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Economic assessment of acquiring water for environmental flows in the Murray Basin

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  • Qureshi, Muhammad Ejaz
  • Connor, Jeffery D.
  • Kirby, Mac
  • Mainuddin, Mohammed

Abstract

This article is an economic analysis of reallocating River Murray Basin water from agriculture to the environment with and without the possibility of interregional water trade. Acquiring environmental flows as an equal percentage of water allocations from all irrigation regions in the Basin is estimated to reduce returns to irrigation. When the same volume of water is taken from selected low-value regions only, the net revenue reduction is less. In all scenarios considered, net revenue gains from freeing trade are estimated to outweigh the negative revenue effects of reallocating water for environmental flows. The model accounts for how stochastic weather affects market water demand, supply and requirements for environmental flows. Net irrigation revenue is estimated to be $75 million less than the baseline level for a scenario involving reallocating a constant volume of water for the environment in both wet and dry years. For a more realistic scenario involving more water for the environment in wet and less in dry years, estimated net revenue loss is reduced by 48 per cent to $39 million. Finally, the external salinity-related costs of water trading are estimated at around $1 million per annum, a quite modest amount compared to the direct irrigation benefits of trade.

Suggested Citation

  • 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. 0(Issue 3), pages 1-21.
  • Handle: RePEc:ags:aareaj:118333
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    File URL: http://ageconsearch.umn.edu/record/118333/files/j.1467-8489.2007.00383.x.pdf
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    References listed on IDEAS

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    1. Rosegrant, M. W. & Ringler, C. & McKinney, D. C. & Cai, X. & Keller, A. & Donoso, G., 2000. "Integrated economic-hydrologic water modeling at the basin scale: the Maipo river basin," Agricultural Economics, Blackwell, vol. 24(1), pages 33-46, December.
    2. Quiggin, John C., 1991. "Salinity Mitigation in the Murray River System," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 0(Number 01), pages 1-13, April.
    3. 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.
    4. 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.
    5. 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. 0(Issue 3), pages 1-21, September.
    6. Rosegrant, M. W. & Ringler, C. & McKinney, D. C. & Cai, X. & Keller, A. & Donoso, G., 2000. "Integrated economic-hydrologic water modeling at the basin scale: the Maipo river basin," Agricultural Economics, Blackwell, vol. 24(1), pages 33-46, December.
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    Keywords

    Resource /Energy Economics and Policy;

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