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

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

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/agwat

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  1. Qureshi, Muhammad Ejaz & Connor, Jeffery D. & Kirby, Mac & Mainuddin, Mohammed, 2002. "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), September.
  2. 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.
  3. Brooks, Robert & Harris, Edwyna, 2008. "Efficiency gains from water markets: Empirical analysis of Watermove in Australia," Agricultural Water Management, Elsevier, vol. 95(4), pages 391-399, April.
  4. Deborah Peterson & Gavan Dwyer & David Appels & Jane Fry, 2005. "Water Trade in the Southern Murray-Darling Basin," The Economic Record, The Economic Society of Australia, vol. 81(s1), pages S115-S127, 08.
  5. 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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  7. 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.
  8. 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.
  9. 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.
  10. Easter, K William & Rosegrant, Mark W & Dinar, Ariel, 1999. "Formal and Informal Markets for Water: Institutions, Performance, and Constraints," World Bank Research Observer, World Bank Group, vol. 14(1), pages 99-116, February.
  11. 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.
  12. Wheeler, Sarah Ann & Bjornlund, Henning & Shanahan, Martin & Zuo, Alec, 2008. "Price elasticity of water allocations demand in the Goulburn–Murray Irrigation District," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(1), March.
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