Disquiet about Murray-Darling Environmental Flows

Australia should pride itself in having one of the most advanced and clever ways to secure environmental flows through the buy-back of water licenses by the Commonwealth Environmental Water Holder (see several previous posts on this blog explaining the CEWH). However, media recently reported some instances of disquiet with the way environmental water is managed by the agency. Some of these concerns have come from very wealthy individuals who have previously sold large amounts of water rights to the government. But, concerns also came from smaller irrigators who are tired by the endless bureaucratic processes in which they are asked to participate.
These are indications that problems start to emerge in allocating environmental water and in adequately engaging stakeholders in the Murray-Darling Basin (MDB). In terms of principles for allocating environmental water, a key is to attempt to allocate water where the benefits from it will be highest at the margin. Despite the inherent difficulties in evaluating benefits pertaining to environmental improvements, including provision of environmental water, one can usually sense when the benefits of feeding ever more water in a particular region are becoming small. This appears to be the economic reasoning behind the concern raised in relation to allocating large amounts of water to the Lower Lakes. In the same time, there seem to be other obvious areas where the allocation of water will yield greater benefit. In light of this, the CEWH should try to better target its environmental flows allocation, so as to maximise benefits to the whole community that pays for those flows (i.e. the Australian taxpayers).
In addition, the relevant agencies (CEWH, the Murray-Darling Basin Authority, and the state government departments and agencies) seem to be entangled in a never-ending process of consultation, evaluation, validation, etc. that on one hand alienates stakeholders, and on the other delays tackling the problem of optimal allocation of environmental water flows. I thought that one of the main points of the Murray-Darling Basin Plan was to centralise jurisdiction and the decision-making process, so as to improve the efficiency of basin management. However, it seems that the old habits of compartmentalised governance in the MDB have not completely dissipated, which makes things more complicated than they should be.
Securing water for the environment has been one of the big challenges in water management in the 21st Century. In Australia, we got the main principles right in that we have a mechanism to procure water for environmental purposes in an efficient way through market mechanisms. However, we are facing challenges in optimally allocating the environmental water flows that were secured in such an efficient way. Those challenges are to be expected, as we are dealing with complex problems. However, the early warning signs that something is not right should be taken seriously by the CEWH and MDBA, who should work towards improving allocation mechanism for environmental water and a more meaningful engagement with basin stakeholders!

Author: Tiho Ancev

Tiho Ancev is a Professor of Agricultural and Resource Economics in the School of Economics, University of Sydney. His main research areas are agricultural, environmental, natural resource and energy economics. Tiho’s main contributions have been in water economics and policy, economics of energy, economics of air pollution and climate change policies, and economics of precision agriculture and agricultural input use. He has published widely on these topics in top international peer reviewed journals. Tiho has led and contributed to national and international research projects in these research areas. He is currently the Managing Editor-in-Chief of the Australian Journal of Agricultural and Resource Economics.