The renewed disputes over environmental flows: What’s it all about?

Numerous newspaper and other media stories emerged over the last couple of weeks reporting on the dispute between South Australian Government and the rest of the MDB partners (VIC, NSW and QLD state governments, plus the Federal government) over environmental flows to be delivered under the MDB plan signed in 2012.
I wrote early this year about the problems with environmental flows and it seems that the situation is escalating further.
The current dispute is about two related, but independent issues: one is the reneging on the MDB plan’s conditional provision (one has to question the wisdom of agreeing to a condition of ‘not being detrimental to river communities’ in the first place!) of additional 450 GL for environmental flows by 2024, which are in addition to the provisioned and likely to be delivered 2750 GL (the CEWH already holds entitlements for nearly 2500 GL); the second is about a proposal by the MDB Authority to reduce recovery of water for environmental purposes in the Northern Basin from the earlier planned 390 GL to 320 GL.
So, overall we talk about a reduction of 520 GL of environmental water: not peanuts, but also not a catastrophe as some present it, when you compare it to nearly 2500 GL that are already there for environmental flows.
However, a key point seems to be missed here: the stipulation of the MDB plan is that the additional 450 GL have to come from willing sellers or from state government infrastructure projects that will improve irrigation efficiency and thus reduce the irrigation demand for water, allowing the 450 GL to go to the environment. NSW, VIC and QLD are reckoning that this second option is too expensive for them, and are not going ahead with it. And they are probably right: as has been argued many times by economists, investing in improving irrigation efficiency is not the most cost-effective way to secure water for the environment.
On the other hand, the Commonwealth is worried about the ‘willing sellers’ bit. Not that there are no willing sellers – there will always be for the right price–, but that’s exactly what the Feds are worried about: they don’t want to let the CEWH bump up the price at which they are buying back water. The extra 450 GL could be secured from willing sellers and delivered for environmental flows, but it might be at a price that is very high, which the Commonwealth does not want to pay under the current fiscal situation.
So, at the end it is all about inter state and federal politics, and very little about the environment or about economics! Why am I not surprised! It has been the way of dealing with Murray-Darling since irrigation first started in Australia, and it unfortunately seems to continue that way!

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.