Water What can the irrigation industry learn from Australia? 31 July 2009 Prof Mike Young Director,...
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Transcript of Water What can the irrigation industry learn from Australia? 31 July 2009 Prof Mike Young Director,...
Water What can the irrigation industry learn from
Australia?
31 July 2009
Prof Mike Young Director, The Environment Institute Research Chair, Water Economics and Management The University of Adelaide
Water
• The irrigation industry depends on access to water
• Adapting to change– Urban and industrial demand is drawing
water away from agriculture;and
– Supply may be decreasing• Industry prosperity will depend on its
capacity to rapidly access water in an rapidly changing world.
Some Australian mistakes
• Climate shifts– We forgot to plan for shifts to a dryer
regimes– We still call what’s happening “a
drought”
• Rights, policy and governance– We embraced water reform without
establishing a property right system that was designed for trading
River Murray Inflows (GL)
In 2006/07, we broke the month by month minimum inflow record for 11 months
Inflows have been well below evaporative losses
Managed by running down stocks and reducing evaporation by closing off wetlands and not replenishing lakes
This last year has been the third driest ever!
Robust planning and water entitlement regimes are essential. Communities rarely plan for severe
adversity!
• When dramatically adverse climate change occurred, many management plans has to be suspended!
Last year, high security licences in SA on 18%. This year they start with 2%!
Symptoms - The River Murray
• Over-allocation– Dredges in its
mouth since Oct 2002
– Level below the sea
– Rising salinity– Serious acid-
sulphate soil problems
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500
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01
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04
Ra
infa
ll (
mm
)
14% less 20% less
Rainfall for Jarrahdale
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01
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04
Str
ea
mfl
ow
(G
L)
N o te s : S tre a m flo w is fro m Ma y o f la b e lle d ye a r to th e fo l lo w in g Ap ri l
48% less
66% less
S tre a m in flo w fo r P e rth d a m s (P rio r to S tirlin g D a m )
PERTH
Insufficient planning for step changes
- 1%
- 3%
With half as much water
Users
Environment
River Flow
Environment
River Flow
Users
Water needed to ensure conveyance
Entitlements Environment
Flood water
Shared WaterEntitlements
Vo
lum
e of w
ater availab
le
Environment with a
fully-specified share
A robust sharing system
Now buying back water for the MDB environment
$3.1 billion
With half as much water
Users
Environment
River Flow
Environment
River Flow
Users
River Flow
Environment
Users
Which future is best?
• One that gets water fundamentals right, now?• A system that can be confidently explained as one that will
enable the irrigation industry to cope -- whatever future arrives
• One that facilitates autonomous adjustment and change• One that creates opportunity
• One that is always behind, always playing catch up?
• No guarantee of resolution of current problems• Lots of impediments to change
• Beyond Triple Bottom Line to system design for autonomous adaptation
Australian water rights & policy
• Share rather than seniority system– In rivers, usually two surface water pools
• High security pool• Low or general security pool
• Formal volumetric allocation systems– All use is metered and use limited to allocation
• Minimal role for courts and lawyers– Allocations and rules decided by government of the
day– Legislative plans that fully specify the rules of the
game– Right to trade held by individual water users not
districts
Water Rights Reform & unbundling
Water
Tradable Right Price
Land
Single Title to
Land with aWater Licence
Entitlement Shares
in PerpetuityBank-like Allocations
Use licences with limits & obligations
Delivery Capacity Shares
Delivery Capacity Allocations
SalinityShares
SalinityAllocations
National CompetitionPolicy 1993/94Plus Cap
National Water Initiative2004
Now trying to fix the problems created by the naive introduction of markets bolted onto an entitlement regimes that lacked hydrological, environmental & economic integrity
Scarcity and Trading
Source: Murray Darling Basin Commission, 2007.
Murray-Darling Basin Water Entitlement Transfers - 1983/84 to 2003/04
0
100
200
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1 000
1 100
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3/8
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198
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Tra
ns
fer
Vo
lum
e (
GL
)
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1 000
1 100
1 200
1983/8
4
1984/8
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1985/8
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1986/8
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1988/8
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1989/9
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1990/9
1
1991/9
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1992/9
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1993/9
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1994/9
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1995/9
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1996/9
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1997/9
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1998/9
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1999/0
0
2000/0
1
2001/0
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2002/0
3
2003/0
4
Intrastate Temporary (GL)
Intrastate Permanent (GL)
Interstate Temporary (GL)
Interstate Permanent (GL)
Trading has been good for the Australia’s irrigation industry
Water Reform Trading opened up
Reform Outcomes
• Positive– Facilitated considerable greenfield development
• Grapes• Almonds
– Massive innovation– Massive wealth creation– Many more irrigators survived the current long
dry– Movement of water out of areas with salinity
environmental problems
• Negative– Over-allocation still not solved
Water reform created Wealth
400
500
600
700
800
900
1000
1100
1200
2000 2001 2002 2003 2004 2005 2006
Year
Cotton Index
Sugar Index
Total crops sector Index
Total Livestock sectorIndexMilk Index
Total prices received Index
Total Grains Index
Waterdex
Psi-Delta 2007
Bjornlund and Rossini 2007
Water reform
• Driven by political realization about the importance of getting water right
• States have referred MDB planning powers to Federal Government– New independent Authority of 6 people to
produce a new Basin Plan
• Buying water entitlements for the Environment
• Investing in water efficiency• Trying to remove remaining barriers to
trade• Taking climate change risk seriously
CSIRO Sustainable Yield Project, 2008
Advice from the lessons Aust has learned
Regime arrangements1. System connectivity – manage GW and SW as one2. Capping use – cap entitlement potential not use3. Return flows – account for them4. Unmetered uses – include them in the entitlement
system5. Climate change – plan for an adverse shift6. The environment’s share – define it and allocate to it
Individual license arrangements1. Registers – validate them early2. Entitlements - define entitlements as shares of defined
pools3. Trading – Get costs and settlement time down & keep
lawyers out 4. Control – Unbundle so you can manage at correct
scales5. Inter-seasonal risk management – allow markets to
optimize carry forward (don’t worry about beneficial use)
6. Exit fees – Allocate water to individuals or them to trade out of districts – communities will be OK
7. Trading risk – develop tagged trading
Water reform and your industry1. Encourage discussion of and planning for very long
drys – build system to manage with very little water before the big dry comes
2. Encourage transfer of ownership to individuals
3. Encourage replacement of seniority system with a share system designed for adverse climate change
4. Encourage connected management of ground and surface water as a single system
5. Encourage preparedness for a different water future and need to trade water on a daily basis
Embrace water reform – trial itWithout reform you do not have a secure future!
South Australia’s new water security plan
South Australia’s new water security plan
Contact:
Prof Mike YoungWater Economics and ManagementEmail: [email protected]: +61-8-8303.5279Mobile: +61-408-488.538 www.myoung.net.au
Download our reports and subscribe to Jim McColl and my droplets at
www.myoung.net.au
24
Water Use-Efficiency in Australia
Australian irrigators have increased water use efficiency significantly– 1991 -2001 water use per hectare down by 50% – Area under irrigation only reduced by 6%
This has been driven by – Low rates of agricultural protection– Water reform - since 1994
• Improved entitlement and risk specification• Water trading• Separation of policy from delivery
– Impact of prolonged drought since 2001
25
Trends in Rice productivity, MIA
0
2
4
6
8
10
12
14
16
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
Wat
er u
se (
ML
/ha)
or
Yie
ld (
t/h
a)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Water p
rod
uctivity (g
/L)
Measured field water use (ML/ha)Grain yield (t/ha)Water productivity (g/L)Linear (Measured field water use (ML/ha))
Source: Modified from Humphreys and Robinson (2003).
Over last 25 years rice yields have risen from 5 to 10 tonnes per hectare
26
National Water Reform
• Competition policy followed by a National Water Initiative
1. Recognition of Scarcity – freeze on new licences
2. Separation of water title from land and trading
3. Administrative separation4. Full cost pricing (Lower Bound)5. Formal Planning6. Reduced allocations per entitlement
27
Competition payments to MDB states (A$millions)
State Year
97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06
NSW 126.5 138.7 148.6 155.9 242.5 251.8 203.5 233.6 292.5
Vic 92.8 102.0 109.2 114.7 179.6 182.4 178.7 201.6 197.9
Qld 74.2 81.6 81.5 73.0 147.9 138.9 87.9 143.3 178.7
SA 34.3 38.4 34.5 35.9 55.7 57.1 40.7 50.4 54.3
Source: NCC. 13th January 2008.
NSW fined A$26 million for non-delivery of water reform milestones
28
Administrative separation - Murrumbidgee
Source: After Young et al. 2006.
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
1.15
1999 2000 2001 2002 2003 2004 2005
Year
Ind
ex
of
co
sts
Bulk Water Costs
Overheads and environment
Water distribution & maintenance
Total costs
Separation of policy from water supply has lowed costs. Allow irrigators to own and run their supply systems