Water Policy in the MDB The Basin Plan - have we finally got it right? University of Queensland workshop, Brisbane Jim Donaldson 21 October 2010

The Basin

Murray-Darling Basin Directly supports 3 million people Feeds approximately 20 million people Significant environmental values 14% of Australia (size of Spain & France) Australia’s three longest rivers 40% Australia’s farmers Agricultural exports earn $9b/year Gross value of agricultural production $15b (40% Australia) – irrigation: $5.5b (15%) Home to 34 major Indigenous groups

Value of MDB Irrigated Agricultural Production (07/08 GVIAP not yet available) ($ Million)

Flow generation

7 Hydrological complexity of the Basin

“dreams of taming the rivers, greening the desert, and making land productive, run deep in the national psyche”

Major water storages in the MDB

Change? Total WaterWater Use Historical Climate23,41711,327 (48%) 2030 Median Climate20,93610,876 (52%) 2030 Dry Extreme15,5248,962 (58%) (CSIRO Water Availability – 2008)

Amplification - decreases in runoff

Ecosystem Health Assessments

Growth in Basin diversions 15

The Need for Reform Return extraction to a more sustainable level Building a more certain future Managing Basin Water resources for future generations Support ecological health of the Basin Sustained economic output 16

1901 Constitution Building on past reform River Murray Commission 1987 Murray-Darling Basin Commission 1990’s Cap on Diversions & Water markets 2004 National Water Initiative & The Living Murray First Step 2007 Commonwealt h Water Act & Murray-Darling Basin Authority 2008 COAG Agreement 2010 Guide to the proposed Basin Plan

Brief history of water policy 1890’s – 1980’s development era: “drought, royal commission, new dam” 1994 COAG reforms: environmental flows, unbundling water and land “titles” 1995 MDB “Cap” on more extractions National Water Initiative 2004: reaffirms commitments to reform agenda, e-flows and role of markets in reallocating water 2007: Water Act

What does the Water Act say? Water Act sets out quite specific basis for developing the Basin Plan – environment! There is a hierarchy of objectives and considerations guiding Basin planning Socio-economic related objectives are to be pursued to the extent they do not compromise other objects of the Act –such as ensuring return to environmentally sustainable levels of extraction

Objectives of the proposed Basin Plan Ecological health –optimise social, cultural and economic wellbeing Sustainable limits on take Environmental resilience Appropriate water quality Efficient and effective water markets Transition path to implementation 20

Phases and Timelines

After the Basin Plan

Key Elements of the Basin Plan Page 8 of the Concept Statement

Conceptual Cycle Identify Key Environmental Assets and Key Ecosystem Functions Determine environmental water requirements of the Key Environmental Assets and Key Ecosystem Functions Calculate possible SDL Assess socio-economic impact Consider alternative scenarios Implement thru Environmental Watering Plan Simplicity belies complexity

How much additional water does the environment need? SDL proposals - process 25 What are the potential impacts on the community? How to manage the transition? What are the sustainable diversion limit proposals?

Env Water Requirements Determined using 2 integrated components 1.Assessment of indicator assets –Detailed assessment of 18 floodplain and wetland sites –Environmental water requirements are typically high flows/floods –High flows contribute most volume, so biggest impact on SDLs 2.Assessment of key ecosystem functions –Broader assessment of flows at 88 sites across the Basin –Main contribution are low flow environmental water requirements (high flows already assessed by assets) –Also provides a mechanism to check the impact of the indicator asset approach on high flows across the whole Basin (other key environmental assets)

Lower Balonne River Floodplain System Gwydir Wetlands Narran Lakes Macquarie Marshes Lower Darling River System Riverland – Chowilla Floodplain Coorong, Lower Lakes and Murray Mouth Hattah Lakes Wimmera River Terminal Wetlands Mid Murrumbidgee Wetlands Booligal Wetlands Lachlan Swamps Great Cumbung Swamp Lower Murrumbidgee Wetlands Edward Wakool River System Gunbower Koondrook Perricoota Forests Barmah Millewa Forest Lower Goulburn River Floodplain Indicator Assets

2,442 key environmental assets 4 key ecosystem functions 28 Range of additional surface water for the environment: 3, ,600 GL/y 106 hydrological indicator sites 18 KEAs 88 KEFs 30,000 wetlands

Flow Events & Frequency

Env Water Requirements Examples of Environmental Water Requirements

Key Ecosystem Functions Assessment of flows required by 4 physical processes Creation and maintenance of habitats - for use by plants and animals Transportation and dilution of nutrients, organic matter and sediment Providing connections along the river - for migration and recolonisation by plants and animals (incl. fish) Providing connections across floodplains, adjacent wetlands and billabongs - for foraging, migration and recolonisation by plants and animals

Key Ecosystem Functions The 4 processes require a variety of flow types Each flow type is important Each flow type is assessed

Modelling and SDLs SDLs informed by modelling of environmental water requirements (assets and functions), and other analysis SDL in each region is affected by environmental water requirements in that region, and also downstream requirements Models are very important tools, but they can’t answer all policy challenges and therefore can’t determine SDLs on their own

Paroo IQQM Warrego IQQM Nebine IQQM Condamine MODFLOW Middle Condamine IQQM St George SGCS13NT Lower Balonne IQQM Upper Condamine IQQM Border R. and Mac B. IQQM Border Rivers MODFLOW Moonie IQQM Gwydir IQQM Lower Gwydir MODFLOW Eastern Mt Lofty Ranges 6*WATERCRESS Daily Weekly Monthly Barwon-Darling IQQM Menindee IQQM Peel IQQM Upper Namoi MODFLOW Namoi IQQM Lower Namoi MODFLOW Macq-Castlereagh 6*IQQM Macquarie MODFLOW Wimmera REALM Lachlan IQQM Mid-Lachlan MODFLOW Lower Lachlan MODFLOW Ovens REALM GSM REALM Avoca REALM Snowy SIM_V9 Murray BigMod Murray MSM Southern Riverine Plains MODFLOW Upper Bidgee IQQM ACTEW REALM Mid Bidgee MODFLOW Bidgee IQQM Lower Bidgee MODFLOW MDB Surface and groundwater models

Current diversion limits Includes all take (total 13,700 GL/y) For surface water this includes: –Watercourse diversions (10,940 GL/y) Diversions from streams Floodplain harvesting –Interception activities (2,740 GL/y) Farm dams Forestry plantations 35

Draws on social and economic assessments and environmental water requirements Indicates a range of reductions: –3,000 GL/y, 3,500 GL/y and 4,000 GL/y Surface water reductions > 4,000 GL/y –Unacceptable social and economic outcomes Surface water reductions < 3,000 GL/y –Outcomes do not meet the environmental requirements Groundwater: –Aggregate 186 GL/y reduction across 11 aquifers 36 SDL proposals

Satisfy environmental water needs in each tributary catchment Connected catchments can contribute to Murray or Darling environmental water needs Some disconnected catchments – e.g. Paroo, Lachlan Darling River system – limited ability to contribute to Murray needs More highly developed catchments can make bigger contribution to environment water needs 37 SDL proposals - considerations

Equal % reductions in current diversion limits (watercourse diversions and interception) Where reductions large to satisfy internal catchment needs, no further reductions Constrain maximum reduction in watercourse diversion component 38 SDL proposals - considerations

39 Water resource plan areas 19 surface water resource plan areas (29 SDLs)

SDL proposals Surface water: 40 Basin-wide Current diversion limits 13,700 GL/y SDL proposals10,700 GL/y10,200 GL/y9,700 GL/y Reduction 3,000 GL/y (22%) 3,500 GL/y (26%) 4,000 GL/y (29%) % reduction in watercourse diversion component* 27%32%37% Max reduction for an SDL area 26%30 %35% Max reduction in watercourse diversion component* 40% 45% * If only this component is reduced

41 When it takes effect proposed Basin Plan Final Basin Plan

Assessing impact on communities Impact of different reductions Impact of reductions on different farming sectors Off-farm (flow-on) impacts Impact of reduction at Basin and regional scales 42

What we were asked to do Assess the likely economic and social implications of setting SDLs and developing the Basin Plan –Inform setting of SDLs –Report on implications to government

Socio-economics beyond SDL’s Socio-economic info can also be used to: Advise on mitigation arrangements –Temporary Diversion Provisions, risk allocation, trade rules, Buyback Inform state water resource plan requirements and development

Socio-economic impact assessments Studies undertaken: Baseline socio-economic circumstances Review of previous studies in the Basin Review of structural adjustment pressures Economic modelling and analysis Local profiles and assessments Indicators of community vulnerability & adaptive capacity Effects of change in water availability on Indigenous people Assessment of benefits Responses of financial institutions to changes 45

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 AgricultureMiningManufacturingOther industries HouseholdsWater supply industry GL Consumptive water use

ABARE Economic Modelling Modelling of economic implications of potential reductions in water availability Focus of project: –Basin-wide, inter-regional, economic modelling –Consider scenarios of reductions –Agricultural sector and regional flow-on effects Report on changes in value of irrigated agriculture, land use and water use –Magnitude and indicative distribution of impacts –Report on impacts at national, basin, regional levels

ABARE’s Approach Irrigated agriculture model of MDB –Shocked with changes in SDLs –Regional level estimates –Industry crop estimates AusRegion CGE model –Regional economy impacts (GRP, employment) Some downscaling possible but limitations Impacts of reduced farm expenditure on towns Results compared with other models –UQ, Monash CoPS, PC, Wentworth

Local profiles & analyses (Marsden Jacob Associates) Socio-economic assessments of likely local implications of reductions in SDLs Focus of project: – Community profiles for regional communities – Identify industry impacts and flow-on effects – Assess vulnerability and adaptive capacity at local scale in 12 targeted irrigation districts – Interviews with regional stakeholders and business and community phone surveys – Consider a range of water use reduction scenarios

Project overview To assist the MDBA with –enhanced understanding of social and economic circumstances of communities –likely impacts of reduced water availability Vulnerability Adaptability Consortium led by Marsden Jacob Associates –RMCG, Geoff McLeod, Tim Cummins, and expert advisors EBC, Anthony Hogan, DBM

Irrigation districts (15)

Scenarios (surface water)

Context of study ‘Near-worst case’ –No compensation –No government transition support –Then discuss impact mitigation (better than ‘worst’) Impact analysis methods provide a spectrum of results –Consultative approach – ‘stated intentions’ of respondents, consensus across sectors and regions, at a regional scale, validation of results

Conclusions (MJA) Impacts of change vary by sector and region –1 in 4 surveyed would exit at 20% adjustment and 1 in 3 at 40% –Magnitude of impact of 20% reduction varies across sectors –Impact of 40%+ reduction significant for all sectors Flow on impacts –Impacts on towns may be great but will be lost at the larger region, basin or national scale –Small irrigation dependent towns likely to be most impacted –Given 75% of farm expenditure is local, impacts will quickly flow to towns Range of factors will influence the impact

Indigenous interests Review and synthesis of current knowledge of Aboriginal interests Case studies – Barmah-Millewa, Brewarrina, Hay –Mixture of interests – consumption, environmental, relationship with country –Paucity of information –Desire for greater role in determining allocations to meet their water interests

Economic impacts Gross impacts * with inter-regional trade All scenarios include groundwater reduction of 186 GL/y 57 ScaleSurface water sustainable diversion limit 10,700 GL/y10,200 GL/y9,700 GL/y National minor % GDP minor % GDP minor % GDP Basin-wide- 13% GVIAP* - 1.1% GRP - 15% GVIAP* - 1.3% GRP % GVIAP* - 1.5% GRP

Socio-economic impact assessment Impacts net of Government investments * with inter-regional trade All scenarios include groundwater reduction of 186 GL/y 58 Scale10,200 GL/ y surface water diversion limit Gross impactsNet impacts National minor % GDP minor % GDP Basin-wide- 15% GVIAP* - 1.3% GRP % GVIAP* % GRP

Socio-economic impact assessment 59 Industry impacts HighIrrigated broadacre agriculture MediumCotton and dairy LowHigh value perennial horticulture (trade a major contributing factor) Regions most impacted (by $ value) Southern Basin Murrumbidgee, Goulburn-Broken, NSW & Vic Murray, Loddon- Avoca Northern Basin Gwydir, Condamine-Balonne, Namoi, Macquarie-Castlereagh

Basin Plan analysis context Rebalancing water use in the MDB –Between consumption and environment –Set environmentally sustainable limits on the extraction of water (SDLs) Trade-offs: optimise economic, social and environmental outcomes What’s the baseline for comparison? Scale of analysis: Basin-wide to local? –Inform decisions to be made by MDBA

What’s the issue? Rebalancing water use in the MDB –What’s the right balance?

Optimal water allocation?

What’s the issue? Rebalancing water use in the MDB –What’s the right balance? Nature of the problem: optimise outcomes –Measuring the benefits and the costs –Water Act sets environmental thresholds

Costs (and benefits) Agriculture –Irrigated –Non-irrigated (e.g. floodplain grazing) Other industries –Mining, manufacturing, forestry, fishing Household water supply Tourism and recreation How do these values change with SDLs?

Benefits Diffuse and difficult to measure in consistent units, including monetary –Ecological values –Environmental valuation review done Non-use values (eg fish, birds, veg etc) –e.g. 1% improvement in native veg: $143m Avoided costs, e.g. salinity & WQ ($353m) Tourism and recreation ($57m/yr Coorong) How do these values change with SDLs?

What’s the impact of SDLs? It depends … –many factors influence the impacts Structural adjustment is ongoing –climate, markets, policy –mining, GFC, wine grapes, redgums Basin Plan and state water plans How the SDLs and Basin Plan are implemented

Main insights … Financial costs of water availability reduction on irrigators depends on extent of risk assignment and Buybacks Social and economic impacts could be significant for dependent local communities which are not directly compensated –particularly in short term

Factors affecting impacts Implications of reduced water availability depends on a range of factors: –Magnitude of reductions –Where environmental water is sourced –Whether losses are compensated or not –Support for regional community adjustment? –Water market flexibility – trade and adjustment –How environmental water portfolios are managed –Information, consistency, trust, confidence, certainty –Timing and sequencing of transition arrangements

Future directions Analyse potential transitional arrangements –Structural adjustment support, risk sharing etc. –Identify community preferences for adaptation –Provide clarity for people to plan on –Crosses multiple agencies/portfolios/tiers of gov’t Understand likely impacts with effective transition support – at a sub- and regional level

Predicting the Future Prediction is very difficult, especially about the future (Niels Bohr)  Analysis to inform judgement

Issues and challenges Scope of research –Costs and benefits to other industries, urban and manufacturing uses –Land use changes / interception activities –Infrastructure and water delivery efficiency Scale of analysis and interpretation is important Assessment needs to be whole of basin yet relate to local level It is difficult to predict the future! What next?

Other issues Environmental works and measures River operations Relationship to NRM activities Critical human water needs Aboriginal cultural flows Evidence base Overbank flows Environmental water holdings 73

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