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30 November 2012, 6.05am EST

Basin Plan is historic but let’s not lose the whole story

Reaching agreement on a Murray-Darling Basin Plan is undoubtedly a significant political accomplishment. The water resources of the Murray-Darling have been the basis of disagreement between states, industries and communities for the best part of a century, and having a national plan is seen by many…

8jbq23t9-1354067176 — With so many interests vested in the Murray-Darling Basin Plan, implementation will remain a challenge. mike (away for a while)/Flickr

The fact that the Opposition has now agreed to support the Plan assures its acceptance by Parliament, even if implementation remains a challenge for future governments and the states.

But before we become too exuberant about the political achievements embodied in a basin plan, it might be helpful to draw lessons from the entire episode. This is especially important as Environment Minister Tony Burke presents Australia’s water planning processes as a panacea to other nations dealing with water scarcity.

The Basin Plan was the latest attempt to rein in the proclivity of governments to treat water resources like a magic pudding. While water resources are renewable, they are also finite. In addition, off-the-cuff decisions to allocate water perceived as “going to waste” is a sure recipe for creating problems for future generations. I can personally recall statements by former water bureaucrats describing water exiting the Murray Mouth as “waste”.

In an effort to avoid repeating mistakes of the past, we should treat cautiously recent proclamations by NSW Governor, Marie Bashir and mining entrepreneur, Gina Rinehart, on turning around river flows. History suggests that a poor appreciation of the benefits conferred by water in different places and the role it plays in supporting a range of environmental processes can prove costly.

So the first principle Australia should promote is greater scrutiny of the value of water in different contexts. Once we start to think about water as having values that differ and can change, great care is needed to develop the institutions that allow for adjustment.

In Australia this was done by introducing water rights that were marketable and separate to land in the 1990s. On the face of it, most economists would see this as a sensible approach, but the Australian experience also shows that sequencing of reform can be critical to the impact on the public purse.

In the case of the Murray-Darling Basin, water rights were conferred at a time when there was increasing demand for extractions and a number of existing rights had not been activated or were only partially used. These became known as “sleeper” and “dozer” rights. Perhaps not surprisingly, the introduction of the water markets saw many of these rights sold to those willing to activate them.

In effect, this increased the extraction of water from the basin. In retrospect, it would have been much more cost-effective for the government to buy “sleeper” and “dozer” rights before the water market was fully functioning. So the second lesson is that sequencing is important when water rights are changed.

Third, once a water market is available it probably makes sense to use it to best effect. Markets will push resources to the highest value on offer and can simultaneously smooth adjustment – those who sell water rights receive cash that allows them to pursue other opportunities.

Markets also have the effect of reducing access for those least equipped to make efficient use of resources. Markets represent the most efficient way to shift water away from one use to another. Thus, it should not be surprising that water buybacks are much more cost effective and likely to lead to better long-term outcomes for agriculture in general.

And yet, despite the effort to create water markets, governments remain reluctant to use water buybacks to achieve the ambitions in the Basin Plan. It would appear this third lesson is some way from being fully appreciated.

The Basin Plan is an accomplishment on the political front. There is still much work to realise its purported benefits and there will undoubtedly be ongoing debate around implementation. Perhaps more importantly, it would be a pity if we did not heed all the lessons that can be distilled from its formulation.

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6 Comments sorted by

David Hamer

student

Correct me if I am wrong, but it is my understanding that there is very little transparency in the water market. People with water rights sell them to traders who sell to people who need water. The problem being that it is in the trader’s best interest to maximise the gap between buyer and seller and pocket the difference rather than to match supply and demand. This leads to problems managing water through market mechanisms.

Secondly the volume of water that flows down the river is not so…
Read more

Correct me if I am wrong, but it is my understanding that there is very little transparency in the water market. People with water rights sell them to traders who sell to people who need water. The problem being that it is in the trader’s best interest to maximise the gap between buyer and seller and pocket the difference rather than to match supply and demand. This leads to problems managing water through market mechanisms.

Secondly the volume of water that flows down the river is not so much the issue as the way that it flows. The Murray River requires periods of erratic flood and drought. This brings in the leaf matter from the eucalypts and other plants to provide food and nutrients to the river and its bio system. Therefore extended periods without flooding leave the river depleted of crucial nutrition. The other problem is that after these extended periods without flooding when the river finally floods there is such a build-up of organic material that its decay depletes the river of oxygen. I have seen 30 crayfish on the river bank after a flood trying to breathe after one flood. It is therefore not only an issue of water volume but one of water flow.

The health of the Murray River is a complex issue, one that won’t be fixed through crippled economic measures, or through increased water flow. Perhaps working with farmers to enable a period of water accumulation before a controlled flood is the best option?

6 months ago report
1. Andrew Gregson
  
  CEO, NSW Irrigators Council
  
  In reply to David Hamer
  
  David, you asked to be corrected if you were wrong - so on the issue of water markets allow me to say "you're wrong".
  
  There are some speculators in the water market, but the vast majority of trade is between irrigators. There's no obligation to sell to or even via a third party. A number of brokers are present and several of them offer trading portals.
  
  What's missing is a central register or portal to provide real-time marginal price and volume data. The Commonwealth has been sponsoring a "National Water Market System" project that has been running at the pace of a Valium-addled snail for several years...
  
  Andrew Gregson
  CEO
  NSW Irrigators Council
  
  6 months ago report
2. David Hamer
  
  student
  
  In reply to David Hamer
  
  Hi Andrew, I stand corrected.
  May I ask your opinion about the health of the Murray River, what needs to be done to balance the needs of farmers across three states with the environment and the impact that a drought has on the allocation of water?
  Thanks,
  David
  
  6 months ago report
3. Andrew Gregson
  
  CEO, NSW Irrigators Council
  
  In reply to David Hamer
  
  Just a short opinion you're after, then? ;)
  
  Remember that I'm a political lobbyist. It isn't my job to provide unbiased commentary - completely the opposite. In this instance, I'll do what I can to provide opinion as I see it based on fact.
  
  I'm not a hydrologist (and have never claimed to be). On the "health" of the Murray question, I can't really provide you with the answer that I suspect you're seeking - how much water does it "need"? That said, I'm not sure there is a "pure" answer to that…
  Read more
  
  Just a short opinion you're after, then? ;)
  
  Remember that I'm a political lobbyist. It isn't my job to provide unbiased commentary - completely the opposite. In this instance, I'll do what I can to provide opinion as I see it based on fact.
  
  I'm not a hydrologist (and have never claimed to be). On the "health" of the Murray question, I can't really provide you with the answer that I suspect you're seeking - how much water does it "need"? That said, I'm not sure there is a "pure" answer to that. For the 5 years that I've been involved with the debate, I've continually heard "the science says we need" followed by a number. The science, though, isn't pure - in itself it is based on a hypothesis and a judgement. The hypothesis is how much water can be extracted before material change occurs (the Basin Plan is based on the SRA which set the somewhat random figure of 30% Basin wide) and the judgement is how much of the natural system are we prepared (as a country) to give up. The answer to that latter issue, in particular, isn't one where science can assist.
  
  Neither farmers nor the environment have absolutely defined "needs". Again, there's judgement involved at a societal level as to which one we want the most of. Interestingly, that decision would be significantly different in other countries. I was in Israel a couple of weeks ago, where extraction of 97% is the norm.
  
  The impact of the drought was furious - on both the environment and irrigators.It's futile to argue that irrigation was responsible for lack of water in any part of the system - allocations were at zero. There's nothing that we can do to avoid droughts - they have always existed and always will. In an environmental context, the MDB environment also needs those droughts to continue in a "normal" fashion. What I do find difficult to understand is the concept that we can avoid drought impacts for environmental assets from the use of water regulatory structures. By my understanding, our dams and regulators are simply not big enough to replicate natural flows in the absence of natural assistance.
  
  In any event, the Commonwealth Environmental Water Holder has a huge job ahead. They've just become Australia's biggest irrigator - they not only have to water environmental assets across the Basin but avoid flooding the rest of us.
  
  The Plan's through Parliament (note that we didn't lobby for disallowance), but now the hard work begins.
  
  Andrew Gregson
  CEO
  NSW Irrigators Council
  
  6 months ago report
4. David Hamer
  
  student
  
  In reply to David Hamer
  
  Thanks for a considered answer. I have tried to talk to a number of people about this issue and very few are willing to put aside the ideology for a rational discussion.
  
  From what I have read I conclude that it is your opinion that there is no right (scientific) answer as to the correct allocation of water. As a result it falls to us as a society to decide the allocation of water between agriculture and environment.
  
  However I can see some flaws with this approach principally the bias…
  Read more
  
  Thanks for a considered answer. I have tried to talk to a number of people about this issue and very few are willing to put aside the ideology for a rational discussion.
  
  From what I have read I conclude that it is your opinion that there is no right (scientific) answer as to the correct allocation of water. As a result it falls to us as a society to decide the allocation of water between agriculture and environment.
  
  However I can see some flaws with this approach principally the bias of democracy. There seems to be a large number of swing seats in South Australia, this means that the federal politicians are more responsive to their ‘demands’ and being at the end of the Murray River many of these are about increasing water flow to South Australia. We only have to look at where the major parties chose to announce their policies in regards to the MDB to see this in action.
  
  Furthermore there is an imbalance in voter representation, with the concerns of metropolitan citizens placed above those of their rural counterparts again due to the political system. This is a problem in regards to the rivers as it is regional Australians who have the greatest connection with the rivers yet have the less say.
  
  Nevertheless (again correct me if I am wrong) there is a cyclical demand for water, with a large portion of grain farmers using little or no water during harvest and large amounts after the crop has been sown. Perhaps this is overly simplistic but could this cycle be used to mimic the traditional flood/dry pattern of the MDB and boost the ecosystem without depleting agriculture?
  
  6 months ago report
Andrew Gregson

CEO, NSW Irrigators Council

Hello Again David,

(Apologies for the delay in responding).

You're absolutely correct in your assessment of my opinion - there is no "right" answer to the "correct" allocation of water between competing demands. Human occupation at any level impacts the environment. The question is how much impact we're prepared to accept against the benefits of what that impact will provide. Whilst Australia is the driest inhabited continent on earth, it conversely has the highest volume of water available…
Read more

Hello Again David,

(Apologies for the delay in responding).

You're absolutely correct in your assessment of my opinion - there is no "right" answer to the "correct" allocation of water between competing demands. Human occupation at any level impacts the environment. The question is how much impact we're prepared to accept against the benefits of what that impact will provide. Whilst Australia is the driest inhabited continent on earth, it conversely has the highest volume of water available for export embedded in food and fibre. It is our export of embedded water (around ninety cubic kilometers a year) that keeps millions of people fed and clothed. There are large swathes of the planet who have insufficient water for the needs and would become mightily belligerent were those needs not met by embedded water exporters such as Australia.

You're also absolutely correct in your description of the fundamental failings of democracy. I'm sure we'd all agree, though, that it's better than the alternatives.

The cyclical demand for water issue is interesting. Yes, our (irrigators) demand is cyclical and so is that of the environment - but the cycles differ. We want to irrigate in summer whereas the environment (prior to the arrival of Europeans) received that water (in the Southern Basin) in spring as snows melted. (It's a bit different in the northern Basin where water arrives in summer on the southern end of the monsoon). There are some pretty gross generalisations here, but you get the picture. We've changed the time when water flows - but we need to be mindful of what the environment had; long wet periods and long dry periods. That can't be replaced with a constant flow year round. That, in itself, would be an environmental disaster waiting to happen.

It's pretty clear that the Environmental Watering Plans are critical in this whole process. They were meant to be a part of the Basin Plan, but were hived off to the States to be completed in coming years. Personally, I think it was shoved into the "too hard" basket - and I think that was a serious mistake. Getting that bit right is utterly critical to a sensible outcome.

6 months ago report

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