1 Recent and Emerging Water Policy Reforms in Australia Paper presented at National Taiwan University – Taipei 14 September 2006 Dr. Henning Bjornlund Research Chair, University of Lethbridge Senior Research Fellow, University of South Australia

2 Historical context Riparian doctrine from England Unsuitable, restricted development Late 19 th century – Victorian reform All streams vested in the crown – licenses All licenses same priority Management of water under the states Inconsistent allocation polices Consistency through National Strategies and Intergovernmental Agreements

3 Historical context Policy legacy resulted in over allocation of water and development of unsustainable land Mechanisms needed to –facilitate and encourage a reallocation of resources to more efficient and higher valued producers in more sustainable locations –provide water for ecosystems

4 Council of Australian Governments Following international trends in 1994 CoAG introduced a reform package: Pricing Water entitlements Water Trading Formally recognizing the environment Institutional reforms Consultation and public education Part of an IGA on a National Competition Policy and related reforms

5 Council of Australian Governments 2003 review identified three shortcomings uncertainty over the long-term access to water was still hampering investment; current water market arrangements are preventing markets from reaching their full potential; concern over the pace of securing adequate environmental flows and adaptive management systems.

National Water Initiative Clear, secure and nationally-compatible characteristics for water access entitlements defined as a perpetual share of the consumptive pool a transparent, statutory-based water planning process defining the consumptive pool and the process of allocating water statutory provisions for environmental and other public benefit outcomes

National Water Initiative returning currently over allocated or overused systems to environmentally sustainable levels of extraction progressive removal of barriers to trade in water assignment of risk arising from future change in the availability of water for consumption address future adjustment issues that may impact on water users and communities

8 The Murray Darling Basin 1996 Cap on water use at 93/94 level 2002 Living Murray process 2004 IGA on addressing overallocation as the first step to provide 500 GL for six sites Water Sharing Plans – NWI no guidelines as to how to share the cost of this Jurisdictional differences in approach

9

10 State legislation and policy South Australia 1997, NSW 2000, Queensland 2000 – New water acts: –Separation of land and water –Separation of ownership and use of water –Planning processes –Water markets –Environmental issues But absolutely inconsistent across states

11 State legislation and policy Victoria White Paper: Introduce the separation of land and water – max 10% of total entitlements of source Share based entitlement Non-tradable site use licenses linked to land Some channels need to be closed – compensation for loss of land value New tradable low security license against 20% reduction in pool for the environment

12 State legislation and policy Victorian white paper continued: Channel capacity entitlement Separate capacity charge – better economic signals Government committed to provide the initial water for environmental flow Promise to consider supporting communities suffering from export of water out of districts

13 State legislation and policy Generally changed allocation practice Transferred most risk management from water authorities to irrigators Water markets looked upon as one of the main instruments to alleviate impact of new policy paradigm by both Federal, State and Basin

14

15 The importance of trade

16 Seasonal allocations and volume traded Goulburn SystemMurray System SeasonAllocation (%)% of tradeAllocation (%)% of trade 1995/ / / / / / / / / /

17 Annual trading activity of farm businesses

18 Accumulated trading activity of farm businesses

19 Conclusions Change in policy paradigm in Australia aggressive due to the extend of the impact of past policies Transferred most risk management to irrigators Reductions in entitlement inevitable in most catchments Water markets relied upon to manage this process

20 Conclusions Presently state and federal governments are working on providing the basis for efficient markets There is still a fair way to go