The 2011 Basin Plan, Climate Change and the Buy-Back
The long-term success of the Basin Plan and the Buy-Back will be judged by the capacity of the allocated public funding to deliver water to the environment, potable water supplies for the community and water for irrigation. Water property rights in the Murray-Darling Basin can be divided into four distinct groups (ground water, high security, general security and supplementary) reflecting their inherent capacity to deliver water supplies in response to climatic conditions in a given year. The price paid for these entitlements reflects their ability to provide water under known climate variability. The optimal portfolio of water entitlements needs to encapsulate this information in order to determine which entitlements to purchase, the number needed and their location in the river system in order to deliver net social benefits. The optimal portfolio of entitlements is further complicated by the climate transitioning from a known mean and variance to a new mean and variance. The spatial impact of climate change on water resources is not uniform. Hence what is seen as a good portfolio now may in fact be sub-optimal in the future. The aim of this paper is to illustrate the benefits of a state contingent framework for describing the optimal portfolio of water entitlements under a changing climate. By explicitly determining the real value of water entitlements in normal, drought and wet states of nature, we can determine the Buy-Back’s ability to achieve the Basin Plan’s goals and suggest an optimal entitlement mix to deliver long-term economic, social and environmental benefits under climate change.
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- C.J. O'Donnell & W.E. Griffiths, 2004.
"Estimating State-Contingent Production Frontiers,"
Department of Economics - Working Papers Series
911, The University of Melbourne.
- Adamson, David & Mallawaarachchi, Thilak & Quiggin, John, 2006.
"Water use and salinity in the Murray-Darling Basin: a state contingent model,"
Risk and Sustainable Management Group Working Papers
149861, University of Queensland, School of Economics.
- 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, 09.
- Adamson, David & Mallawaarachchi, Thilak & Quiggin, John C., 2002. "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), September.
- David Adamson & Thilak Mallawaarachchi & John Quiggin, 2006. "Water use and salinity in the MurrayÐDarling Basin: a state-contingent model," Murray-Darling Program Working Papers WP5M06, Risk and Sustainable Management Group, University of Queensland.
- Johnston, Christopher R. & Vance, George F. & Ganjegunte, Girisha K., 2008. "Irrigation with coalbed natural gas co-produced water," Agricultural Water Management, Elsevier, vol. 95(11), pages 1243-1252, November.
- Adamson, David & Oss-Emer, Max & Quiggin, John, 2011. "Property Rights and Water Buy Back in Australia's Murray-Darling Basin," Risk and Sustainable Management Group Working Papers 149883, University of Queensland, School of Economics.
- Robert Chambers & John Quiggin, 2007. "Information value and efficiency measurement for risk-averse firms," Journal of Productivity Analysis, Springer, vol. 27(3), pages 197-208, June.
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