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Rural Water Use and the Environment: The Role of Market Mechanisms


  • Anonymous


The Productivity Commission released its final research report into "Rural Water Use and the Environment: The Role of Market Mechanisms" in August 2006. The report indicates that there is scope for markets to play a greater role in improving the efficient use of water, including for environmental purposes. The Commission suggests that governments should give greater recognition to the integrated nature of water resources and use markets to more efficiently allocate water among competing users. Water for environmental purposes can be obtained cost effectively through purchasing a range of water products from willing sellers on the open market, including, but not limited to, water entitlements. This can often be more cost effective than investing in new infrastructure works: Markets can also be used to achieve other environmental goals, such as managing salinity, but need to be targeted to location and scale - no "one size" fits all. Unless accounted for, climate change, farm dams, vegetation and land-use change, groundwater extractions or changes in irrigation management have the potential to undermine efforts to achieve environmental goals and affect the reliability of existing entitlements. Governments should press ahead with the National Water Initiative, especially refining and clarifying property rights, undertaking further research on water systems and improving water accounting.

Suggested Citation

  • Anonymous, 2006. "Rural Water Use and the Environment: The Role of Market Mechanisms," Commissioned Studies 8020, Productivity Commission.
  • Handle: RePEc:ags:prodcs:8020

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    References listed on IDEAS

    1. 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.
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    Cited by:

    1. O'Sullivan, Dan, 2006. "Emerging Rights and Risks in the Management of Water Quantity and Water Quality," 2006 Conference, August 24-25, 2006, Nelson, New Zealand 31960, New Zealand Agricultural and Resource Economics Society.
    2. R. Quentin Grafton & Tom Kompas, 2006. "Sydney Water: Pricing for Sustainability," Economics and Environment Network Working Papers 0609, Australian National University, Economics and Environment Network.
    3. O'Sullivan, Dan, 2006. "Emerging Rights and Risks in the Management of Water Quantity and Water Quality," 2006 Conference, August 24-25, 2006, Nelson, New Zealand 31960, New Zealand Agricultural and Resource Economics Society.
    4. McClintock, Anthea, 2009. "Investment in irrigation technology: an application of real options analysis," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 47934, Australian Agricultural and Resource Economics Society.
    5. 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.
    6. Kym Anderson & Peter Lloyd & Donald Maclaren, 2007. "Distortions to Agricultural Incentives in Australia Since World War II," The Economic Record, The Economic Society of Australia, vol. 83(263), pages 461-482, December.
    7. 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.
    8. Freebairn, John W., 2012. "Risk Aversion and Urban Water Decisions," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124206, Australian Agricultural and Resource Economics Society.
    9. Gary D. Libecap & R. Quentin Grafton & Clay Landry & J.R. O’Brien, 2009. "Markets - Water Markets: Australia’s Murray-Darling Basin and the US Southwest," ICER Working Papers 15-2009, ICER - International Centre for Economic Research.
    10. Marianne LEFEBVRE & Lata GANGADHARAN & Sophie THOYER, 2011. "Do Security-differentiated Water Rights Improve Efficiency?," Working Papers 11-14, LAMETA, Universtiy of Montpellier, revised Jun 2012.
    11. Heather Roper & Chris Sayers & Andrew Smith, 2006. "Stranded Irrigation Assets," Staff Working Papers 0605, Productivity Commission, Government of Australia.


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