Agriculture Reference
In-Depth Information
Conclusions from the case
The water trading schemes in place in New South Wales in the Murray-Darling river
basin resulted from a long process of political negotiations and legislative reform,
triggered by increasing water scarcity and influenced by external pressures from the
interstate basin level and the national level. Water trading is embedded in a complex
system of rules and regulation that has been established through this political process and
that include various safeguards, such as the rules for the establishment of water
availability determinations and a phased transition towards full trading. Within this
legislative framework, further conditions for water allocations are determined by the local
water management committees, through the development of water sharing plans.
Key conclusions from the cases
Although the three cases covered two very different types of economic arrangements,
namely water protection funds or payment for environmental service schemes in New
York City and Quito and water markets in New South Wales, one key aspect clearly
emerges from the descriptions of the processes that preceded the described arrangements:
economic arrangements are the result of a (long) negotiation process among stakeholders.
The arrangements were put in place only when the stakeholders agreed on the adoption of
trading mechanisms or payment schemes. This was the result of a stakeholder process
which had its own pace and rationale and was not imposed by an external (government)
actor, but that was initiated after years of profound problems, causing stakeholders to
unite for action. Conflict and distrust among stakeholders was often part of this process,
but also a joint realisation that sound water management required a co-operative approach
and a joint recognition of the value of water.
A negotiated agreement among stakeholders is key, because the successful economic
arrangements in the described cases operate within well-defined boundaries. They are
part of a larger package of economic, administrative and institutional arrangements to
ensure that a broad range of societal values are included. Particularly, the rules and
regulations that shaped the administrative and institutional arrangements were the subject
of negotiations among stakeholders, before they trusted the 'invisible hand' of the market
to play its role. The agreements for the New York City Watershed and for the FONAG in
Quito are basically agreements on the way in which the economic funds are regulated:
how much funding is to be made available or how funds are to be collected, and what
guidelines and procedures apply for financing projects and activities with these funds.
Although much closer to a free market, the trade in water rights in the Murray-Darling
basin is also constrained by various licenses and trading rules and is embedded in an
institutional and regulatory system that safeguards environmental baseflows as well as
social fairness. The importance of the regulatory arrangements in the last case is further
underlined by the fact that existing laws were changed to enable the use of market
mechanisms.
Although previous studies on existing economic and market mechanisms in water
management did not focus on the process leading up to those mechanisms, the findings
here are very much in line with the findings from previous studies. As was mentioned in
an earlier section, those studies point out the need to balance economic arrangements with
institutional, regulatory and administrative arrangements, but they also point out the
importance of active stakeholder participation for the proper functioning of the resulting
hybrid economic/administrative/regulatory systems (Briscoe, 1996; World Bank, 1999).
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