Declaración producción gas natural. 2012-2021

Cessation of non-strategic water entitlement purchasing conformed to a recommendation from the Parliamentary Inquiry into the impact of the Guide (Australian Parliament, 2011). Specifically, the inquiry called for strategic water entitlement purchasing that prioritised low community impacts (i.e. where consequences for communities had been identified prior to purchase) and dealings with proactive sellers. The inquiry also recommended (amongst other things) that: i) the identification and implementation of viable efficiency works for the environment should be done immediately; ii) tax impediments to efficiency investment should be addressed; iii) tax-based incentives for irrigation efficiency uptakes should be introduced; iv) there should be immediate investment in R&D for efficiency uptakes; and v) a national water fund should be established to achieve these outcomes.

In February 2011 the federal government announced that, in response to irrigator concerns about the rural effects of water purchasing in sMDB districts, it would shift its program emphasis to smaller and rolling tender rounds to provide a measured and steady pace of water recovery (NWC, 2011b). Water purchases had to align with new criteria including: closer matches of purchasing locations to areas with scientifically proven environmental water needs; a demonstrated capacity to meet environmental needs; and cost effectiveness of the purchases relative to current market prices. In response, federal purchases in the sMDB fell from 488 GL in 2009/10 to 221 GL in 2010/11 and largely emphasized high reliability water entitlements over other reliability types (NWC, 2011b). The market price for sMDB water entitlements also fell by around 15% in 2010/11 (Waterfind, 2012). This price fall was largely consistent with modelling by Hone et al. (2010) that estimated federal government intervention in the water entitlement market had increased prices between 13% (northern MDB) and 18% (southern MDB) overall.

An emphasis on infrastructure investment has provided the basis for an additional $1.7 billion investment into water recovery via on-farm efficiencies such as channel- lining and farm evaporation reduction technology, as well as larger barrier reduction projects to improve environmental watering (Wroe, 2012). As a consequence, the total RtB water recovery target increased to 3,200 GL by 2024; or an additional 450 GL on current Basin Plan arrangements (MDBA, 2012c). On-farm benefits from infrastructure investment include greater farm flexibility and viability, reduced labour inputs and nutrient runoff and production stability from efficient supply (Burke, 2012). Community advantages can also accrue from short-term and long-term labour and capital injections, improved property values, and enhanced secondary/tertiary sector viability and adjustment periods to water reform requirements (MDBA, 2012d). 10 Where irrigation losses contribute minimal return-flows, infrastructure investments can also be cost-effective (Qureshi et al., 2010).

However, the savings from such projects are often called into question (Ward et al., 2007) and irrigators can be burdened with higher variable farm operating costs, as well as enduring water structure operation, maintenance and refurbishment costs (Crase, 2012a). Viable projects can also be difficult to identify, as many fail benefit- cost tests or contradict NWI requirements from state investments in water infrastructure (Crase and O'Keefe, 2009). Finally, total water recovery from

10

Although for an opposing argument to public social welfare benefits from infrastructure investment in private irrigation works see Crase (2012b).

infrastructure investment may not exceed 600 GL due to improvement limits or questionable reductions in seepage/evaporation losses (Quiggin, 2006b).

In response to the parliamentary inquiry recommendations, the federal government announced a range of further reforms in the sMDB. Specifically, in April 2012 the government announced that it would suspend all non-strategic water purchases in the MDB and shift its RtB spending emphasis toward infrastructure investment (ABC News, 2012b). By way of tangible support for this approach, in early November 2012 the federal government announced that it would seek to return a further 450 GL of water to the environment via an additional $1.77 billion funding package (i.e. on top of the existing SRWU program funds) toward infrastructure investments within the sMDB. The target date for returning water to the system was also extended out beyond 2019 to 2024.

Further research by Loch et al. (under review-b) suggests that there is not the increased demand for greater water infrastructure investment as commonly perceived. They found that irrigators marginally prefer infrastructure expenditure above the sum of a set of market-based options (namely water entitlement purchasing, temporary water market products and exit- based packages). However, their infrastructure preference weighting is less than current budget expenditure, and the use of market-based options has higher support from irrigators than current policy recognises.

3.5. Key points

The major points from this section include:

 Australia’s progress toward water markets has been long and costly. However, it is clearly apparent that during this time water trade has become entrenched as a tool to manage water scarcity, particularly during severe shortages associated with drought (e.g. the Millennium drought). However, active water markets are still mainly limited to the sMDB.

 A major element from this section is that periods of extreme dry (and wet) have seen water markets expand and develop as a tool for the effective and efficient reallocation of water resources between competing uses and users. This has primarily provided a basis for assisting sectoral, structural and community adjustment particularly in rural areas. As future climate change is set to exacerbate the twin issues of water scarcity and variability to a potentially greater degree than ever before, the usefulness of water markets and an adaptation tool for water users is clearly evident.

 The following section thus details the expected effects of climate change for water supply and agriculture in Australia and the sMDB in particular as a basis for examining how water markets might assist adaptation in that context.