IDEAS home Printed from https://ideas.repec.org/a/ags/aareaj/116976.html
   My bibliography  Save this article

Water policy reform in Australia: lessons from the Victorian seasonal water market

Author

Listed:
  • Brennan, Donna C.

Abstract

The nature of the seasonal water market is examined using a theoretical model and empirical evidence from the Victorian market. Drivers of the seasonal opportunity cost of water include the underlying nature of investment in the industry made in the context of risky entitlement yields; and the timing and nature of information regarding seasonal water availability and rainfall. Seasonal water markets facilitate the reallocation of water availability according to this short-run opportunity cost. Evidence from the market suggests that transactions costs are low and most of the existing constraints to trade in seasonal allocations are the result of hydrological conditions. Analysis of market data suggests that the price response of the market to water availability is much more pronounced in years of low rainfall. The implications of the paper for wider policy reform are that attention should be paid to improving property rights for the management of intertemporal risk before other reforms, such as broadening of permanent water markets and institutionalising environmental flows, are implemented. This is because these other reforms will change the spatial and temporal pattern of water use and thus affect reliability, which underpins the value of water in irrigated agriculture.

Suggested Citation

  • Brennan, Donna C., 2006. "Water policy reform in Australia: lessons from the Victorian seasonal water market," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 1-21, September.
  • Handle: RePEc:ags:aareaj:116976
    DOI: 10.22004/ag.econ.116976
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/116976/files/j.1467-8489.2006.00359.x.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.116976?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Freebairn, John W. & Quiggin, John C., 2006. "Water rights for variable supplies," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 1-18.
    2. Mike Young & Jim McColl, 2003. "Robust Reform: Implementing robust institutional arrangements to achieve efficient water use in Australia," Natural Resource Management Economics 03_003, Policy and Economic Research Unit, CSIRO Land and Water, Adelaide, Australia.
    3. M. D. Young & J. C. McColl, 2003. "Robust Reform: The Case for a New Water Entitlement System for Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 225-234, June.
    4. Mike Young, 2000. "Market-based Opportunities to Improve Environmental Flows: A scoping paper," Natural Resource Management Economics 00_004, Policy and Economic Research Unit, CSIRO Land and Water, Adelaide, Australia.
    5. Jones, Randall & Fagan, Margot, 1996. "Estimated Demand and Supply for Irrigation Water in Southern NSW," 1996 Conference (40th), February 11-16, 1996, Melbourne, Australia 156419, Australian Agricultural and Resource Economics Society.
    6. 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.
    7. 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.
    8. Mark Morrison & Jeff Bennett, 2004. "Valuing New South Wales rivers for use in benefit transfer," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(4), pages 591-611, December.
    9. 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.
    10. David Adamson & Thilak Mallawaarachchi & John Quiggin, 2006. "State-contingent modelling of the Murray Darling Basin: implications for the design of property rights," Murray-Darling Program Working Papers WP2M06, Risk and Sustainable Management Group, University of Queensland.
    11. 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, June.
    12. Qureshi, Muhammad Ejaz & Connor, Jeffery D. & Kirby, Mac & Mainuddin, Mohammed, 2005. "Integrated assessment and management of stochastic water resources in the Murray Darling Basin," 2005 Conference (49th), February 9-11, 2005, Coff's Harbour, Australia 137944, Australian Agricultural and Resource Economics Society.
    13. Mike Young, 2002. "A preliminary Assessment of the economic and social implications of Environmental Flow Scenarios for the Murray River System," Natural Resource Management Economics 02_009, Policy and Economic Research Unit, CSIRO Land and Water, Adelaide, Australia.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Donna Brennan, 2006. "Water policy reform in Australia: lessons from the Victorian seasonal water market ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 403-423, September.
    2. John Freebairn, 2005. "Issues in the Design of Water Markets," Melbourne Institute Working Paper Series wp2005n18, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Qureshi, M. Ejaz & Shi, Tian & Qureshi, Sumaira E. & Proctor, Wendy, 2009. "Removing barriers to facilitate efficient water markets in the Murray-Darling Basin of Australia," Agricultural Water Management, Elsevier, vol. 96(11), pages 1641-1651, November.
    4. Gavan Dwyer & Robert Douglas & Deb Peterson & Jo Chong & Kate Maddern, 2006. "Irrigation externalities: pricing and charges," Staff Working Papers 0603, Productivity Commission, Government of Australia.
    5. M. Ejaz Qureshi & Wendy Proctor & M. Kirby, 2000. "Economic Assessment of Water Trade Restrictions in the Murray Darling Basin," Regional and Urban Modeling 283600079, EcoMod.
    6. M Ejaz Qureshi & Tian Shi & Sumaira Qureshi & Wendy Proctor & Mac Kirby, 2009. "Removing Barriers to Facilitate Efficient Water Markets in the Murray Darling Basin – A Case Study from Australia," Socio-Economics and the Environment in Discussion (SEED) Working Paper Series 2009-02, CSIRO Sustainable Ecosystems.
    7. David Adamson & Thilak Mallawaarachchi & John Quiggin, 2007. "Water use and salinity in the Murray-Darling Basin: A state-contingent model ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 263-281, September.
    8. Mallawaarachchi, Thilak & Auricht, Christopher & Loch, Adam & Adamson, David & Quiggin, John, 2020. "Water allocation in Australia’s Murray–Darling Basin: Managing change under heightened uncertainty," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 345-369.
    9. Qureshi, Muhammad Ejaz & Connor, Jeffery D. & Kirby, Mac & Mainuddin, Mohammed, 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 1-21.
    10. Mike Young & Jim McColl, 2003. "Robust Reform: Implementing robust institutional arrangements to achieve efficient water use in Australia," Natural Resource Management Economics 03_003, Policy and Economic Research Unit, CSIRO Land and Water, Adelaide, Australia.
    11. Alexandros Maziotis & Elisa Calliari & Jaroslav Mysiak, 2013. "Robust Institutions for Sustainable Water Markets: A Survey of the Literature and the Way Forward," Working Papers 2013.58, Fondazione Eni Enrico Mattei.
    12. Carlos Gutiérrez-Martín & José A. Gómez-Limón & Nazaret M. Montilla-López, 2022. "Priority Water Rights for Irrigation at the River Basin Level. Do They Improve Economic Efficiency During Drought Periods?," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 36(10), pages 3737-3758, August.
    13. M. D. Young & J. C. McColl, 2003. "Robust Reform: The Case for a New Water Entitlement System for Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 225-234, June.
    14. Gómez-Limón, José A. & Gutiérrez-Martín, Carlos & Montilla-López, Nazaret M., 2021. "Priority water rights. Are they useful for improving water-use efficiency at the irrigation district level?," Agricultural Water Management, Elsevier, vol. 257(C).
    15. Hawke, Richard, 2006. "Improving the Water Allocation Framework in New Zealand," Occasional Papers 06/9, Ministry of Economic Development, New Zealand.
    16. Zaman, A.M. & Malano, H.M. & Davidson, B., 2009. "An integrated water trading-allocation model, applied to a water market in Australia," Agricultural Water Management, Elsevier, vol. 96(1), pages 149-159, January.
    17. Anna Heaney & Gavan Dwyer & Stephen Beare & Deborah Peterson & Lili Pechey, 2006. "Third-party effects of water trading and potential policy responses ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 277-293, September.
    18. Productivity Commission, 2008. "Towards Urban Water Reform: A Discussion Paper," Research Papers 0801, Productivity Commission, Government of Australia.
    19. Daniel Connell, 2010. "Sustainability and the National Water Initiative," Centre for Water Economics, Environment and Policy Papers 1006, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
    20. Davidson, Brian, 2004. "The Problems of Analysing Markets for Irrigation Water," 2004 Conference (48th), February 11-13, 2004, Melbourne, Australia 58400, Australian Agricultural and Resource Economics Society.

    More about this item

    Keywords

    Resource /Energy Economics and Policy;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aareaj:116976. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaresea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.