Water Trade Alternatives in the Face of Climate Change

Abstract

Purpose – Prolonged drought and climate change uncertainty have created an urgent need to re-distribute water away from irrigators and back to environmental flows. Previous approaches to achieve this objective have had mixed results. The current approach focuses on purchasing water from irrigators to bolster river flows for ecosystem health. However, governments are purchasing entitlements, not allocations, which do not provide large amounts of water for the money that is spent. This paper aims to review the policies and events that have driven this process.

Design/methodology/approach – Following a the review of the policies and events, the paper identifies how the regulatory/market-based approaches have resulted in a status quo or path dependent situation, to the detriment of achieving sustainable water use.

Findings – Previous approaches have so far simply maintained path dependency, i.e. the consumptive pool at more or less existing levels. Government intervention to purchase entitlements from irrigators for the environment through water markets is meant to break the status quo, but questions whether this can be achieved from a solitary focus on entitlement recovery. Practical implications – It is suggested that both historical approaches offer less reform value, and that appropriate market intervention is warranted. However, entitlement water purchasing alone may limit provision of wet water to key environmental sites during critical periods and perpetuate a continuation of the path dependency arrangements.

Originality/value – A suggested expansion of the water-purchasing programme that utilises allocation based products to meet adaptive environmental flow strategies is provided. Such an approach may offer a more suitable framework for dealing with the uncertain outcomes of climate change and ecosystem needs.

Keywords: Water supply, Australia, global warming, uncertainty management, resource allocation