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on how to mess things up « Previous | |Next »
June 3, 2004

John Quiggin has an op-ed in the Australian Financial Review on water (subscription only) in the Murray-Darling Basin. He rightly identifies the core problem and solution : the over-allocation of water licences across the basin (but particularly in NSW) and the need to claw these back. John says:


"We have made commitments, which in total have exceeded the amount [of water] available.These commitments include water for existing irrigators, promise of access to new entrants, urban water supply for Adelaide and elsewhere and the preservation of sufficient flow to sustain the natural environment. As with all unbalanced budgets, the only resolution is for some users to take less. The problem is to determine who should go without and who, if anyone, should bear the cost of compensating the losers."


Spot on. The solution adopted by the state and federal governments is a market one. Convert water entitlements (licences) into property rights and establish a water market so that irrigators could trade water.

Alas, the state governments meerily continued on their incompetent and corrupt ways. They neglected to buy the water licences that they had issues but irrigators had not used (sleepers and dozers) before setting up the water market. The federal government was looking elsewhere.

John points out the problem:


"Thanks to the property-rights approach these "sleeper" rights have been converted into tradeable entitlements for which the holders, naturally enough, want comenpsation at full market value. As a result, the simplest and neatest solution to the problem of overallocation, that of buying out enough users to bring supply and demand into balance, is considerably more expensive than it mght have been. The conflict over who should bear the costs has therefore become sharper."


Rightly said.
It's a mess. The National Water Initiative talks in terms of "firm pathways and open processes for returning overallocated surface and groundwater systems to environmentally sustainable levels." But it says little about this is to be done.

Quiggin offers a way. He says:


"One way to resolve some of the conflicts ...might be to make payments to irrigators now in return for relinquishment of water rights in the future. This could be a step towards a fully-fledged futures market in water entitlements...As part of the reform proccess, existing licences with fixed terms of 10 and 15 years are to be converted to perpetual entitlements It would make sense to see if some licence holders were willing to forgo this conversions in return for an upfront payment."


It's a good idea. It would be a step to help bring supply and demand into balance.

However, it does not return water to the Murray-Darling rivers to ensure ecosystem health. That is not happening. It should be since the state of the River Murray's wetlands is very poor.

| Posted by Gary Sauer-Thompson at 2:35 PM | | Comments (5)
Comments

Comments

Why wouldn't you impose a flat rate levy on water, similar to a Medicare levy, to be banked for the purchase of environmental flows,salinity reduction,etc? The existing water rights owners can carry on with business as usual, albeit with a higher cost structure.A levy could be phased in with complete afore knowledge of the price hikes, similar to thje reverse case with car tarriff reductions.

If the Greens think they'll get away with with their communard, quantity controls policies, when they get into a position to implement their agenda, let them think again. The SA Govt's immediate backdown over controls on the use of water from rainwater tanks, should be a salutary lesson. The howls of public protest had these particular communards in full retreat within days. The lesson for parties like the Democrats is, appropriate market green policies or nothing. It's time the environmentally concerned, screwed their heads on.

Observa,
There already is a flat levy on water users.

That levied on irrigators is used to fund the River Murray Water Catchment Management Board.

That levied on the public is used for? I'm not clear on that one.

The problem with state governments is that they tend to park this money in general revenue, rather than use it for the River Murray. So it becomes a general tax in the guise of an environmental levy.

I'm not sure whether this is happening in this particular case.

Observa,

This is a very green weblog but it has never advocated measures to prevent people from using the water from their rain water tanks for their gardens.

It has advocated incentives for people to put rainwater tanks in. How they would use it is up to them. The whole rational is to lessen SA's reliance on River Murray water and to encourage urban users to become more efficient in the way they use their water

I suggest you sheet home the blame where it really lies: a heavy handed state bureaucracy.

Notice that little to nothing is being done by the SA government to water proof Adelaide---recycling storm and grey water. There is no momey going in for this.

Yet that is what Adelaide has to do.

Gary,
I should make it clear here I am referring to Bob Brown's 'The Greens' and a perusal of their policies shows very clearly what their agenda is. The attempted controls on use of tank water by a State Labor Govt, shows they have similar loopy allies in other left of centre parties.

I don't believe in subsidies to instal rainwater tanks or controls on water use. What I do believe in is taxing water to reduce marginal demand. With about 7000 litres of water used to produce a dollars worth of a tropical crop like rice, clearly we have the price wrong. Certainly a higher levy would have to be nationally applied to reduce water use. The raising of the price could be phased in to a level that equated supply and demand(the latter including environmental flows)Certainly this would have the greatest impact on low value added use such as tropical crop growing, flood irrigated pasture and the like. High value horticulture and metropolitan demand would be least affected. If suburban lawngrowers are prepared to pay more than rice or cottongrowers can for the available supply, then so be it. We don't ration out steak and mince to clear the market for a side of beef. Why should we interfere in water allocation, other than to ensure users pay a truer social cost via a flat rate quantity levy? When resources get dear, we conserve them by adjusting our consumption, without the need for Big Brother. The left just don't get it. They levy metro users with Save the Murray levies and let the cotton and rice corporations off scott free. Feel good city slickers.

OR perhaps you believe in the UN taking charge of the ME oil reserves and rationing it out equally to the world's population? Perhaps the fundies should take control of it and ration it out, only among good Sharia Law muslims that bow to Mecca? Now there's a couple of thoughts for the quantity control freaks to mullah over.