Prof' Mike Young and Jim McColl

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Water reform and the wine industryWhat's
different, what matters?

• Prof. Mike Young and Jim McColl
• Research Chair, Water Economics and
  ManagementThe University of Adelaide
• Research Fellow, CSIRO Land and Water
• Wine Industry Environment Conference2nd August
  2007

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Water withdrawals per capita
Australia The driest inhabited continent in
the world.
Australia
(Australia 135/161 countries)
We have a water management problem not a water
supply problem! Business Council of Australia
2006
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Total Murray-Darling Basin inflows Annual flows
(year ending June) showing forecast for 2006/07
Source Craik, MDBC
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National Plan for Water Security Outcomes

• 10 Billion over 10 years
• (10,000,000,000)
• Referral of powers to Commonwealth
• Really to Murray Darling Basin Authority
• Control over all ground and surface water and all
  interception
• Solve over-allocation for once and for all time

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Balanced water sharing

• Outcome 1
• The reservation of a minimum base-flow
  entitlement for each system that cannot be eroded
  as climate changes
• coupled with explicit definition of the remaining
  water entitlements as shares allocated to
• the environment and
• to all other water users.
• Powers and Functions
• A capacity to establish Basin-wide allocation
  management principles and give statutory approval
  to catchment water sharing plans.
• A capacity to require all overland flow,
  unregulated, regulated and groundwater resources
  in each catchment to be managed as one.
• An exclusive capacity to define bulk water
  entitlement pools and allocate water to shares in
  them.

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Hydrological integrity

• Outcome 2
• An entitlement and allocation system coupled with
  a land-use control system that ensures that all
• adverse forms of water interception and
• interactions among water bodies are accounted for
  
• in a regime that prevents over-allocation from
  recurring.
• Powers and Functions
• A capacity to require that the effects of all
  significant forms of interception on water
  entitlements be off-set.
• A capacity to define the rules by which shares
  and allocations in one entitlement pool may be
  transferred to another pool.

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Investment security

• Outcome 3
• An entitlement register and an allocation
  accounting system whose contents are guaranteed.
• Powers and Functions
• Access to and control of all water entitlement
  registers and allocation accounts coupled with a
  power to make them consistent.
• A capacity to set and vary conversion and
  exchange rates..

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Continuously efficient resource use

• Outcome 4
• A low-cost trading system free of any
  administrative barriers to the inter-regional
  transfer of shares and allocations.
• Powers and Functions
• A capacity to set pricing and trading rules and
  prevent any organisation from impeding structural
  adjustment.
• A capacity to regulate charges for the supply,
  delivery and management of water and water
  infrastructure.

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Water Quality

• Outcome 5
• A Basin whose water resources and associated
  water-dependent ecosystems do not degrade below
  defined limits.
• Powers and Functions
• A capacity to manage both Instream salinity and
  land-use practices that increase the probability
  that increase salinity risk.
• A capacity to provide salinity credits to States
  and individuals.

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Optimal storage management

• Outcome 6
• Allocation rules and accounting rules that ensure
  the efficient inter-seasonal use and storage of
  water in response to market and environmental
  needs.
• Powers and Functions
• A capacity to make allocations and decide how
  much water may be held as a strategic reserve.
• A capacity to allow carry forward of water unused
  allocations from season to season and define
  carry forward rules.

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Resolution of over-allocation

• Outcome 7
• Definition of all environmental entitlements and
  all user entitlements so that, in aggregate, they
  align perfectly with defined bulk entitlement
  sharing rules.
• Powers and Functions
• A capacity to acquire entitlements, cancel
  entitlements and equitably redefine entitlements
  as shares in a defined water resource.
• A requirement to place entitlements acquired for
  the environment in one or more Independent
  Environmental Trusts.

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Over-allocation modernisation

• 3 billion to buy entitlements
• Enough to purchase between 1,500 and 5,000 GL
  depending upon entitlement type purchased
• MDB Market current max trade is 100 GL/ year
• 5.8 billion to be spent on infrastructure
  modernisation
• Reform sequencing reforms is VIP
• Massive investment that could go wrong
• 721,302 per irrigator in the Southern-Connected
  MDB
• 573,374 per irrigator in the entire MDB
• 9.9 billion is the current market value of all
  water entitlements

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Over-allocation Over-entitlement

• Options
• Voluntary acquisition
• Market-assisted pro-rata compulsory acquisition
• Paid 2 years in advance
• No administrative charges for a trade
• All exit fees paid
• Tax advantage for some

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Political and public accountability

• Outcome 8
• Regular, transparent assessments of performance
  against defined benchmarks.
• Prescribed accountability to a Minister and to
  Parliament.
• Ministerial powers of direction defined and
  specified.
• Powers and Functions
• A requirement to consult widely, be transparent
  and make information available in a timely
  manner.
• Ministerial intervention authorised whenever
  Authority decisions are inconsistent with agreed
  outcomes and powers.

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What matters?

• That we get the detail right
• That Australia solves this problem for once and
  for all
• Single system managed apolitically
• Efficiently
• Equitably
• In harmony with the environment
• A system that enables Australia to retain its
  clean and green reputation

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Contact Prof Mike Young Water Economics and
Management Email Mike.Young_at_adelaide.edu.au P
hone 61-8-8303.5279Mobile [phone]

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