National Water Initiative–The Economics of Water Management in Australia–An Overview - Water and Agriculture: Sustainability, Markets and Policies - page 11

A step change improvement in water accounting
Along with secure property rights, most market instruments require an agreed
standard of measuring the commodity as a precondition for their operation.
The National Water Commission sees proper measurement, monitoring and reporting
systems for water as among the highest priorities for the NWI.
In the NWI, governments have committed to a series of actions to improve
Australia's water resource accounting (NWI paragraphs 80-89).
In particular, the outcome for these actions is to “ensure that adequate measurement,
monitoring and reporting systems are in place in all jurisdictions, to support public and
investor confidence in the amount of water being traded, extracted for consumptive use,
and recovered and managed for environmental and other public benefit outcomes ” (NWI
paragraph 80).
Most states are currently in the process of expanding metering of water used for
irrigation. Australia has almost universal metering of water used in residential and
business settings in major metropolitan areas.
Adequate metering practices and accounting systems for water are, of course,
necessary for effective charging for water use, and to support water trading (e.g., to
ensure that water which is traded is available to be traded, is delivered to the buyer, and
that information about water trades is made available to inform the market).
Less sophisticated measurement and monitoring of water may be entirely appropriate
in catchments where the resource is relatively undeveloped and there are few production
pressures. In such cases the need to improve monitoring is driven by the need to better
understand the resource so as to better manage its environmental values. For example,
Land and Water Australia (an Australian Government natural resource management
knowledge broker) has a current call for projects to better understand northern Australian
rivers (www.lwa.gov.au).
Clear assignment of risk for changes in water allocation
As noted above, the creation of share-based water access entitlements establishes a
secure right to access the water resource. In the NWI, governments have also committed
to establish a level of security around the size of the consumptive pool of water which
entitlement holders can access. To this end, the NWI establishes a framework for
assigning the risks of future reductions in the availability of water for consumptive use
(NWI paragraphs 46-51).
The risk assignment framework only operates on the premise that existing over-
allocation of the resource is being addressed. It also operates in the context that share-
based water access entitlements have been established, effective water plans have
determined the water allocation, and regular reporting of progress on plans is occurring.
In part, to enable time to create this context, the NWI risk assignment framework
becomes operational after 2014.
The NWI framework seeks to assign risks for reductions in water allocations based on
the cause of the reduction. Risk is to be assigned along the following lines:
holders of water access entitlements bear the risk of any reduction in water allocation
which arises from climatic changes or natural events (such as bushfires);