Can Water Allocation Buyback Schemes be Equitable for Impacted Communities? - Water and Agriculture: Sustainability, Markets and Policies - page 115

Rural adjustment policy tools
A great deal of effort has been invested in negotiations between key stakeholders in
the exploration of options to develop a range of policy tools needed to create a sustainable
water market that takes the needs of the environment into account, whilst allowing and
encouraging industry development. Much of the discussion has centred on structuring the
current water market into a cohesive and completely national market. However, in the
natural resource management context, there are few instances where a pure system of
private property rights will guarantee the outcomes the Australian community desires,
because of the ongoing tensions between competing commercial and environmental
interests.
The policy-makers' aim is to assist with adjustment at the community as well as the
individual level, so that all members of the community are able to adjust to the new
economic, social and environmental structure brought about through policy changes, to
ensure all water resources are used within sustainable limits; and to foster the
development of a national water market where the environment is a stakeholder. To date
most structural change has focussed on acknowledging the environment as a legitimate
water user and on improving operational efficiency of water transport and management
systems, to release more water to the environment and for further economic development.

Many water management discussions, particularly those related to the Murray-
Darling Basin, are currently about the purchase, by governments, of water entitlements to
surrender back to the environment. The literature generally acknowledges that in many
cases, structural change will occur faster than the 'natural' flow on effect of any
adjustment, and that this might cause hardships that would unjustly afflict members of a
wider rural community. In the case of irrigation areas, much of the rural community has
evolved around servicing the irrigators, who are the beneficiaries of any significant water
allocation buyback scheme. Given such changes would be driven by government policy
changes, should government play a role in easing the adjustment of the impacted rural
economies, enabling them to survive essentially what is a water reallocation process?

There are, however, some gaps between the policy tools suggested and designed in
literature, and the intentions of COAG and the National Water Initiative.
First of all, the term “socio-economic” is generally limited in literature to irrigators
themselves and their social welfare. The language of COAG, the NWI Agreement and
the NWC Act 8 reflects a broader view of social capital, one that embraces not only other
irrigators, but also the support structures such as irrigation manufacturers, food
processing plants and other businesses along the agricultural supply chain. Rural
adjustment policy discussions should broaden to include these businesses.

Second, the literature considering the impact of water policy changes also discusses
the issue of “stranded assets” and proposes models to compensate those who have
invested in assets such as dams and irrigation channels that will no longer be required. In
this context, stranded assets refers to the infrastructure that becomes redundant when the
water that it was developed for has been transferred away to another use or location, thus
rendering the infrastructure unnecessary or of a utilisation level well below its designed
capacity.

8. National Water Commission Act 2004.