the murray-darling basin mike young executive director, the environment institute

The Environment InstituteWhere ideas grow

The Murray-Darling Basin

Mike Young Executive Director, The Environment Institute

The Environment Institute

Life Impact The University of Adelaide

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



Flow generation



The Murray will haveto solve its own problems



Ecosystem Health Assessments 2004-07



Change?

Total Water Water Use

Historical Climate 23,417 11,327 (48%)

2030 Median Climate 20,936 10,876 (52%)

2030 Dry Extreme 15,524 8,962 (58%)

(CSIRO Water Availability – 2008)



Growth in Basin diversions

7



Water Rights Reform & unbundling

Water

Tradable Right Price

Land

Single Title to

Land with aWater Licence

Entitlement Shares

in PerpetuityBank-like Allocations

Use licences with limits & obligations

National CompetitionPolicy 1993/94Plus Cap

National Water Initiative2004



Scarcity and Trading

Source: Murray Darling Basin Commission, 2007

Murray-Darling Basin Water Entitlement Transfers - 1983/84 to 2003/04

0

100

200

300

400

500

600

700

800

900

1 000

1 100

1 2001983/8

4

1984/8

5

1985/8

6

1986/8

7

1987/8

8

1988/8

9

1989/9

0

1990/9

1

1991/9

2

1992/9

3

1993/9

4

1994/9

5

1995/9

6

1996/9

7

1997/9

8

1998/9

9

1999/0

0

2000/0

1

2001/0

2

2002/0

3

2003/0

4

Tra

ns

fer

Vo

lum

e (

GL

)

0

100

200

300

400

500

600

700

800

900

1 000

1 100

1 200

1983/8

4

1984/8

5

1985/8

6

1986/8

7

1987/8

8

1988/8

9

1989/9

0

1990/9

1

1991/9

2

1992/9

3

1993/9

4

1994/9

5

1995/9

6

1996/9

7

1997/9

8

1998/9

9

1999/0

0

2000/0

1

2001/0

2

2002/0

3

2003/0

4

Intrastate Temporary (GL)

Intrastate Permanent (GL)

Interstate Temporary (GL)

Interstate Permanent (GL)

Water Reform Trading opened up



Return to investment in entitlement systems & trading

After Bjornlund & Rossini 2007

0%

10%

20%

30%

40%

50%

Jul

-98

Nov

-98

Mar

-99

Jul

-99

Nov

-99

Mar

-00

Jul

-00

Nov

-00

Mar

-01

Jul

-01

Nov

-01

Mar

-02

Jul

-02

Nov

-02

Mar

-03

Jul

-03

Nov

-03

Mar

-04

Jul

-04

Nov

-04

Mar

-05

Jul

-05

Nov

-05

Mar

-06

Jul

-06

Nov

-06

Mar

-07

Jul

-07

Nov

-07

Mar

-08

Jul

-08

Nov

-08

Mar

-09

Jul

-09

Annu

alis

ed R

etur

n

5 Year Holding Period Ending

Total returns - Median allocation and entitlement prices compared to capital growth, and the S&P ASX Accumulation Index Returns

Annual Return - Median

Annual Return - Capital Growth

Annual Return - S&P ASX



Water needed to ensure conveyance

Entitlements Environment

Flood water

Shared WaterEntitlements

Vo

lum

e of w

ater availab

le

Environment with a

fully-specified share

A robust sharing system

Now buying back water for the MDB environment

$3.1 billion



The Guide to the Plan

1. Conveyance to and through Mouth 9 in 10 yrs2. Prepared to lose 25% of red gum forests3. Most benefits from 3,000 GL to 4,000 GL local

are within region where reduction occurs4. States must comply with SDLs even if

Commonwealth fails to buy enough water5. Now have agreement to align by 2019



Guide principles and concepts• Hydrological integrity

– Most interception is included in the SDL algebra• Equitable risk sharing with Environment

– Conveyance reserve specified separately– Environment gets an entitlement for freshes and some overbank work

• Maximum subsidiarity– Uniform definition of SDL across the Basin built around a 114 year

average less 3% allowance for adverse climate change– But CEWH takes a centralised view of the world ....

• Robust planning as the “premier” control instrument– Entitlement and allocation system sits under the plan– Could reverse this approach



SDL proposals

Surface water:

14

Basin-wide

Current diversion limits

13,700 GL/y 13,700 GL/y 13,700 GL/y

SDL proposals 10,700 GL/y 10,200 GL/y 9,700 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% 40 % 45%

* If only this component is reduced



The LTA SDL• Long Term

– Hides climate change signal• Average

– Mean not mode or median• Sustainable

– Not defined as a limit Don’t compromise key environment or productive base

• Diversion– Not allocated– Not “used”

• Limit• Not a share of inflows• Not a seasonal resource allocation



“Take” not “net use”environmentally sustainable level of take for a water

resource means the level at which water can be taken from that water resource which, if exceeded, would compromise:(a) key environmental assets of the water resource; or(b) key ecosystem functions of the water resource; or(c) the productive base of the water resource; or(d) key environmental outcomes for the water resource.

• Management of “take” not amount “allocated” for taking • Little concept of optimal storage management



Conveyance Reserve• Conveyance water is water in the River

Murray System required to deliver water to meet critical human water needs as far downstream as Wellington in South Australia.

• Not to barrages• No requirement to have a minimum annual

flow to the sea



Elements of a way forward• A much more regional approach• Commit to a fully specified “entitlement” system rather than a “planning”

system– Define conveyance water needed throughout the system– Define the maximum amount that may be allocated in any irrigation season as

the amount held when every “user” including interceptors has 100% allocation– Define a target portfolio of entitlements for the environment in each district

• Continue with a market-driven approach– buy entitlements at higher and less callous prices – Establish community development funds and place money in proportion to

money spent on buy backs and scale of the buy back• Establish regional environmental trusts to hold and manage entitlements. • Move forward step by step, monitoring, adjusting learning as we go



An adaptive approach to the definition of SDLs• For water body i and under the powers given to the Authority through section 23(2) (c), a register

will be established to record the Sustainable Diversion Limit (SDL t,i) that applies to that body at any point in time.

• This register is designed to enable SDL’s to be increased as local communities, regional authorities and States find more efficient ways to deliver environmental objectives.

– All benefits flow to the region where innovative solutions are found.– Adaptive management will always be possible.

• Under the arrangements proposed in the Guide the Basin Plan, once and an SDL is set, there is no incentive for anyone to invest in environmental works and measures.

• After 2012, the main way to adjust an SDL is to use the “compulsory acquisition like” arrangements set out in sections 75 and 76 of the Act.

• This adaptive approach set out above overcomes these these impediments and dramatically increases the opportunity to prepare a Basin Plan that will withstand the test of time.

SDL t,i = SDL 2012,i - Water entitlements purchased and transferred to the environmental water register

+ any increase in the SDL that the Authority determines can be made at no detriment to the attainment of environmental objectives because environmental works and measures are allowing the more efficient management of environmental water

+ any increase in the SDL that the Authority determines can be made at no detriment to the attainment of environmental objectives as a result of a policy change that has occurred



Funding adjustment• $3.1b Buy back programs• $5.8b Infrastructure upgrade• $8.9b in Total

• 15,120 irrigators

• $588,624 per irrigator

The Environment InstituteWhere ideas grow

www.adelaide.edu.au/environment

www.myoung.net.au

the murray-darling basin mike young executive director, the environment institute

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