development of economic activities. Regarding the fundamental problems of urban water supply in Yazd province, combined management of water supply and demand in order to balance the future supply and demand of water is considered as one of the long-term solutions to manage the water crisis.
Methodology: In this study, by developing a general equilibrium water status model, three scenarios on consumption and three scenarios in water supply at the horizon of 2018 to 2046 were investigated.
Findings: Based on the predictions made in all cases of supply shortages in Yazd province, even taking into account the most optimistic rainfall situation, 265 million cubic meters of urban water and taking into account the realistic pattern and ongoing state of the art in providing water resources of 1.97 billion, there will be a lack of urban water resources cubic meters. Also, in the event of an increase in the drought wave in the province and the lack of optimal policies in the field of water demand, there will be 557.5 million cubic meters of water shortage in order to provide the water needed by the residents of Yazd province.
Conclusion: In order to control the supply and demand of water in the province, in addition to the use of demand management policies such as optimal pricing, rationing and supply policies such as reforming the transmission system, the establishment of purification and separation of drinking water and sanitation, the need for water transfer methods from sustainable resources outside the province should also be taken seriously.
Droughts are natural hazards characterized by a prolonged period of below-average precipitation. Water scarcity is defined as insufficient water resources to meet demands in a region. This paper examines three regions (Spain, California, and the Murray-Darling Basin in Australia) which share similar social and climatic characteristics and face severe water-scarcity problems. The frequency and persistence of droughts in these regions over the last few decades have triggered changes in water laws as well as in the behaviour of water users and managers. This paper compares the major water reforms in these regions and the achievements and failures of the various approaches implemented. This comparison shows how, despite the differences in institutions and governance regarding water allocation in the three regions, recent droughts have catalysed the creation of institutions and the implementation of sophisticated long-term measures to mitigate the impact of future droughts. A deeper understanding of the effectiveness of mechanisms and regulations is necessary to better manage droughts since the uncertain impacts of climate change will require responses of a more effective nature.
The threats of climate change and the trade-offs between extractions and
flows are examined for the Colorado, the Murray, the Orange and the
Yellow Rivers. In all four basins, and over a long period of time,
outflows have greatly reduced as a direct result of increased water
extractions. Although climate change will aggravate hydrological impacts
on river systems, currently high levels of water extractions remain the
principal contributor to reduced system flows. Changes in governance,
including sharing the variability between the environment and consumers,
are urgently required if the health of these rivers is to be maintained.
This article presents an integrated framework for assessing water markets in terms of their institutional foundations, economic
efficiency, and environmental sustainability. This framework can be a tool for (a) comparing different water markets, (b)
tracking performance over time, and (c) identifying ways in which water markets might be adjusted by policy makers to achieve
desired goals. The framework is used to identify the strengths and limitations of five water markets: (a) Australia’s Murray-Darling
Basin, (b) the western United States, (c) Chile (in particular the Limarí Valley), (d) South Africa; and (v) China (in particular,
the North). The framework helps identify which of these water markets are currently able to contribute to integrated water
resource management, which criteria underpin these markets, and which features of these markets may require further development.
The findings for each market, as well as comparisons between them, provide general insights into water markets and how water
governance can be improved.
In Australia's Murray-Darling Basin the Australian and state governments are attempting to introduce a system of water management that will halt ongoing decline in environmental conditions and resource security and provide a robust foundation for managing climate change. This parallels similar efforts being undertaken in regions such as southern Africa, the southern United States, and Spain. Central to the project is the Australian government's Water Act 2007, which requires the preparation of a comprehensive basin plan expected to be finalized in 2011. This paper places recent and expected developments occurring as part of this process in their historical context and examines factors that could affect implementation. Significant challenges to the success of the basin plan include human resource constraints, legislative tensions within the Australian federal system, difficulties in coordinating the network of water-related agencies in the six jurisdictions with responsibilities in the Murray-Darling Basin, and social, economic, and environmental limitations that restrict policy implementation.
Water markets in Australia’s Murray-Darling Basin (MDB) and the US west are compared in terms of their ability to allocate scarce water resources. The study finds that the gains from trade in the MDB are worth hundreds of millions of dollars per year. Total market turnover in water rights exceeds $2 billion per year while the volume of trade exceeds over 20% of surface water extractions. In Arizona, California, Colorado, Nevada, and Texas, trades of committed water annually range between 5% and 15% of total state freshwater diversions with over $4.3 billion (2008 $) spent or committed by urban buyers between 1987 and 2008. The two-market comparison suggests that policy attention should be directed towards ways to promote water trade while simultaneously mitigating the legitimate third party concerns about how and where water is used, especially conflicts between consumptive and in situ uses of water. The study finds that institutional innovation is feasible in both countries and that further understanding about the size, duration, and distribution of third-party effects from water trade, and how these effects might be regulated, can improve water markets to better manage water scarcity.
There has now been almost two decades of natural resource management by signatory states under the Murray-Darling Basin Agreement Despite significant public expense, the success of initiatives to improve the Basin’s environmental remains ambiguous. This confusion is partly due to poorly distinguished investment outcomes, a blurring of the transparency of public spending and a lack of accountability of decision makers. The aim of this study is to demonstrate that significant environmental improvements could have been achieved at a much lower cost if decisive action been taken early. The research report outlines the myriad of Murray-Darling Basin related policies and its funding. It also notes the achievements and impediments to program success.
Most of the world's water entitlement and allocation regimes evolved during periods of abundance and, hence, are not well suited to the management of water scarcity. Development of the institutional arrangements necessary to manage changing demands and supplies is in its infancy.
Design criteria for the development of a set of institutional arrangements for the robust management of scarce water resources is offered and then used to develop a generic framework for the allocation and use of water. Variations to account for differences in ground, regulated and unregulated water resources are offered. The question of how best to sequence reform of existing water entitlement and allocation regimes is also addressed.
The result is a recommendation for the use of water sharing plans to determine how much water may be used at any point in time and an unbundled suite of arrangements that enable efficient but separated management of long term and short term considerations and, also, the control of externalities.
System-wide adjustment is facilitated through the periodic revision of water sharing plans. Individual adjustment to changing circumstances is facilitated through trade in entitlements and allocations.
Before the introduction of institutional arrangements that encourage adjustment through trade it is recommended that the abstraction regime used be converted into one that accounts for return flows and allocates water according to shareholder entitlement. Seniority, beneficial-use criteria and opportunities to third parties to prevent adjustment according to pre-specified rules should be repealed. Well-designed regimes can be extended to include dam-capacity shares and allow the use of market-based instruments in delivery of water-quality objectives. Pooling can be used to lower the costs of risk management.
[1] With increasing urban, industrial, and agricultural water demand and projected reduced supply under climate change, allocations to the environment are critically low in many arid and semiarid basins. Consequently, many governments are striving to augment environmental flows, often through market-oriented mechanisms that involve compensating irrigated agriculture, the largest water user in most basins, for reducing diversions. A widely documented challenge with policies to recover water for the environment arises because part of the water diversion reduction can form the basis for downstream consumptive water rights or environmental flows. This article gives an empirical comparison of two incentive policies to acquire water for environmental flows for a part of the Murray-Darling Basin (MDB), Australia. One policy consists of paying irrigators and water delivery firms to make capital and management investments that improve on-farm irrigation and water-conveyance; the other policy consists of having the government buy water from irrigators on the active MDB water market. The results show that the first option results in relatively larger return flow reduction, while the second option tends to induce significant irrigated land retirement with relatively large reductions in consumptive use and small reductions in return flow. In cases where irrigation losses result in little useful return flow (e.g., evaporative loss reduction or during drought in some instances), efficiency-improving investments may provide some cost-effective opportunities. Where a large portion of loss forms valuable return flow, it is difficult to make a case for the cost-effectiveness of policies involving payments for investments in irrigation and conveyance system upgrades.
The Murray-Darling Basin Plan is now in place, marking a further significant step in water policy development and water reform in Australia's Murray-Darling Basin (MDB). While it is an important planning and regulatory framework in its own right, and one that should further enhance the efficiency and effectiveness of water markets in the MDB, implementation and enforcement of the plan and continued action by governments, communities and stakeholders on key reform commitments are required to ensure much-needed improvement in economic, social and environmental sustainability. This article outlines seven watch points that will affect whether the desired outcomes are achieved.
This paper focuses on the use of three economic approaches to water management in
Australia that can increase the efficiency of water use and water security, thus providing
a fillip to sustainability and economic growth: the establishment of water markets and
water pricing; government spending; and the adoption of legislation and economic
regulations promoting the development of water markets. Australia is well down the
reform path, but needs to complete implementation. Australia’s challenge is relevant to
many countries struggling with demand and supply water imbalances, and the
consequential declining environmental outcomes in rural areas and persistent water
shortages in urban areas.
As water extractions from the world’s rivers have grown, flows available for the environment have dwindled.
In many parts of the world governments are now considering strategies to restore environmental
flows. One strategy is for a government to buyback water from irrigators for the environment with
annual lease arrangements. In this paper we have studied the role of market competition (in terms of
environmental water demand and number of sellers) in determining the performance of multi-round
environmental water buyback auctions using a stylized agent based simulation model. The results suggest
that rent extraction lowers as the number of bidders increase and water demand decreases. However,
we find significant differences in the way changes in demand and supply influence rent extraction. Reduction
in water demand has much greater impact on rent extraction than increasing the number of bidders
in the market. Further, in wet years (when supply is abundant relative to demand) bidders engage in more
competitive bidding compared to cases in dry years. Results from the analysis indicate that government
agencies benefit more from arranging buyback tenders (1) with a small target relative to tenders with a
large bidder population and (2) with greater opportunities for the bidders to learn from the market in
wet years compared to dry years.
As consumptive extractions and water scarcity pressures brought about by climate
change increase in many world river basins, so do the risks to water-dependent ecological
assets. In response, public or not for profit environmental water holders (EWHs) have been
established in many areas and bestowed with endowments of water and mandates to manage
water for ecological outcomes. Water scarcity has also increasingly spawned water trade
arrangements in many river basins, and in many instances, EWHs are now operating in
water markets. A number of EWHs, especially in Australia, begin with an endowment of
permanent water entitlements purchased from irrigators. Such water entitlements typically
have relatively constant interannual supply profiles that often do not match ecological water
demand involving flood pulses and periods of drying. This article develops a hydrologiceconomic
simulation model of the Murrumbidgee catchment within the Murray-Darling
Basin to assess the scope of possibilities to improve environmental outcomes through EWH
trading on an annual water lease market. We find that there are some modest opportunities
for EWHs to improve environmental outcomes through water trade. The best opportunities
occur in periods of drought and for ecological outcomes that benefit from moderately large
floods. We also assess the extent to which EWH trading in annual water leases may create
pecuniary externalities via bidding up or down the water lease prices faced by irrigators.
Environmental water trading is found to have relatively small impacts on water market
price outcomes. Overall our results suggest that the benefits of developing EWH trading
may well justify the costs.
Water trading in Australia is enabled by much historical institutional development, which had other objectives at the time that it was implemented. After 2 decades of institutional reform to enable water markets in the Murray Darling Basin, active markets are reallocating surface water entitlements among irrigation users. However, permanent water trading is currently limited in terms of the volume traded and reallocation among uses. Given these limitations, this paper seeks to assess the success of surface water markets in the Murray-Darling Basin by comparing current practice against the six desirable characteristics for water markets suggested by Howe et al. (1986). Overall, it is argued that, despite the relatively low rate of reallocation, the market performs well against most criteria but that ongoing evolution of institutional arrangements is critical for improved success.
Governments in Australia are purchasing water entitlements to secure water for environmental benefit, but entitlements generate an allocation profile that does not correspond fully to environmental flow requirements. Therefore, how environmental managers will operate to deliver small and medium-sized inundation environmental flows remains uncertain. To assist environmental managers with the supply of inundation flows at variable times, it has been suggested that allocation trade be incorporated into efforts aimed at securing water. This paper provides some qualitative and quantitative perspective on what influences southern MurrayDarling Basin irrigators to trade allocation water at specific times across and within seasons using a market transaction framework. The results suggest that while irrigators now have access to greater risk-management options, environmental managers should consider the possible impact of institutional change before intervening in traditional market activity. The findings may help improve the design of intervention strategies to minimise possible market intervention impacts and strategic behaviour
We use TERM-HO in analysing the effects of the Government buying back water from irrigators in the Southern Murray-Darling Basin (SMDB) and thereby increasing river flows. TERM-HO is a dynamic multiregional computable general equilibrium model containing water accounts. Controversially, our results suggest that buyback would increase economic activity in SMDB. Although a scheme of environmentally useful size would sharply increase the price of irrigation water, there would be little effect on aggregate SMDB farm output. Instead, farm resources would be reallocated between activities. Because farmers are owners of water rights, they would benefit from the price increase induced by buyback.
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