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Removing barriers to facilitate efficient water markets in the Murray-Darling Basin of Australia

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  • Qureshi, M. Ejaz
  • Shi, Tian
  • Qureshi, Sumaira E.
  • Proctor, Wendy

Abstract

We discuss the role and characteristics of water markets in Australia in facilitating efficient water allocation. Administrative, regulatory and/or political barriers to effective functioning of water markets are reviewed with a focus on the southern Murray-Darling Basin (MDB) region of Australia. A mathematical model is developed to estimate the costs of existing restrictions and the benefits from potential changes in water markets (e.g., removing barriers in temporary water markets). The modelling results reveal that expanding trade leads to an increase in mean annual net returns from AU $2502 million to AU $2590 million (i.e., an increase of AU $88 million). When the current volume restrictions, exchange rates, and trading charges are accounted for, mean annual net returns reduced from AU $2590 million to AU $2573 million (i.e., a reduction of AU $17 million). The exclusion of any of the three southern MDB states from the interstate water trading imposes significant costs. If South Australia, New South Wales or Victoria withdraws from the water market, net returns are reduced by AU $27 million, AU $31 million and $63 million, respectively. The paper outlines the policy implications of strategies to remove market barriers and to facilitate efficient and effective water trading.

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Bibliographic Info

Article provided by Elsevier in its journal Agricultural Water Management.

Volume (Year): 96 (2009)
Issue (Month): 11 (November)
Pages: 1641-1651

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Handle: RePEc:eee:agiwat:v:96:y:2009:i:11:p:1641-1651

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Web page: http://www.elsevier.com/locate/agwat

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Keywords: Market barrier Mathematical modelling Opportunity cost Temporary water market;

References

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  1. Mainuddin, Mohammed & Das Gupta, Ashim & Raj Onta, Pushpa, 1997. "Optimal crop planning model for an existing groundwater irrigation project in Thailand," Agricultural Water Management, Elsevier, vol. 33(1), pages 43-62, May.
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  3. Shi, Tian, 2006. "Simplifying complexity: Rationalising water entitlements in the Southern Connected River Murray System, Australia," Agricultural Water Management, Elsevier, vol. 86(3), pages 229-239, December.
  4. Heaney, Anna & Dwyer, Gavan & Beare, Stephen & Peterson, Deborah C. & Pechey, Lili, 2005. "Third-party effects of water trading and potential policy responses," Conference/Workshop Proceedings 31907, Productivity Commission.
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  6. M. Ejaz Qureshi & Jeff Connor & Mac Kirby & Mohammed Mainuddin, 2007. "Economic assessment of acquiring water for environmental flows in the Murray Basin ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 283-303, 09.
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  8. Peterson, Deborah C. & Dwyer, Gavan & Appels, David & Fry, Jane, 2004. "Modelling Water Trade in the Southern Murray-Darling Basin," Staff Working Papers 31925, Productivity Commission.
  9. David Zilberman, 1997. "Allocation and Pricing at the Water District Level," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 952-963.
  10. Appels, David & Douglas, Robert A. & Dwyer, Gavan, 2004. "Responsiveness of Demand for Irrigation Water: A Focus on the Southern Murray-Darling Basin," Staff Working Papers 31924, Productivity Commission.
  11. Bell, Rosalyn & Blias, Athena, 2002. "Capturing benefits from the removal of impediments to water trade: a modelling framework," 2002 Conference (46th), February 13-15, 2002, Canberra 125059, Australian Agricultural and Resource Economics Society.
  12. John Freebairn, 2003. "Principles for the Allocation of Scarce Water," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 203-212.
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Citations

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Cited by:
  1. Hang Zheng & Zhongjing Wang & Siyi Hu & Yongping Wei, 2012. "A Comparative Study of the Performance of Public Water Rights Allocation in China," Water Resources Management, Springer, vol. 26(5), pages 1107-1123, March.
  2. R. Quentin Grafton & Qiang Jiang, 2010. "Economic Effects of Water Recovery on Irrigated Agriculture in the Murray‚ÄźDarling Basin," Centre for Water Economics, Environment and Policy Papers 1011, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
  3. Speelman, Stijn & Veettil, Prakashan Chellatan, 2012. "Comparing the scope for irrigation water rights reforms in India and South Africa," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126731, International Association of Agricultural Economists.
  4. Speelman, Stijn & Veettil, Prakashan Chellattan, 2013. "Heterogeneous preferences for water rights reforms among smallholder irrigators in South Africa," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 2, August.
  5. Iftekhar, M.S. & Tisdell, J.G. & Connor, J.D., 2013. "Effects of competition on environmental water buyback auctions," Agricultural Water Management, Elsevier, vol. 127(C), pages 59-73.
  6. Skurray, James H. & Roberts, E.J. & Pannell, David J., 2013. "Hydrological challenges to groundwater trading: lessons from south-west Western Australia," Working Papers 161073, University of Western Australia, School of Agricultural and Resource Economics.

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