tag:theconversation.com,2011:/nz/topics/water-buyback-69785/articlesWater buyback – The Conversation2023-11-13T02:49:40Ztag:theconversation.com,2011:article/2031422023-11-13T02:49:40Z2023-11-13T02:49:40ZMurray-Darling water buybacks won’t be enough if we can’t get water to where it’s needed<p>When it was clear the Murray-Darling Basin Plan could not be completed on time, Federal Water Minister Tanya Plibersek <a href="https://minister.dcceew.gov.au/plibersek/media-releases/historic-deal-struck-guarantee-future-murray-darling-basin">announced a new agreement</a> (without Victoria) to deliver in full the plan’s aim of restoring the health of this vast river system.</p>
<p>The new agreement required changes to the Water Act to allow more water for the environment to be purchased from irrigators (<a href="https://theconversation.com/water-buybacks-are-back-on-the-table-in-the-murray-darling-basin-heres-a-refresher-on-how-they-work-200529">water buybacks</a>). Concerns about these changes prompted a Senate inquiry. </p>
<p>The <a href="https://www.aph.gov.au/Parliamentary_Business/Tabled_Documents/4142">report</a> from that inquiry, released on Friday, <a href="https://www.abc.net.au/news/rural/2023-11-10/murray-darling-senate-inquiry-more-offset-project-scrutiny/103084420">supports buybacks</a> but also makes key recommendations to remove “constraints” to water delivery. These are physical constraints or limits to the movement of water through the river system. Managers can only deliver so much water before it spills out of the river onto private land. </p>
<p>The report goes so far as to ask whether constraints should be removed before more water is recovered. This is a question we have been asking in our research. And our results suggest the answer is yes.</p>
<p>Currently, we cannot physically deliver all of the water recovered from other uses for the environment (known as <a href="https://www.sciencedirect.com/science/article/abs/pii/B9780128039076000012">environmental water</a>) to where it’s needed without flooding private property along the way. And the government is not prepared to do that. </p>
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<a href="https://theconversation.com/murray-darling-basin-plan-to-be-extended-under-a-new-agreement-without-victoria-but-an-uphill-battle-lies-ahead-212002">Murray-Darling Basin Plan to be extended under a new agreement, without Victoria – but an uphill battle lies ahead</a>
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<h2>Basin health is improving but challenges remain</h2>
<p>Under the <a href="https://www.mdba.gov.au/water-management/basin-plan">Basin Plan</a>, about 20% of water used for irrigation a decade ago is now used for environmental purposes. This has improved river health, encouraging fish to spawn and plants to grow, and reduced salt levels in the Lower Lakes and Coorong. </p>
<p>These benefits rely on the river’s <a href="https://www.jstor.org/stable/1313099">flow regime</a>, not just the annual volume. Higher flows inundate wetlands, move sediment down the river, and provide natural triggers for various species to breed or migrate. </p>
<p>But raising water levels in the river channel isn’t enough to get environmental water everywhere it’s needed. Sometimes larger flows are required. Unfortunately, sending more water down the river runs the risk of inundating private property or damaging infrastructure such as low-lying pumps on floodplains. </p>
<p>Restoring the river’s health requires not only recovering water but also completing projects that allow more of this water to flow despite physical constraints such as a narrow stretch of river. These <a href="https://www.dcceew.gov.au/water/policy/mdb/policy/sdl-adjustment-mechanism">projects</a> might involve modifying or improving infrastructure such as low-lying roads and bridges, as well as working with communities to limit damage and compensate for flooding of private property.</p>
<p>The Senate inquiry report highlights the challenges for these projects. It also supports improving the approach to delivering these projects across the southern basin. </p>
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<h2>Challenges, priorities and solutions may differ</h2>
<p><a href="https://www.frontiersin.org/articles/10.3389/fenvs.2021.789206/full">Our research</a> on the Goulburn River in Victoria’s part of the Murray-Darling Basin shows recovery of additional water for the environment does not guarantee environmental outcomes. </p>
<p>This is because the amount of water that can be sent down the river is constrained. So having more environmental water at your disposal does not help, because it is physically impossible to get all the water to where it is needed, when it is needed, without risking inundation of private property.</p>
<p>Current river system operations, including rules and physical constraints, prevent the full volume of environmental water held in Goulburn River being delivered at the right time and in the right way to achieve the best environmental outcomes.</p>
<p>Narrow sections of the river and adjacent private development limit releases from Lake Eildon. River managers are not allowed to deliberately inundate the floodplain if it risks private property. </p>
<p>So the volume of environmental water available in the Goulburn River is not the issue – delivering this water is the challenge. In this regard, <a href="https://theconversation.com/murray-darling-basin-plan-to-be-extended-under-a-new-agreement-without-victoria-but-an-uphill-battle-lies-ahead-212002">Victoria’s refusal</a> to sign up to the new basin deal is understandable, because more water buybacks would potentially cause more pain to the local community than gain to the local environment. </p>
<p>However, neither Victoria nor New South Wales has addressed these capacity constraint issues, significantly limiting the ability to get better environmental outcomes with less water. So the challenge is much more complex than simply redistributing entitlements and buying back environmental water. </p>
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Read more:
<a href="https://theconversation.com/water-buybacks-are-back-on-the-table-in-the-murray-darling-basin-heres-a-refresher-on-how-they-work-200529">Water buybacks are back on the table in the Murray-Darling Basin. Here's a refresher on how they work</a>
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<h2>The elephant in the room: climate change</h2>
<p>Temperature, rainfall and streamflow have already changed in parts of the Murray-Darling Basin. Over the coming decade these changes will become more pronounced, <a href="https://www.sciencedirect.com/science/article/pii/S002216942300313X">widespread and entrenched</a>, causing more frequent floods and droughts. </p>
<p>While the precise consequences for water availability remain to be seen, the impact on the basin will be immense. </p>
<p>But climate change simply adds to the need to have difficult conversations around the future of communities along the Murray-Darling. Focusing on whether buyback targets have been achieved does not resolve this. In many regions, there will not be enough water, with or without buybacks, to achieve <a href="https://cdn.environment.sa.gov.au/environment/docs/6.8.1-Preliminary-adaptation-pathways-for-the-Coorong-Lower-Lakes-and-Murray-Mouth.pdf">current management objectives</a>. </p>
<p>Buybacks should be placed in the context of this imminent threat. In rivers like the Goulburn, addressing capacity constraints provides the <a href="https://www.frontiersin.org/articles/10.3389/fenvs.2021.789206/full">single best climate adaptation option</a> to improve environmental outcomes in the short and medium term. </p>
<p>Removing these constraints would allow more water onto the lower Goulburn River floodplain, with due care for land and infrastructure that could be affected. For example, projects may offer landholders <a href="https://www.gbcma.vic.gov.au/our-region/waterway-floodplain-management/waterways/constraints-management-strategy">options to avoid or compensate for any water damage and associated costs</a>. </p>
<p>This is because removing constraints gives river managers more flexibility, which can increase the resilience of the environment to a wider range of future climates. More water from buybacks provides very limited additional benefit because it doesn’t change how environmental water can be delivered. </p>
<p>The senate report emphasises the need to embed consideration of climate change in the Water Act and Basin Plan. The decisions we are making now on water recovery and constraints relaxation will have big impacts on communities.</p>
<p>Our work shows considering climate change is essential to ensuring lasting benefits and resilient outcomes for the rivers and communities that rely on them.</p>
<p>The first basin plan took a big step towards sustainable management of the vast Murray-Darling river system. But it was always meant to be the first step in an adaptive policy process. Priorities and solutions will look different across the basin. We need a holistic approach where buybacks may very well be part of the solution, but are not the whole solution. We also need to ensure we can deliver this water where and when the environment needs it. </p>
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Read more:
<a href="https://theconversation.com/victorias-plans-for-engineered-wetlands-on-the-murray-are-environmentally-dubious-heres-a-better-option-204116">Victoria’s plans for engineered wetlands on the Murray are environmentally dubious. Here’s a better option</a>
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<p class="fine-print"><em><span>Avril Horne receives funding from the Victorian Government Department of Energy, Environment and Climate Action.
Avril has recently been appointed as a member of the Murray-Darling Basin Authority Advisory Committee on Social Economic and Environmental Sciences.</span></em></p><p class="fine-print"><em><span>Andrew John receives funding from the Victorian Government Department of Energy, Environment and Climate Action. </span></em></p>Buying back water from irrigators across the Murray-Darling Basin will not be enough to restore river health because we have big problems getting this ‘environmental water’ to where it’s needed most.Avril Horne, Research fellow, Department of Infrastructure Engineering, The University of MelbourneAndrew John, Research fellow, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1452892020-08-31T20:01:13Z2020-08-31T20:01:13ZRecovering water for the environment in the Murray-Darling: farm upgrades increase water prices more than buybacks<figure><img src="https://images.theconversation.com/files/355465/original/file-20200831-17-1px0nes.jpg?ixlib=rb-1.1.0&rect=0%2C329%2C4000%2C1940&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Murray Darling Junction, Wentworth NSW.</span> <span class="attribution"><span class="source">Hypervision Creative/Shutterstock</span></span></figcaption></figure><p>It’s been 13 years since the Australian Government set out to develop the <a href="https://www.mdba.gov.au/basin-plan/plan-murray-darling-basin">Murray-Darling Basin Plan</a> with the goal of finding a more sustainable balance between irrigation and the environment.</p>
<p>Like much of the history of water sharing in the Murray-Darling over the last 150 years, the process has been far from smooth. However, significant progress has been achieved, with about 20% of water rights recovered from agricultural users and redirected towards environmental flows.</p>
<p>One of the most difficult debates has been over how the water should be recovered. </p>
<p>Initially most occurred via “buybacks” of water rights from farmers. While relatively fast and inexpensive, opposition to buybacks emerged due to <a href="https://www.abc.net.au/news/2011-06-02/windsor-report-slams-murray-darling-authority/2742822">concerns</a> about their effects on water prices and irrigation farmers and regional communities. </p>
<p>This led to a new emphasis on infrastructure programs including farm upgrades in which farmers received funding to improve their irrigation systems in return for surrendering water rights.</p>
<p>While these farm upgrades are more expensive, it was thought that they would have fewer negative effects on farmers and communities. </p>
<p>However, new research from the <a href="https://www.agriculture.gov.au/abares/publications/insights/economic-effects-of-water-recovery-in-Murray-Darling-Basin">Australian Bureau of Agricultural and Resource Economics and Sciences</a> finds that – while beneficial for their participants – these programs push water prices higher, placing pressure on the wider irrigation sector.</p>
<h2>Two types of water recovery programs</h2>
<p>The Murray-Darling Basin operates under a “cap and trade” system. Each year there is a limit on how much water can be extracted from the basin’s rivers, based on the available supply. </p>
<p>Water users (mostly farmers) hold rights to a share of this limit, and they can trade these rights on a market.</p>
<p>To date 1,230 gigalitres of these water rights have been bought from farmers via buyback programs at a cost of about A$2.6 billion. </p>
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Read more:
<a href="https://theconversation.com/drought-and-climate-change-are-driving-high-water-prices-in-the-murray-darling-basin-119993">Drought and climate change are driving high water prices in the Murray-Darling Basin</a>
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<p>The other type of program is farm upgrades which offer farmers funding to improve their irrigation infrastructure in return for a portion of their water rights. </p>
<p>To date 255 gigalitres of water has been recovered through farm upgrades at a cost of about $1 billion. </p>
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<p><strong>Annual volume of water rights recovered for the environment since 2007-08</strong></p>
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<a href="https://images.theconversation.com/files/355477/original/file-20200831-14-1ic8o79.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/355477/original/file-20200831-14-1ic8o79.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/355477/original/file-20200831-14-1ic8o79.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=168&fit=crop&dpr=1 600w, https://images.theconversation.com/files/355477/original/file-20200831-14-1ic8o79.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=168&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/355477/original/file-20200831-14-1ic8o79.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=168&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/355477/original/file-20200831-14-1ic8o79.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=211&fit=crop&dpr=1 754w, https://images.theconversation.com/files/355477/original/file-20200831-14-1ic8o79.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=211&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/355477/original/file-20200831-14-1ic8o79.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=211&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">For infrastructure projects the financial year refers to the contract date. The actual transfer of entitlements may occur in a later financial year. The volume of water recovered is expressed in terms of the long-term average annual yield. The estimates do not include water recovered through state projects (160 gigalitres) or water gifted to the Commonwealth (15 gigalitres). Off-farm infrastructure includes water recovered through projects that are a combination of on-farm, off-farm and land purchases.</span>
<span class="attribution"><a class="source" href="https://www.agriculture.gov.au/abares/publications/insights/economic-effects-of-water-recovery-in-Murray-Darling-Basin">Sources: Department of Agriculture Water and Environment, Commonwealth Environmental Water Holder</a></span>
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<h2>Water recovery has increased prices</h2>
<p>As would be expected, the dominant short-term driver of prices is water availability, with large price increases during droughts. The dominant longer-term drivers include lower average rainfall related to <a href="https://theconversation.com/drought-and-climate-change-are-driving-high-water-prices-in-the-murray-darling-basin-119993">climate change</a> and the emergence of new irrigation crops including almonds.</p>
<p>While water recovery has played less of a role, buybacks and farm upgrades have still reduced the supply of water to farmers and increased prices to some extent. </p>
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Read more:
<a href="https://theconversation.com/climate-change-since-2000-has-cut-farm-profits-22-128860">Climate change since 2000 has cut farm profits 22%</a>
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<p>Our <a href="https://www.agriculture.gov.au/abares/publications/insights/economic-effects-of-water-recovery-in-Murray-Darling-Basin">modelling</a> suggests water prices in the southern basin are around $72 per megalitre higher on average as a result of water recovery measures, with the effects varying year-to-year depending on conditions.</p>
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<p><strong>Modelled water allocation prices with and without water recovery</strong></p>
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<span class="caption">Price refers to volume weighted average annual water allocation prices across the southern Murray Darling Basin. Water recovery reflects the cumulative volume of buybacks and farm upgrades at each year. Water recovery began in 2007-08.</span>
<span class="attribution"><a class="source" href="https://www.agriculture.gov.au/abares/publications/insights/economic-effects-of-water-recovery-in-Murray-Darling-Basin">ABARES modelling</a></span>
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<h2>Farm upgrades increase prices more than buybacks</h2>
<p>Farm upgrades are often viewed as an opportunity to save water and produce “more crop per drop”. </p>
<p>But they can also encourage farmers to increase their water use as they seek to make the most of their new infrastructure: sometimes referred to as a “rebound effect”. </p>
<p>While there have been concerns about rebound effects for some time, there has been limited evidence until recently.</p>
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<span class="caption">Less-wasteful irrigation can save water, as long as there’s no ‘rebound’</span>
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<p>As would be expected, <a href="https://www.agriculture.gov.au/abares/publications/insights/economic-effects-of-water-recovery-in-Murray-Darling-Basin">our study</a> finds that upgraded farms have benefited in terms of profits and productivity. However, we also find large rebound effects, with upgraded farms increasing their water use by between 10% and 50%.</p>
<p>To get the extra water they need to buy it from other farmers, putting pressure on prices. We find the resulting price impact to be much more than the impact of buying back water. Per unit of water recovered, it is about double that of buybacks.</p>
<p>These higher water prices increase the risk that irrigation assets – including some newly upgraded systems – could become stranded as price sensitive irrigation activities become less profitable.</p>
<h2>No easy answers</h2>
<p>Recovering water through off-farm infrastructure is one alternative, however the most effective projects have already been developed, leaving cost-effective water saving schemes harder to find.</p>
<p>This brings us back to buybacks. Because buybacks are cheaper than farm infrastructure programs, there is more scope to combine them with regional development investments to help offset negative impacts on communities. </p>
<p>The challenge is that in a connected water market the flow-on effects on water prices and farmers can be complex and difficult to predict, making it hard to know where to direct development investments.</p>
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Read more:
<a href="https://theconversation.com/billions-spent-on-murray-darling-water-infrastructure-heres-the-result-119985">Billions spent on Murray-Darling water infrastructure: here's the result</a>
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<p>A potential middle ground is rationalisation, where parts of the water supply network are decommissioned, and affected farmers are compensated both for their water rights and for being disconnected from water supply. This approach has less effect on water prices and allows regional development initiatives to be targeted to the affected areas. </p>
<p>However, rationalisation can be hard to implement given it requires negotiating with all affected farmers and all levels of government.</p>
<p>Given the complexity of the Murray-Darling Basin, water policy is far from simple. While it is clear more water will be needed to put the basin on a sustainable footing, there are no easy options. </p>
<p>Further progress will require careful policy design to help ease adjustment pressure on farmers and regional communities.</p><img src="https://counter.theconversation.com/content/145289/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Marking farms more water-efficient pushes up prices twice as much as buying water back.Neal Hughes, Senior Economist, Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)David Galeano, Assistant Secretary, Natural Resources, Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)Steve Hatfield-Dodds, Executive Director, Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1280482019-12-10T19:01:51Z2019-12-10T19:01:51ZDon’t blame the Murray-Darling Basin Plan. It’s climate and economic change driving farmers out<p>For the thousand or so farmers in Canberra in the past week venting their anger at the federal government, it’s the<a href="https://www.canberratimes.com.au/story/6522046/convoy-calls-to-can-murray-darling-plan/"> Murray-Darling Basin Plan to blame</a> for destroying their livelihoods and forcing them off the land. </p>
<p>We can’t comment directly on their claims about the basin plan. But our research, looking at the years 1991 to 2011, suggests little association between the amount of water extracted from the Murray-Darling river system for irrigation and total farmer numbers. </p>
<p>That’s not to say there aren’t fewer farms in the basin now than a decade ago – there are – but our analysis points to the more important drivers being the longer-term influences of changing climate, economics and demographics.</p>
<p>Indeed our study predicts another 0.5°C increase in temperature by 2041 will halve the current number of farmers in the basin. </p>
<h2>Hostility to water recovery</h2>
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<a href="https://images.theconversation.com/files/283224/original/file-20190709-51312-1bmd1r9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/283224/original/file-20190709-51312-1bmd1r9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/283224/original/file-20190709-51312-1bmd1r9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=839&fit=crop&dpr=1 600w, https://images.theconversation.com/files/283224/original/file-20190709-51312-1bmd1r9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=839&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/283224/original/file-20190709-51312-1bmd1r9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=839&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/283224/original/file-20190709-51312-1bmd1r9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1054&fit=crop&dpr=1 754w, https://images.theconversation.com/files/283224/original/file-20190709-51312-1bmd1r9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1054&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/283224/original/file-20190709-51312-1bmd1r9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1054&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The waters of the northern basin run to the Darling River and the waters of the southern basin run to the Murray River.</span>
<span class="attribution"><a class="source" href="https://www.mdba.gov.au/discover-basin/landscape/geography">MDBA</a></span>
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</figure>
<p>Over many decades state governments in Queensland, New South Wales, Victoria and South Australia licensed to farmers more entitlements to water than the river system could sustain. The basis of the Murray-Darling Basin Plan, enacted in 2012, was to rectify this through buying back about a quarter of all water licences to ensure an environmental flow.</p>
<p>A water entitlement, despite its name, does not guarantee a licence holder a certain amount of water. That depends on the water available, and that is determined by the states, which make allocations to each type of licence based on its type of security and current conditions. </p>
<p>With drought, farmers have seen their allocations severely cut back, sometimes to nothing. And partly because they see there’s still water in the River Murray, some are <a href="https://thenewdaily.com.au/news/politics/australian-politics/2019/12/03/farmers-drought-protest-canberra/">very angry</a>.</p>
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Read more:
<a href="https://theconversation.com/the-water-crisis-has-plunged-the-nats-into-a-world-of-pain-but-they-reap-what-they-sow-128238">The water crisis has plunged the Nats into a world of pain. But they reap what they sow</a>
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<p>Hostility to water recovery in fact predates the plan’s enactment, to when the federal government began buying back water entitlements in 2008. The Commonwealth now holds about 20% of water entitlements across the basin. More than two-thirds of these licences were recovered between <a href="https://www.annualreviews.org/doi/abs/10.1146/annurev-resource-100517-023039">2008 and 2012</a>.</p>
<h2>Lack of correlation</h2>
<p>Our research thus covers the period of most significant water buybacks. It also covers the period of the Millennium Drought, from 2001 to 2009, when the amount of water extracted from the river system dropped by about 70%. </p>
<p>Yet we see little evidence reduced water extractions led to more farmers exiting the industry. </p>
<p>As a very broad overview of the situation, the following graph illustrates the lack of correlation between measured water extraction in the Murray-Darling Basin and decreasing farmer numbers.</p>
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<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/306067/original/file-20191210-95111-mzuk3r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/306067/original/file-20191210-95111-mzuk3r.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=469&fit=crop&dpr=1 600w, https://images.theconversation.com/files/306067/original/file-20191210-95111-mzuk3r.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=469&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/306067/original/file-20191210-95111-mzuk3r.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=469&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/306067/original/file-20191210-95111-mzuk3r.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=590&fit=crop&dpr=1 754w, https://images.theconversation.com/files/306067/original/file-20191210-95111-mzuk3r.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=590&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/306067/original/file-20191210-95111-mzuk3r.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=590&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>Water extractions have varied significantly between years, with a big decline over the decade of the 2000s even while farmers’ need for irrigated water increased due to lack of rain. La Niña brought record rains in 2010-11. The current drought across the basin took grip from about 2017.</p>
<p>Yet farmer numbers have declined at a relative steady rate. Within the basin in the time-period we modelled, they fell from about 90,000 in 1991 to 70,000 in 2011. This can be seen as part of a wider trend, with total farmer numbers in the four basin states falling from more than 230,000 in 1976 to barely 100,000 in 2016. </p>
<p>It might be argued that because irrigated farms make up only a quarter of all farms, the overall numbers might mask a greater correlation between water extractions and decline in irrigated farms. While the specific impacts on irrigation farming in recent years warrant further study, there’s no signal in our data pointing to extractions making a discernible contribution to farmer numbers throughout the basin. </p>
<h2>Modelling farmer movement</h2>
<p>Our <a href="https://link.springer.com/article/10.1007/s10584-019-02601-8">findings</a> are based on a specialised data set of population and agricultural census information from <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/bb8db737e2af84b8ca2571780015701e/23d04985e1786824ca25720b0002bb18!OpenDocument">statistical local areas</a> from 1991 to 2011. We used climate risk measures from 1961 onwards. </p>
<p>The following infographic shows the exit pattern of farmers by local area between 1991 and 2011.</p>
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<p>We included as many climate, economic, farming, water and socio-demographic characteristics as possible to capture historical farmer movements and create a model able to predict movements based on variables such as average temperature. </p>
<h2>Need for a multifaceted response</h2>
<p>Overall our modelling results suggests the most significant and largest influences on farmer exit are rising temperatures and increased drought risk, followed by the economic factors that have have been reducing the proportion of the population engaged in farming for more than a century. </p>
<p>Declining commodity prices, higher unemployment and urbanisation are strongly associated with farmer exit. Urbanisation, for example, has made it attractive for farmers on city fringes to sell their land to property developers and exit the industry. </p>
<p>Research suggests irrigators in <a href="https://www.sciencedirect.com/science/article/abs/pii/S0743016717302000?via%3Dihub">psychological distress</a> are more likely to want the basin plan suspended. Our research suggests their distress is probably not primarily driven by the federal government buying water entitlements from licence holders who sold them willingly. Water recovery and the basin plan is simply an easier focal point of blame than the longer-term trends making the farming lifestyle less viable. </p>
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Read more:
<a href="https://theconversation.com/scarcity-drives-water-prices-not-government-water-recovery-new-research-124491">Scarcity drives water prices, not government water recovery: new research</a>
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<p>Nothing will be gained by focusing on short-term “fixes” at the cost of longer-term environmental harm. The problems facing all farmers cannot be addressed in isolation from longer-term global climate and economic trends. </p>
<p>As a society we have to decide what we value: do we want to see such a mass exodus of farmers from the land in the face of a drying climate? If not, future policy for the Basin must consider the real long-term drivers of farm exit and take a multi-faceted approach to climate change, water, land, drought and rural development.</p><img src="https://counter.theconversation.com/content/128048/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sarah Ann Wheeler receives funding from Australian Research Council, Meat and Livestock Australia, the Australian Centre for International Agricultural Research and Wine Australia. She is the President-elect of the Australasian Agricultural Resource Economics Society.</span></em></p>Our study predicts a further 0.5°C increase in temperature by 2041 will halve the current number of farmers in Australia’s Murray-Darling BasinSarah Ann Wheeler, Professor in Water Economics, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1244912019-10-02T20:04:01Z2019-10-02T20:04:01ZScarcity drives water prices, not government water recovery: new research<p>Australia has one of the most sophisticated water markets in the world, particularly notable for the ways in which government can return water to the environment. </p>
<p>Water markets allow the return of this water through two main mechanisms. The first is buybacks, in which the government purchases water licences directly from willing irrigators via an open tender process. </p>
<p>The second involves subsidising irrigation infrastructure on (and off) farms to improve water efficiency, with a percentage of the assumed water savings being transferred to a licence held by the government. </p>
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Read more:
<a href="https://theconversation.com/the-darling-river-is-simply-not-supposed-to-dry-out-even-in-drought-109880">The Darling River is simply not supposed to dry out, even in drought</a>
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<p>However, open tender buybacks essentially <a href="https://www.theguardian.com/world/2014/feb/27/murray-darling-basin-deal-caps-water-buybacks">stopped in 2014</a> in favour of infrastructure projects. This was due to the widespread belief that buybacks were inflating the price of water and causing economic hardship in rural communities. </p>
<p>Our research, published in <a href="https://www.sciencedirect.com/science/article/pii/S0928765518304585">Resource and Energy Economics</a>, set out to test this assumption of the impact of water recovery on water markets. We found that water scarcity (due to seasonal change or water allocation reductions) had far more influence on water prices than government water recovery. In fact, voluntary, open tender buybacks are the most cost-effective and low-risk option for increasing river flow. </p>
<p>By ignoring this option, we are hamstringing Australia’s ability to flexibly cope with drought conditions and long-term climate change.</p>
<h2>Lessons from 20 years of data</h2>
<p>My colleagues and I wanted to understand the impact of government water recovery on the Murray-Darling Basin’s water markets. To do so, we needed to understand the dynamics and drivers of the markets both before and after buybacks began.</p>
<p>We looked at monthly prices over twenty years in the Goulburn catchment in Victoria (<a href="https://www.mdba.gov.au/managing-water/water-markets-trade/interstate-water-trade">1A Greater Goulburn</a>) - both for permanent water markets (where a water licence is permanently transferred) and temporary ones (a seasonal transfer of water).</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/295324/original/file-20191002-49365-xmv3hp.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/295324/original/file-20191002-49365-xmv3hp.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/295324/original/file-20191002-49365-xmv3hp.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=540&fit=crop&dpr=1 600w, https://images.theconversation.com/files/295324/original/file-20191002-49365-xmv3hp.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=540&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/295324/original/file-20191002-49365-xmv3hp.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=540&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/295324/original/file-20191002-49365-xmv3hp.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=679&fit=crop&dpr=1 754w, https://images.theconversation.com/files/295324/original/file-20191002-49365-xmv3hp.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=679&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/295324/original/file-20191002-49365-xmv3hp.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=679&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>The drivers of water market prices in temporary and permanent water markets are different, but market dynamics are similar: market volatility shocks go from prices to volumes.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/295325/original/file-20191002-49404-n8hk9p.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/295325/original/file-20191002-49404-n8hk9p.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/295325/original/file-20191002-49404-n8hk9p.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/295325/original/file-20191002-49404-n8hk9p.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/295325/original/file-20191002-49404-n8hk9p.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/295325/original/file-20191002-49404-n8hk9p.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/295325/original/file-20191002-49404-n8hk9p.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/295325/original/file-20191002-49404-n8hk9p.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Temporary water trade is driven by water scarcity, caused by factors such as seasonal fluctuation in water allocated to licences and the weather. Conversely, permanent water trade is influenced by a combination of past prices and temporary water prices.</p>
<h2>What about government intervention?</h2>
<p>We found no evidence that government water recovery influenced water prices in either market in a statistically significantly way.</p>
<p>However, we did find that increases in the amount of water recovered by the government reduced the volume of temporary water traded. This is probably due to the fact that many irrigators who sold water to the government had been <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1759-3441.12038">selling surplus temporary water</a>, and this volume was then taken out of the market.</p>
<p>We also found that government water recovery increased the volatility of temporary market prices and volumes, signalling potential increased risk and uncertainty for irrigators engaging in temporary water markets.</p>
<p>These results are significantly different to previous estimates by consultants, some of which suggest government buybacks cause <a href="http://rmcg.com.au/app/uploads/2017/01/Basin-Plan-Impact-GMID_Final_14-October-2016.pdf">temporary water market prices to double</a>.</p>
<p>Our findings contradict this. Our results are in line with and reinforce other peer-reviewed economic literature, which has shown buyback of water entitlements had <a href="https://mdbrcsa.govcms.gov.au/sites/g/files/net3846/f/mdbrc-submission-professor-sarah-wheeler-sa.pdf?v=1527826747">far less impact on rural communities than commonly claimed</a>.</p>
<p>This is partly because government buybacks simply do not create large enough changes in the amount of seasonal water available to affect prices, given that variability. A 1% increase in water buybacks caused a 0.1% drop in temporary water volume traded. In addition, farmers are very good at adapting to changes in water, and have a number of strategies and options available to them in most years.</p>
<p>Unfortunately, commonly held perceptions about the impacts of buyback on rural communities and water markets has had serious policy ramifications.</p>
<h2>Irrigation schemes are not enough</h2>
<p>As noted earlier, buybacks are now off the table. Funding for water recovery is now directed exclusively to infrastructure projects, which are deficient in a number of key respects.</p>
<p>Since water buybacks started in 2008, A$2.5 billion has been spent to recover 1,227 gigalitres of water licences. At the same time, A$3.9 billion has been spent so far on things like lining channels and building dams, which has saved <a href="http://www.agriculture.gov.au/water/mdb/progress-recovery/progress-of-water-recovery">695 gigalitres</a>. </p>
<p>Water recovery by infrastructure schemes now cost at <a href="https://www.annualreviews.org/doi/full/10.1146/annurev-resource-100517-023039">least three times</a> as much as buybacks per megalitre recovered. These infrastructure projects <a href="https://theconversation.com/paddling-blind-why-we-urgently-need-a-water-audit-122118">may not</a> return as much water to the environment as assumed, while they also also create the risk of <a href="https://wentworthgroup.org/wp-content/uploads/2018/05/Requirements-for-SDL-adjustment.pdf">environmental harm</a>. </p>
<p>Irrigation infrastructure <a href="http://www.fao.org/3/I7090EN/i7090en.pdf">subsidies</a> can also expand total irrigation areas and increase water use, and encourage a conversion from seasonal crops to permanent plantings such as orchard trees. These permanent crops demand a fixed amount of water every year, making farms less adaptable in the face of drought and climate change. </p>
<h2>How did policy get this wrong?</h2>
<p>The results of our water market study show that there are key differences between high quality, peer-reviewed economic science on the one hand, and short-term consultancies and people’s perceptions on the other. </p>
<p>High quality economic science takes time, expertise and requires reputable, consistent and long-term datasets that control for the myriad of influences on economic change. Short-term consultancies and inquiries (such as the Northern Basin Review) are often rushed, not representative and are often not based on reliable datasets. </p>
<p>Inquiries also often amplify the voices of <a href="https://www.sciencedirect.com/science/article/abs/pii/S026483771630401X">lobby groups and the people who are most aggrieved</a> by water recovery, while other voices – floodplain irrigators, indigenous representatives, irrigators who want water reallocated to the environment – may be <a href="https://www.smh.com.au/environment/conservation/the-thirsty-giants-killing-our-rivers-20190411-p51d4j.html">silenced</a>. </p>
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Read more:
<a href="https://theconversation.com/aboriginal-voices-are-missing-from-the-murray-darling-basin-crisis-110769">Aboriginal voices are missing from the Murray-Darling Basin crisis</a>
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<p>There are currently two inquiries looking at <a href="https://www.accc.gov.au/focus-areas/inquiries/inquiry-into-murray-darling-basin-water-markets">water markets</a> and <a href="https://www.basin-socio-economic.com.au/">socio-economic conditions in the basin</a>. It is vitally important they capture all voices equally and are supplemented by independent, high quality analysis. </p>
<p>If we can’t understand the real drivers of change in the Basin, we can’t identify the best options for improving the social and economic health of its communities – particularly in the face of drought and climate change.</p><img src="https://counter.theconversation.com/content/124491/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sarah Ann Wheeler receives current funding from the Australian Research Council, the Australian Centre for International Agricultural Research, Meat and Livestock Australia and Wine Australia.</span></em></p>Buybacks by open tenders were a successful, cost-effective way of returning water to the Murray-Darling Basin. They should never have been abandoned.Sarah Ann Wheeler, Professor in Water Economics, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1199892019-07-08T20:13:11Z2019-07-08T20:13:11ZThe Murray-Darling Basin scandal: economists have seen it coming for decades<p>Nations behave wisely, Israeli foreign minister Abba Eban <a href="https://quoteinvestigator.com/2012/11/11/exhaust-alternatives/">observed</a> five decades ago, “once they have exhausted all other alternatives”. </p>
<p>One can only hope that proves the case with water policy in Australia’s Murray-Darling Basin, the nation’s largest river system and agricultural heartland.</p>
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Read more:
<a href="https://theconversation.com/billions-spent-on-murray-darling-water-infrastructure-heres-the-result-119985">Billions spent on Murray-Darling water infrastructure: here's the result</a>
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<p>The ABC’s Four Corners program <a href="https://www.abc.net.au/4corners/cash-splash/11275810">Cash Splash</a>, aired last night, illustrates how thoroughly we are exhausting the options that don’t work to keep rivers being sucked dry by irrigators. Billions of dollars have been spent on infrastructure schemes that have failed to deliver any measurable improvement in water flows or the state of the environment. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/283004/original/file-20190708-51312-c9xhmr.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/283004/original/file-20190708-51312-c9xhmr.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/283004/original/file-20190708-51312-c9xhmr.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=549&fit=crop&dpr=1 600w, https://images.theconversation.com/files/283004/original/file-20190708-51312-c9xhmr.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=549&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/283004/original/file-20190708-51312-c9xhmr.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=549&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/283004/original/file-20190708-51312-c9xhmr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=689&fit=crop&dpr=1 754w, https://images.theconversation.com/files/283004/original/file-20190708-51312-c9xhmr.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=689&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/283004/original/file-20190708-51312-c9xhmr.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=689&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The Murray–Darling Basin is Australia’s largest and most complex river system. With 77,000 km of rivers, it is the food bowl of the nation.</span>
<span class="attribution"><a class="source" href="https://www.mdba.gov.au/discover-basin">Murray–Darling Basin Authority</a></span>
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<p>This failure is no surprise to economists who have studied the problems of the Murray-Darling Basin for decades.</p>
<p>The central problem is well understood, as are the workable (and unworkable) possible responses. </p>
<p>The basin covers four states: Queensland, New South Wales, Victoria and South Australia. All state governments have allocated permits to extract water for human uses (irrigated agriculture and urban water). The allocations grew rapidly in the second half of the 20th century, exceeding the sustainable capacity of the natural environment. </p>
<p>One sign of the failure became dramatically obvious in 1991, with an outbreak of toxic <a href="https://prototype.mdba100.aws1.adelphi.digital/articles/heartbreak/blue-green-algae-outbreak-on-the-darling-river/">blue-green algae</a> over 1,200 km of the Darling River. Algal blooms are fed by nitrogen and other nutrients in fertiliser runoff and sewerage. They continue to occur.</p>
<p>This event underlined the need to leave enough water in rivers for “environmental flows” to keep the system healthy.</p>
<p>Acting with what now seems like impressive promptness, the Murray-Darling Basin Ministerial Council (made up of the water resources ministers from the basin states, the Australian Capital Territory and the federal government) imposed a cap on water extractions in 1995. It limited extractions to the volume of water capable of being taken out <a href="https://www.mdba.gov.au/sites/default/files/archived/cap/cap_brochure_0.pdf">by the infrastructure</a> (pumps, dams, channels, management rules) that existed in 1993-94.</p>
<p>The cap was supposed to be a temporary measure. It wasn’t intended to solve the problem, just stop it getting any worse in the short run. </p>
<p>The long-term solution was to be a system of trade in water rights, introduced by the Council of Australian Governments in 1994. Combined with the right price signals from environmental purchases, this system was meant to allocate water to its most productive uses while reducing extractions to sustainable levels. </p>
<p>A quarter-century on, the cap is only now being phased out, and a vast array of measures have come and gone, including the National Water Initiative, the Water Act of 2007, Water for the Future and the Murray-Darling Basin Plan. </p>
<h2>Buying block</h2>
<p>The failure of these initiatives rests on one simple fact: the refusal of irrigation lobby groups to countenance the government buying water rights on the open market to increase environmental flows. Their opposition has been immovable, despite many individual irrigators being keen to sell their water rights and use the money to invest in alternative cropping activities or retire. </p>
<p>On the other hand, there are a lucky (often politically well-connected) few who have done very well from “strategic” purchases of water. Investigative journalist Michael West <a href="https://www.michaelwest.com.au/tandou-can-do-double-standards-in-water-purchases-in-the-murray-darling-basin/">has noted</a> the National Party’s Barnaby Joyce has been publicly hostile towards buybacks of water entitlements but authorised, as federal water resources minister, three major “strategic purchases”.</p>
<p>Instead of water purchases, politicians like Joyce have put their faith in subsidies to infrastructure, to improve the efficiency of water use. </p>
<p>The idea has a lot of intuitive appeal. If less water can be used, it should be possible to increase flows in the river system without reducing agricultural output. With rare exceptions, this appealing vision has dominated the thinking of politicians and much of the public.</p>
<p>The reality is sadly different. The failure of infrastructure-based water recovery was both predictable and predicted. </p>
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Read more:
<a href="https://theconversation.com/is-the-murray-darling-basin-plan-broken-81613">Is the Murray-Darling Basin Plan broken?</a>
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<p>I pointed out the main difficulties in a <a href="https://johnquiggin.com/2012/06/02/high-cost-basin-plan-water-is-bad-for-all/">piece for ABC Online</a> in 2012. The article didn’t contain any remarkable insights. It simply stated views shared by every independent economist who has worked on the issue.</p>
<h2>The illusion of efficiency</h2>
<p>Among the many problems with infrastructure schemes, two have stood out. </p>
<p>First, the measured cost of saving water through infrastructure schemes is two to three times as much as that of buying water on the open market. </p>
<p>Second, and more importantly, much of the supposed water savings are illusory. Much of the water “wasted” in irrigation systems is not lost to the environment. Most of the water leakage and seepage from irrigation channels eventually returns to rivers through groundwater systems. So “saving” this water through infrastructure efficiency doesn’t actually add anything more to environmental flows. </p>
<p>My 2012 analysis assumed a scientifically based effort to secure water savings at the lowest possible cost to the public. As the Four Corners report has shown, that assumption was massively over-optimistic. In reality, the scheme has been characterised by lax monitoring, cronyism and rorting. </p>
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Read more:
<a href="https://theconversation.com/5-ways-the-government-can-clean-up-the-murray-darling-basin-plan-116265">5 ways the government can clean up the Murray-Darling Basin Plan</a>
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<p>After the expenditure of billions in public money, the system may be worse off than before. As a result, environmental disasters keep on happening.</p>
<p>Along with recurring algal outbreaks, we are witnessing disasters such as the massive fish kills like that in western New South Wales in January. The massive fish kills have been attributed to little or no flow in the Darling River combined with plunges from high temperatures, <a href="https://www.theguardian.com/australia-news/2019/jan/24/murray-darling-fish-kill-extreme-weather-and-low-river-flow-led-to-drop-in-oxygen-levels">starving the water of oxygen</a>.</p>
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<span class="caption">Hundreds of thousands of dead fish in waterways around Menindee, far-west New South Wales, in January 2019.</span>
<span class="attribution"><span class="source">Graeme McCrabb/AAP</span></span>
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<p>As the riverine environment keeps deteriorating, there’s no sign of any positive change in policy. </p>
<p>Eventually, though, we must hope Abba Eban will be proved right. Having exhausted all the options that don’t work, we will have to turn to those that do.</p><img src="https://counter.theconversation.com/content/119989/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Quiggin receives no current funding for work on this issue, but has received government-funded research grants for work on this topic at various times since the early 1980s. He is a signatory of the Murray-Darling Declaration, a statement prepared by a group of independent scientists and economists <a href="https://murraydeclaration.org/signatories/">https://murraydeclaration.org/signatories/</a></span></em></p>Billions of dollars have been spent on infrastructure schemes in the Murray Darlling Basin with no measurable improvement.John Quiggin, Professor, School of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1160682019-04-26T04:55:56Z2019-04-26T04:55:56ZVIDEO: Michelle Grattan on week two of the campaign #AusVotes<figure>
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<p>University of Canberra Vice-Chancellor Deep Saini speaks with Michelle Grattan about the week in politics. They discuss the messaging and tactics of the leaders on the campaign trail, the resurrection of the issue of water buybacks, and the impact of Clive Palmer’s political advertising on his election chances and what his popularity means for preference deals.</p><img src="https://counter.theconversation.com/content/116068/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Deep Saini speaks with Michelle Grattan about the week in politics.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1158662019-04-23T11:55:45Z2019-04-23T11:55:45ZView from The Hill: Joyce could be facing waves at a judicial inquiry after the election<p>It’s hard to believe Barnaby Joyce really wants to lead the Nationals again. Of course everyone knows he does, desperately, but his unhinged <a href="https://www.abc.net.au/radionational/programs/drive/barnaby-joyce-responds-to-australias-watergate/11036040">ABC interview</a> with Patricia Karvelas on Monday showed a breathtaking absence of political judgement or personal restraint.</p>
<p>Joyce went on the program to defend his conduct in the 2017 A$79 million water buyback from two Queensland properties owned by Eastern Australia Agriculture (EAA).</p>
<p>Regardless of how his approval of this deal will ultimately be judged, his shouting, interruptions and at times absurd language drowned out any chance of his getting his points across.</p>
<p>Joyce loyalists will see it as Barnaby-being-Barnaby. But it was further reason for Nationals to despair about the parlous state of their party, as they watch an ineffective leader and an out-of-control aspirant.</p>
<p>The Joyce interview made it harder for the government to manage this big distraction in a messy second campaign week.</p>
<p>The controversy over the water purchase is based on an old story; the election has enabled it to be resurrected for a powerful fresh spin around the political circuit.</p>
<p>Water expert Quentin Grafton, professor of economics at the Crawford School at the Australian National University, lays out the issues.</p>
<p>Grafton estimates the Commonwealth paid about $40 million too much for this water. He identifies three areas of concern: the government’s failure to get value for money (remembering this was floodwater, which is unreliable); the lack of transparency in the deal, and the nature of the process – a negotiated sale rather than an open tender.</p>
<p>Much has been made of EAA being a subsidiary of Eastern Australian Irrigation (EAI), which is based in the Cayman Islands, a tax haven. This does, however, seem an irrelevance in the context of the value for money issue.</p>
<p>Also, it is one thing to say tax avoidance structures should be cracked down on, quite another to suggest the government should decline to deal with a company with a structure that accords with the law.</p>
<p>There has also been talk about Energy Minister Angus Taylor. As a business consultant Taylor helped set up the two companies and was a director of each.</p>
<p>But according to Taylor’s office he ended all links before entering parliament, never had a direct or indirect financial interest in EAA or any associated company, had no knowledge of the water buyback until after it happened, and received no benefit from this transaction.</p>
<p>So the questions in this affair centre on the conduct of the Agriculture Department and its then minister.</p>
<p>Grafton says: “Either the public servants were incompetent in relation to understanding value for money – or there’s an alternative explanation.”</p>
<p>The department is sensitive, taking the unusual step during Easter (and in the “caretaker” period) of issuing a <a href="http://www.agriculture.gov.au/about/media-centre/on-the-record/eastern-aus-ag-water-purchase">statement</a> defending its actions. It said it had done “due diligence”. The water purchase had been consistent with Commonwealth Procurement Rules “and paid at a fair market rate, as informed by independent market valuation,” the statement said. </p>
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Read more:
<a href="https://theconversation.com/australias-watergate-heres-what-taxpayers-need-to-know-about-water-buybacks-115838">Australia's 'watergate': here's what taxpayers need to know about water buybacks</a>
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<p>Joyce is known in general to have been a meddling minister.</p>
<p>In this case, he insists he followed departmental advice in approving the purchase, and had been at arms length from the deal. </p>
<p>“My role was never to actually select a purchaser or to determine a price,” he told a Tuesday news conference. But he approved the authority to negotiate without tender, and imposed conditions, including having the department report back to him before finalising the deal.</p>
<p>The current Minister for Agriculture and Water Resources, David Littleproud, tried to stem the damage on Tuesday by asking the Auditor-General to inquire into the matter. Littleproud added a political twist, requesting the audit to look back as far as 2008, to encompass Labor’s period.</p>
<p>But this wasn’t going to satisfy Labor in an election campaign. </p>
<p>The opposition had demanded documents by the end of Tuesday; predictably, it didn’t get what it wanted.</p>
<p>Bill Shorten had already flagged the need for a judicial inquiry.</p>
<p>Late Tuesday, environment spokesman Tony Burke <a href="https://www.abc.net.au/radionational/programs/drive/shadow-environment-minister-tony-burke-rules-out-murray-darling/11040172">accused</a> Scott Morrison of “trying to cover up his government’s incompetence, chaos and potential misconduct”.</p>
<p>“It is now clear that there needs to be an independent inquiry into the Eastern Australia Agriculture scandal, with coercive powers so that Australians can get the truth,” Burke said. (That inquiry, however, wouldn’t be probing Labor deals.)</p>
<p>If Labor wins on May 18, yet again we will see a government launch an investigation into the conduct of its predecessor. If this comes to pass, Joyce will find himself in the witness box, a prospect he seems to relish - at least now.</p><img src="https://counter.theconversation.com/content/115866/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The controversy over the water purchase is based on an old story; the election has enabled it to be resurrected for a powerful fresh spin around the political circuit.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1158382019-04-23T11:16:05Z2019-04-23T11:16:05ZAustralia’s ‘watergate’: here’s what taxpayers need to know about water buybacks<figure><img src="https://images.theconversation.com/files/270366/original/file-20190423-15224-l8c00.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The federal government committed to reducing water extraction from the Murray-Darling Basin.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/aerial-helicopter-view-dried-drought-stricken-594566828?src=ag1S2DWqHXZJRmsv5ObzLA-1-9">Shutterstock</a></span></figcaption></figure><p>In 2017, the then agriculture minister, Barnaby Joyce, signed off on an A$80 million purchase of <a href="https://www.abc.net.au/news/rural/2017-08-16/murray-darling-basin-plan-condamine-balonne-water-purchase/8813280">a water entitlement</a> from a company called Eastern Australia Agriculture. </p>
<p>The <a href="https://www.abc.net.au/news/rural/2017-08-16/murray-darling-basin-plan-condamine-balonne-water-purchase/8813280">problem</a> is that Energy Minister Angus Taylor used to be a director of Eastern Australia Agriculture – though he didn’t have a financial interest – and the company is a Liberal party <a href="https://periodicdisclosures.aec.gov.au/Donor.aspx?SubmissionId=51&ClientId=32932">donor</a>. What’s more, the value of the water purchased for A$80 million is under question. </p>
<p>Now, as the election looms, this issue has resurfaced. But why should taxpayers be concerned?</p>
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Read more:
<a href="https://theconversation.com/is-the-murray-darling-basin-plan-broken-81613">Is the Murray-Darling Basin Plan broken?</a>
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<p>Water buybacks using an open tender were halted by the current government in <a href="https://www.abc.net.au/news/2019-04-23/water-buybacks-everything-we-know/11037798">2015</a>, even though this is the most cost-effective way to set aside water for the environment. Instead, the government pronounced that subsidies for irrigators were a better deal. </p>
<p>Until 2015, the government bought back most water using an open tender process, before it was replaced by a subsidy scheme for irrigation and occasional closed tenders.</p>
<p>The problem with the closed tender process is that it tends to lack transparency, which raises questions about how effectively the government is spending public money. And it’s hard to prove closed tenders deliver the most cost effective outcome.</p>
<p>The Murray-Darling Basin is a very productive agricultural zone and its rivers have been used to boost agricultural outputs through irrigation.</p>
<p>State governments spent much of the 20th century allocating this water to agricultural users. By the 1990s it was clear too much water was being extracted. This resulted in both harm to the river environment and potential reduced reliability for those with existing water rights.</p>
<p>Various attempts to rein in extractions were made around this time, but ultimately the <a href="https://www.mdba.gov.au/basin-plan/plan-murray-darling-basin">Murray-Darling Basin Plan</a> was adopted to deal with the problem.</p>
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<p>In agreeing on the plan, the federal government committed to spending <a href="http://www.agriculture.gov.au/water/mdb">A$13 billion</a> to reduce the amount of water being extracted from the Murray-Darling Basin. To accomplish this the government has two basic strategies. </p>
<p>One involves buying up existing rights for water use. The other hinges on using subsidies so farmers use less water when irrigating.</p>
<h2>Reducing water extraction from the basin</h2>
<p>The second approach of using subsidies is generally more politically appealing. This is because few farmers ever object to receiving a subsidy and the public has an affinity with the idea of “saving” water.</p>
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Read more:
<a href="https://theconversation.com/damning-royal-commission-report-leaves-no-doubt-that-we-all-lose-if-the-murray-darling-basin-plan-fails-110908">Damning royal commission report leaves no doubt that we all lose if the Murray-Darling Basin Plan fails</a>
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<p>The problem, however, is that subsidies are a more costly way of returning water to the river system than simply buying back existing water rights. And so-called water savings are <a href="https://www.pc.gov.au/inquiries/completed/murray-darling-water-recovery/report">hard to measure</a> how much water savings are a result of subsidies or some other factor. </p>
<p>This is why <a href="https://murraydeclaration.org/">some analysts</a> even claim subsidies are reducing the level of water available for the environment.</p>
<p>Buying back water rights is generally more cost-effective than providing subsidies. But a clear and transparant process still matters because water rights are not the same for everyone and it’s a complex process to determine their overall value.</p>
<h2>Allocations and entitlements</h2>
<p>First, most water users hold a legal right, known as an entitlement. Water entitlements represent the long-term amount of water that can be taken and used – subject to rain, of course. </p>
<p>Second, water allocations represent the amount of water currently available against a given entitlement – this is the water that is available now.</p>
<p>If a farmer owns an entitlement in the River Murray, chances are the annual allocation will be determined by how much water has flowed into upstream storages like Hume Dam, Dartmouth Dam or Lake Eildon. </p>
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<p>Even then the allocation will vary, depending on which state issued the original entitlement. For instance, New South Wales water is generally allocated more aggressively. This means NSW entitlements tend to be less reliable in dry years than Victorian or South Australian entitlements.</p>
<p>If a farmer owns an entitlement where there are no upstream storages, as is the case with much of the Darling River system, then the allocation will vary depending on how much water is flowing in the river.</p>
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<strong>
Read more:
<a href="https://theconversation.com/discontent-with-nationals-in-regional-areas-could-spell-trouble-for-coalition-at-federal-election-115364">Discontent with Nationals in regional areas could spell trouble for Coalition at federal election</a>
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<h2>So what?</h2>
<p>All of this means the amount of water that can actually be used for the environment when an entitlement passes to the government will depend heavily on the underlying characteristics of the water right.</p>
<p>Partly for this reason, water buybacks were historically conducted using an open tender process. </p>
<p>This meant the government would announce its willingness to buy water entitlements. Farmers would then notify the government about what entitlements they held and the price they were prepared to take. </p>
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Read more:
<a href="https://theconversation.com/investors-and-speculators-arent-disrupting-the-water-markets-69492">Investors and speculators aren't disrupting the water markets</a>
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<p>Running an open tender allowed the government to assess the value for money of the different entitlements on offer at the time. </p>
<p>Water buybacks through open tender began seriously in about 2007 to 2008. This meant the price owners were prepared to sell for would be registered, and then the government would determine which offer provided the best value. Around 60% of all water now held for the environment by the Commonwealth was secured through open tenders.</p>
<p>As a general rule, a relatively high-reliability water entitlement was bought for about <a href="https://www.accc.gov.au/system/files/sub%2062_Queensland%20Department%20of%20Natural%20Resources%20and%20Water.pdf">$2,000 per megalitre</a> and this has become the metric for many in the market. But the current government halted this process in 2015.</p>
<p>Now, the government buys water through direct negotiation with water-entitlement holders.</p>
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<p>The government justified ending open-tender buybacks on the basis that the water being secured was causing undue harm to rural and regional communities. And, instead, much more expensive subsidies would supposedly generate a better overall return. </p>
<p>This view is not universally shared. The receipts from openly tendered water entitlements were being used by many farmers to adjust their business, while still staying in the region.</p>
<p>Many rural communities continue to thrive, regardless of the strategy chosen to secure water for the environment. Subsidies also tend to favour particular irrigators rather than the community in general.</p>
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Read more:
<a href="https://theconversation.com/droughts-extreme-weather-and-empowered-consumers-mean-tough-choices-for-farmers-112857">Droughts, extreme weather and empowered consumers mean tough choices for farmers</a>
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<p>Having set aside the cheapest option of open-tender buybacks and declaring support for irrigation subsidies, the problem the government now faces is that it must explain why closed tenders persisted (albeit in isolated cases) and were signed off by Ministers as good value for money. </p>
<p>Closed tenders need not deliver a poor outcome for taxpayers. But it does mean the likelihood of establishing the best value for money is reduced, simply because there are fewer reference points. </p>
<p>And if it’s legitimate to overspend public money on irrigation infrastructure subsidies, the credibility of a supposedly cost-effective closed tender is also brought into question.</p><img src="https://counter.theconversation.com/content/115838/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Professor Lin Crase is the South Australian branch president of the Australasian Agriculture and Resource Economics Society. </span></em></p>The latest Murray-Darling Basin scandal calls into question whether the government is using public money wisely.Lin Crase, Professor of Economics and Head of School, University of South AustraliaLicensed as Creative Commons – attribution, no derivatives.