Civil Engineering Reference
In-Depth Information
O
individual users are provided with entitlements to a share of the total pool;
O
entitlement rights and the quantity of water allocated to an entitlement
each season (a water allocation) are tradeable, so that ownership, control
and use can change over time;
O
the price is determined in the market by the value placed on water by
many buyers and sellers.
A fundamental aspect for establishing water markets is defining the water
resource unit within which a 'cap' is set and trading can occur. The water
resource unit is usually a river system or aquifer that is strongly internally
hydraulically connected, so that movement of water extraction within the
resource has a neutral effect on overall water availability. As a result, in
Australia there is no single water market, but rather hundreds of markets
defined by water resource units.
NWC (2011: 11) suggests that investment in facilitating markets will be
most beneficial where:
O
the water resource is fully developed with respect to consumptive use
O
there is high variability in water availability on a seasonal and/or annual
basis
O
there are a large number of water users
O
users have varying demands and degrees of flexibility to respond to water
shortages
O
water users are exposed to the cycles of global agricultural markets
O
demands for urban and environmental water are increasing
O
there is pressure for change in the existing structure of water-using
industries.
While water trading is widely enabled in Australia, in most cases trading
activity is low, because the units are small, there are only a small number
of water rights holders, and/or there is little competition for the available
water. NWC (2011: 25, 103) reports that over 90% of water trading
activity in Australia occurs in the connected perennial rivers in the southern
Murray-Darling Basin. These rivers consist of the River Murray and its
major tributaries each of which has large dams to capture wet season flows.
The dominant water use is irrigation, predominantly for dairy, rice and
horticulture. All the criteria listed above apply to this area. The connected
rivers do, however, span three states each with different systems for water
entitlements.
The volume of water allocation and entitlement trading has grown signifi-
cantly since the introduction of trading (Figure 7.3). The first significant
increase was in 1994-95, when there was a large drop in seasonal water avail-
ability for the first time since the introduction of water trading. The second
boost to water trading occurred in 2002-03. The severe drought in that year
prompted a step-change increase in the proportion of water allocations that
