IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v66y2020icp345-369.html
   My bibliography  Save this article

Water allocation in Australia’s Murray–Darling Basin: Managing change under heightened uncertainty

Author

Listed:
  • Mallawaarachchi, Thilak
  • Auricht, Christopher
  • Loch, Adam
  • Adamson, David
  • Quiggin, John

Abstract

Historically, water resource policy in the Murray–Darling Basin (Basin) has taken a pro-farmer orientation leaving the environment to become the residual claimant. Around 1990, the attention was focused on minimisingoveruse that led to on-farm productivity losses and developing a market for water to help define opportunity costs of water in irrigation. More recently, the scope has been extended to include explicit allocations for the environment. However, the failure to agree on policies for recovering water for the environment in the implementation of the Basin Plan has extended avenues for rent seeking and cost shifting, thereby raising the total costs of reform. A focus on water use per se, rather than system productivity, and sidelining of market-based approaches in preference for government investment in water recovery and water use efficiency has complicated risk assignment amongst different users. Recurring droughts and resultant scarcity of water has made negotiations further complicated and controversial, broadening the gulf between environmentalists seeking public good outcomes and irrigators seeking private profit.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:ecanpo:v:66:y:2020:i:c:p:345-369
    DOI: 10.1016/j.eap.2020.01.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592619304096
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.eap.2020.01.001?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ekaterina Nikitina, 2019. "Opportunity Cost of Environmental Conservation in the Presence of Externalities: Application to the Farmed and Wild Salmon Trade-Off in Norway," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(2), pages 679-696, June.
    2. Adamson, David & Mallawaarachchi, Thilak & Quiggin, John C., 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 1-19.
    3. John Freebairn & John Quiggin, 2006. "Water rights for variable supplies ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 295-312, September.
    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. Adamson, David & Mallawaarachchi, Thilak & Quiggin, John C., 2006. "State-contingent modelling of the Murray Darling Basin: implications for the design of property rights," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 137977, Australian Agricultural and Resource Economics Society.
    6. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    7. David Adamson & Adam Loch, 2018. "Achieving environmental flows where buyback is constrained," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(1), pages 83-102, January.
    8. Quiggin, John C., 2001. "Environmental economics and the Murray-Darling river system," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 45(1), pages 1-28.
    9. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    10. Marshall, Graham R., 2013. "Transaction Costs, Collective Action And Adaptation In Managing Social-Ecological Systems," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152166, Australian Agricultural and Resource Economics Society.
    11. Randall, Alan, 1981. "Property Entitlements And Pricing Policies For A Maturing Water Economy," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 25(3), pages 1-26, December.
    12. Crean, Jason & Parton, Kevin & Mullen, John & Jones, Randall, 2013. "Representing climatic uncertainty in agricultural models – an application of state-contingent theory," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(3).
    13. Haoyang Li & Jinhua Zhao, 2018. "Rebound Effects of New Irrigation Technologies: The Role of Water Rights," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(3), pages 786-808.
    14. Daniel McFadden, 2009. "The human side of mechanism design: a tribute to Leo Hurwicz and Jean-Jacque Laffont," Review of Economic Design, Springer;Society for Economic Design, vol. 13(1), pages 77-100, April.
    15. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521785235.
    16. Heaney, Anna & Dwyer, Gavan & Beare, Stephen & Peterson, Deborah C. & Pechey, Lili, 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 1-17, September.
    17. Marshall, Graham R., 2013. "Transaction costs, collective action and adaptation in managing complex social–ecological systems," Ecological Economics, Elsevier, vol. 88(C), pages 185-194.
    18. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, Oxford University Press, vol. 75(4), pages 643-669.
    19. Hall, Nigel H. & Mallawaarachchi, Thilak & Batterham, Robert L., 1991. "The Market for Irrigation Water: A Modelling Approach," 1991 Conference (35th), February 11-14, 1991, Armidale, Australia 145889, Australian Agricultural and Resource Economics Society.
    20. Alan Randall, 1981. "Property Entitlements And Pricing Policies For A Maturing Water Economy," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 25(3), pages 195-220, December.
    21. Karl Widerquist, 2018. "The Bottom Line," Exploring the Basic Income Guarantee, in: A Critical Analysis of Basic Income Experiments for Researchers, Policymakers, and Citizens, chapter 0, pages 93-98, Palgrave Macmillan.
    22. 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.
    23. Mike Young & Jim McColl, 2002. "Robust Separation:A search for a generic framework to simplify registration and trading of interests in natural resources," Natural Resource Management Economics 02_004, Policy and Economic Research Unit, CSIRO Land and Water, Adelaide, Australia.
    24. Jean-Paul Chavas, 2011. "Agricultural policy in an uncertain world," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 38(3), pages 383-407, August.
    25. John Quiggin, 1988. "Murray River Salinity—An Illustrative Model," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(3), pages 635-645.
    26. 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.
    27. Sherzod B. Akhundjanov & Felix Muñoz-García, 2019. "Transboundary Natural Resources, Externalities, and Firm Preferences for Regulation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(1), pages 333-352, May.
    28. Daniel McFadden, 2009. "The human side of mechanism design: a tribute to Leo Hurwicz and Jean-Jacques Laffont (Publisher’s Erratum)," Review of Economic Design, Springer;Society for Economic Design, vol. 13(4), pages 377-377, December.
    29. Thilak Mallawaarachchi & Céline Nauges & Orion Sanders & John Quiggin, 2017. "State-contingent analysis of farmers’ response to weather variability: irrigated dairy farming in the Murray Valley, Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 61(1), pages 36-55, January.
    30. Dincecco,Mark, 2017. "State Capacity and Economic Development," Cambridge Books, Cambridge University Press, number 9781108439541, October.
    31. Dwyer, Gavan & Douglas, Robert A. & Peterson, Deborah C. & Chong, Joanne & Maddern, Kate, 2006. "Irrigation externalities: pricing and charges," Staff Working Papers 31923, Productivity Commission.
    32. 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.
    33. Adam Loch & David Adamson, 2015. "Drought and the rebound effect: a Murray–Darling Basin example," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 79(3), pages 1429-1449, December.
    34. Loch, Adam & Wheeler, Sarah Ann & Settre, Claire, 2018. "Private Transaction Costs of Water Trade in the Murray–Darling Basin," Ecological Economics, Elsevier, vol. 146(C), pages 560-573.
    35. Chambers, Robert G., 2002. "Information, incentives, and the design of agricultural policies," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 34, pages 1751-1825, Elsevier.
    36. Jason Crean & Kevin Parton & John Mullen & Randall Jones, 2013. "Representing climatic uncertainty in agricultural models – an application of state-contingent theory," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(3), pages 359-378, July.
    37. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Clevo Wilson & Wasantha Athukorala & Benno Torgler & Robert Gifford & Maria A. Garcia-Valiñas & Shunsuke Managi, 2021. "Willingness to pay to ensure a continuous water supply with minimum restrictions," Empirical Economics, Springer, vol. 61(3), pages 1519-1537, September.
    2. 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).
    3. Monjardino, Marta & Harrison, Matthew T. & DeVoil, Peter & Rodriguez, Daniel & Sadras, Victor O., 2022. "Agronomic and on-farm infrastructure adaptations to manage economic risk in Australian irrigated broadacre systems: A case study," Agricultural Water Management, Elsevier, vol. 269(C).
    4. 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.
    5. Guy M. Robinson & Bingjie Song, 2023. "Managing Water for Environmental Provision and Horticultural Production in South Australia’s Riverland," Sustainability, MDPI, vol. 15(15), pages 1-20, July.

    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. Carlos Mario Gómez Gómez & C. D. Pérez-Blanco & David Adamson & Adam Loch, 2018. "Managing Water Scarcity at a River Basin Scale with Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-31, January.
    2. Claire Settre & Jeff Connor & Sarah Ann Wheeler, 2017. "Reviewing the Treatment of Uncertainty in Hydro-economic Modeling of the Murray–Darling Basin, Australia," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1-35, July.
    3. Adamson, David & Mallawaarachchi, Thilak & Quiggin, John C., 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 1-19.
    4. Sarah Ann Wheeler, 2022. "Debunking Murray‐Darling Basin water trade myths," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(4), pages 797-821, October.
    5. C. D. Pérez-Blanco & E. E. Koks & E. Calliari & J. Mysiak, 2018. "Economic Impacts of Irrigation-Constrained Agriculture in the Lower Po Basin," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-38, January.
    6. Adam Loch & Christopher Auricht & David Adamson & Luis Mateo, 2021. "Markets, mis‐direction and motives: A factual analysis of hoarding and speculation in southern Murray–Darling Basin water markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(2), pages 291-317, April.
    7. Productivity Commission, 2008. "Towards Urban Water Reform: A Discussion Paper," Research Papers 0801, Productivity Commission, Government of Australia.
    8. Adamson, David & Mallawaarachchi, Thilak & Quiggin, John, 2009. "Declining inflows and more frequent droughts in the Murray–Darling Basin: climate change, impacts and adaptation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(3), pages 1-22.
    9. Alauddin, Mohammad & Quiggin, John, 2008. "Agricultural intensification, irrigation and the environment in South Asia: Issues and policy options," Ecological Economics, Elsevier, vol. 65(1), pages 111-124, March.
    10. Juliane Haensch & Sarah Ann Wheeler & Alec Zuo & Henning Bjornlund, 2016. "The Impact of Water and Soil Salinity on Water Market Trading in the Southern Murray–Darling Basin," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 1-26, March.
    11. Pérez-Blanco, C.D. & Gutiérrez-Martín, C., 2017. "Buy me a river: Use of multi-attribute non-linear utility functions to address overcompensation in agricultural water buyback," Agricultural Water Management, Elsevier, vol. 190(C), pages 6-20.
    12. John Quiggin, 2006. "Repurchase of renewal rights: a policy option for the National Water Initiative ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 425-435, September.
    13. Quiggin, John C., 2001. "Environmental economics and the Murray-Darling river system," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 45(1), pages 1-28.
    14. David Adamson & Adam Loch, 2018. "Achieving environmental flows where buyback is constrained," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(1), pages 83-102, January.
    15. John Quiggin & David Adamson & Sarah Chambers & Peggy Schrobback, 2010. "Climate Change, Uncertainty, and Adaptation: The Case of Irrigated Agriculture in the Murray–Darling Basin in Australia," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 58(4), pages 531-554, December.
    16. Peggy Schrobback & David Adamson & John Quiggin, 2011. "Turning Water into Carbon: Carbon Sequestration and Water Flow in the Murray–Darling Basin," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(1), pages 23-45, May.
    17. Guifang Li & Dingyang Zhou & Minjun Shi, 2019. "How Do Farmers Respond to Water Resources Management Policy in the Heihe River Basin of China?," Sustainability, MDPI, vol. 11(7), pages 1-19, April.
    18. Ancev, Tiho, 2015. "The role of the commonwealth environmental water holder in annual water allocation markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 59(1), January.
    19. Quiggin, John & Adamson, David & Chambers, Sarah & Schrobback, Peggy, 2009. "Climate change, mitigation and adaptation: the case of the Murray-Darling Basin in Australia," Risk and Sustainable Management Group Working Papers 149878, University of Queensland, School of Economics.
    20. Wallace E. Oates & Paul R. Portney & Wallace E. Oates & Paul R. Portney, 2004. "The Political Economy of Environmental Policy," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 1, pages 3-30, Edward Elgar Publishing.

    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:eee:ecanpo:v:66:y:2020:i:c:p:345-369. 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: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    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.