Removing Barriers to Facilitate Efficient Water Markets in the Murray Darling Basin – A Case Study from Australia
AbstractWater markets have been seen as an effective way of addressing water scarcity and allocation issues. In this paper we discuss the role and characteristics of water markets in facilitating efficient water allocation. Administrative, regulatory and/or political barriers to effective functioning of water markets are reviewed with a focus on southern Murray-Darling Basin in Australia. A mathematical model is developed to estimate the costs of existing restrictions and the benefits from potential changes in the water markets (eg. removing barriers in temporary water market). The modelling results reveal that when expanding trade from intraregional only to interregional trade, mean annual net returns increased from $2,502 million to $2,590 million (i.e. an increase of $88 million). When the current volume restrictions, exchange rates, and trading charges are in place, mean annual net returns reduced from $2,590 million to $2,573 million (i.e. a reduction of $17 million). The exclusion of any state from the interstate water trading market imposes significant costs. If South Australia, New South Wales or Victoria withdraws from the market, it reduces net returns by $27 million, $31 million and $63 million, respectively, from water trading. In conclusion, the policy implications on strategies to removing market barriers are outlined to facilitate efficient and effective water trading.
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Bibliographic InfoPaper provided by CSIRO Sustainable Ecosystems in its series Socio-Economics and the Environment in Discussion (SEED) Working Paper Series with number 2009-02.
Length: 32 pages
Date of creation: Jan 2009
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market barrier; opportunity cost; temporary water market; efficient water market; Australia;
Find related papers by JEL classification:
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
- Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
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