Water Resources Management

, Volume 30, Issue 3, pp 913–926 | Cite as

On the Marketisation of Water: Evidence from the Murray-Darling Basin, Australia

  • R. Quentin Grafton
  • James Horne
  • Sarah Ann Wheeler
Article

Abstract

Policy makers will increasingly have to turn to water demand management in the future to respond to greater water scarcity. Water markets have long been promoted as one of the most efficient ways to reallocate water by economists, but have also been subject to much criticism due to their possible social, economic and environmental impacts. We engage with common critical perceptions of water markets by presenting first-hand evidence of their effects in the Murray-Darling Basin (MDB), Australia. Water markets in the MDB, as developed within an appropriate institutional framework and coupled with comprehensive water planning, have: (1) helped deliver improved environmental outcomes; (2) assisted irrigators’ adaptation responses to climate risks, such as drought; (3) increased the gross valued added of farming; and (4) been regulated in ways to meet social goals. If water markets are embedded within fair and effective meta-governance and property right structures, the potential exists for marketisation to increase efficiency, promote fairness in terms of initial water allocations, and to improve environmental outcomes.

Keywords

Water markets Murray-Darling Basin Economic impacts 

Notes

Acknowledgments

The authors acknowledge the helpful comments of the journal’s editor and reviewers. This research was supported by ARC Future Fellowship FT140100773 and ARC Discovery project DP140103946.

References

  1. Adamson D, Loch A (2014) Possible feedbacks from ‘gold-plating’ irrigation. Agric Water Manag 145:134–144CrossRefGoogle Scholar
  2. Alston M, Whittenbury K (2011) Climate change and water policy in Australia’s irrigation areas: a lost opportunity for a partnership model of governance. Environ Polit 20:899–917CrossRefGoogle Scholar
  3. Anderson T, Leal D (2001) Free market environmentalism, revised edn. Palgrave, New YorkCrossRefGoogle Scholar
  4. Australian Bureau of Statistics (2013) 4610.0 - Water account, Australia, 2011–12. ABS, CanberraGoogle Scholar
  5. Australian Government (2014) Water act 2007. http://www.comlaw.gov.au/Details/C2014C00194. Accessed 3 September 2014
  6. Bakker K (2007) The "commons" versus the "commodity": alter-globalization, anti-privatization and the human right to water in the global south. Antipode 39:430–455CrossRefGoogle Scholar
  7. Barlow M (2007) Blue covenant: the global water crisis and the coming battle for the right to water. The New Press, New YorkGoogle Scholar
  8. Barlow M, Clarke T (2002) Who owns water? The Nation 2:11–14Google Scholar
  9. Bauer C (2004) Results of Chilean water markets: empirical research since 1990. Water Resour Res. 40:W09S06, doi:10.1029/2003WR002838
  10. Bell S, Quiggin J (2008) The limits of markets: the politics of water management in rural Australia. Environ Polit 17(5):712–729CrossRefGoogle Scholar
  11. Bjornlund H, Wheeler S, Cheesman J (2011) Irrigators, water trading, the environment, and debt: perspectives and realities of buying water entitlements for the environment. In: Grafton Q, Connell D (eds) Basin futures: water reform in the Murray-Darling Basin. ANU Press, Canberra, pp. 291–302Google Scholar
  12. Briscoe J, Anguita Sala P, Pena TH (1998) Managing water as an economic resource: reflections on the Chilean experience. Environmental Economics Series, The World BankGoogle Scholar
  13. Burness HS, Quirk JP (1979) Appropriate water rights and efficient allocation of resources. Am Econ Rev 69:25–37Google Scholar
  14. COAG (1994) Council of Australian governments’ communiqué 25 February 1994, Attachment A – Water Resour Policy. http://archive.coag.gov.au/coag_meeting_outcomes/1994-02-25/index.cfm - water. Accessed 16 September 2014
  15. Connor J, Franklin B, Loch A, Kirby M, Wheeler S (2013) Trading water to improve environmental flow outcomes. Water Resour Res 49:4265–4276CrossRefGoogle Scholar
  16. Garrido S (2011) Governing scarcity: water markets, equity and efficiency in pre-1950s eastern Spain. Int J Commons 5:513–524CrossRefGoogle Scholar
  17. Goldman M (2007) How “water for all!” policy became hegemonic: the power of the world bank and its transnational policy networks. Geoforum 38:786–800CrossRefGoogle Scholar
  18. Grafton RQ (2010) How to increase the cost effectiveness of water reform and environmental flows in the Murray-Darling Basin. Agenda 17:17–40Google Scholar
  19. Grafton RQ, Chu L, Stewardson M, Kompas T (2011) Optimal dynamic water allocation: irrigation extractions and environmental flows in the Murray River, Australia. Water Resour Res 47:W00G08. doi:10.1029/2010WR009786
  20. Grafton RQ, Horne J (2014) Water markets in the Murray-Darling Basin. Agric Water Manag 145:61–71CrossRefGoogle Scholar
  21. Grafton RQ, Libecap GD, Edwards EC, O’Brien RJ, Landry C (2012) Comparative assessment of water markets: insights from the Murray–Darling Basin of Australia and the Western USA. Water Policy 14:175–193CrossRefGoogle Scholar
  22. Grafton RQ, Pittock J, Davis R, Williams J, Fu G, Warburton M, Udall B, McKenzie R, You X, Che N, Connell D, Jiang Q, Kompas T, Lynch A, Norris R, Possingham H, Quiggin J (2013) Global insights into water resources, climate change and governance. Nat Clim Chang 3:315–321CrossRefGoogle Scholar
  23. Grafton RQ, Pittock J, Williams J, Jiang Q, Possingham H, Quiggin J (2014) Water planning and hydro-climatic change in the Murray-Darling Basin. Aust Ambio 43:1082–1092CrossRefGoogle Scholar
  24. Grafton RQ, Rowlands D (1996) Development impeding institutions: the political economy of Haiti. Can J Dev Stud 17(2):261–278CrossRefGoogle Scholar
  25. Griffin W (2006) Water resource economics: the analysis of scarcity, policies, and projects. The MIT Press, CambridgeGoogle Scholar
  26. Hart BT (2015) The Australian Murray-Darling basin plan: challenges in its implementation (part 1). Inter J Water Res. Dev. http://dx.doi.org/10.1080/07900627.2015.1083847.
  27. Harris E (2011) The impact of institutional path dependence on water market efficiency in Victoria, Australia. Water Resour Manag 25:4069–4080CrossRefGoogle Scholar
  28. Harvey D (1993) The nature of environment: the dialectics of social and environmental change. The Socialist Register 29. http://socialistregister.com/index.php/srv/article/view/5621. Accessed 16 September 2014
  29. Harvey D (2003) The new imperialism: accumulation by dispossession. The Socialist Register 40. http://socialistregister.com/index.php/srv/article/view/5811. Accessed 16 September 2014
  30. Honey-Rosés J (2009) Reviewing the arguments for market based approaches to water distribution: a critical assessment for sustainable water management in Spain. Sust Dev 17:357–364CrossRefGoogle Scholar
  31. Horne J (2013) Australian water policy in a climate change context: some reflections. Intern J Water Resour Dev 29:137–151CrossRefGoogle Scholar
  32. Horne J (2014) Murray-Darling Basin plan gets off to a very slow and shaky start. The Conversation. https://theconversation.com/murray-darling-basin-plan-gets-off-to-a-very-slow-and-shaky-start-24732. Accessed 14 April 2014
  33. Ingram H, Oggins C (1992) The public trust doctrine and community values in water. Nat Resour J 32(3):515–537Google Scholar
  34. Kiem AS (2013) Drought and water policy in Australia: challenges for the future illustrated by the issues associated with water trading and climate change adaptation in the Murray-Darling Basin. Glob Environ Change 23:1615–1626CrossRefGoogle Scholar
  35. Kiem AS, Askew LE, Sherval M, Verdon-Kidd DC, Clifton C, Austin EK, McGuirk PM, Berry H (2010) Drought and the future of rural communities: drought impacts and adaptation in regional Victoria, Australia Technical Report prepared for the National Climate Change Adaptation Research Facility (NCCARF)Google Scholar
  36. Kirby M, Bark R, Connor J, Qureshi ME, Keyworth S (2014) Sustainable irrigation: how did irrigate agriculture in Australia’s Murray-Darling Basin adapt in the millennium drought? Agric Water Manag 145:154–162CrossRefGoogle Scholar
  37. Livingston ML (1995) Designing water institutions: market failures and institutional response water Res. Management 9:203–220Google Scholar
  38. Loch A, Wheeler S, Bjornlund H, Beecham S, Edwards J, Zuo A, Shanahan M (2013) The role of water markets in climate change adaptation. National Climate Change Adaptation Research Facility, Gold CoastGoogle Scholar
  39. National Water Commission (NWC) (2010) The impacts of water trading in the southern Murray-Darling Basin. Commonwealth of Australia, CanberraGoogle Scholar
  40. National Water Commission (2012) The impacts of water trading in the southern Murray darling basin between 2006 and 07 and 2010–11. Commonwealth of Australia, CanberraGoogle Scholar
  41. Nauges C, Wheeler S, Zuo A (forthcoming) Elicitation of irrigators’ risk preferences from observed behaviour, Aust J Agric Res EconGoogle Scholar
  42. Nikolakis W, Grafton RQ, To H (2013) Indigenous values and water markets: survey insights from northern Australia. J. Hydrology 500:12–20CrossRefGoogle Scholar
  43. Nikolakis W, Grafton RQ (2014) Fairness and justice in indigenous water allocations: insights from Northern Australia. Water Policy 16:19–35CrossRefGoogle Scholar
  44. Parsons LS (1993) Management of marine fisheries in Canada. National Research Council of Canada, OttawaGoogle Scholar
  45. Perry C (2013) ABCDE + F: a framework for thinking about water resources management. Water Int 38:95–107CrossRefGoogle Scholar
  46. Productivity Commission (2010) Market mechanisms for recovering water in the Murray-Darling Basin. Productivity Commission, MelbourneGoogle Scholar
  47. Richter B (2014) Chasing water. Island Press, Washington DCCrossRefGoogle Scholar
  48. Rosegrant MW, Binswanger HP (1994) Markets in tradable water rights: potential for efficiency gains in developing country water resource allocation. World Dev 2:1613–1625CrossRefGoogle Scholar
  49. Scheierling S, Treguer D, Booker J, Decker E (2014) How to assess agricultural water productivity? Looking for water in the agricultural productivity and efficiency literature. World Bank Policy Research Working Paper 6982, JulyGoogle Scholar
  50. Segerfeldt F (2005) Water for sale: how business and the market can resolve the world’s water crisis. The Cato Institute, Washington DCGoogle Scholar
  51. Sitarz D (1993) AGENDA 21: the earth summit strategy to save our planet. Earth Press, ColoradoGoogle Scholar
  52. Subramanian M (2014) Neoliberalism and water rights: the case of India. Current Sociol 62:3939–3411Google Scholar
  53. Thobani M (1995) Tradable property rights to water: how to improve water use and resolve water conflicts. Viewpoint, FPD note no. 34, World BankGoogle Scholar
  54. Trawick P (2003) Against the privatization of water: an indigenous model for improving existing laws and successfully governing the commons. World Dev 31:977–996CrossRefGoogle Scholar
  55. Van der Zaag P, Savenije HHG (2006) Water as an economic good: the value of pricing and the failure of markets. UNESCO-IHE Research Report Series No.19Google Scholar
  56. Wheeler S (2014) Insights, lessons and benefits from improved regional water security in Australia. Water Resour Econ 8:57–78CrossRefGoogle Scholar
  57. Wheeler S, Cheesman J (2013) Key findings from a survey of sellers to the restoring the balance programme. Econ Pap J Appl Econ Policy 23:340–352CrossRefGoogle Scholar
  58. Wheeler S, Loch A, Zuo A, Bjornlund H (2014a) Reviewing the adoption and impact of water markets in the Murray-Darling Basin, Australia. J Hydrol 518:28–41CrossRefGoogle Scholar
  59. Wheeler S, Zuo A, Bjornlund H (2013) Farmers’ climate change beliefs and adaptation strategies for a water scarce future in Australia. Glob Environ Change 23:537–547CrossRefGoogle Scholar
  60. Wheeler S, Zuo A, Bjornlund H (2014c) Investigating the delayed consequences of selling water entitlements in the Murray-Darling Basin. Agric Water Manag 145:72–82CrossRefGoogle Scholar
  61. Wheeler S, Zuo A, Hughes N (2014b) The impact of water ownership and water market trade strategy on Australian irrigators’ net farm income. Agric Syst 129:81–92CrossRefGoogle Scholar
  62. Wilson NJ (2014) Indigenous water governance: insights from the hydrosocial relations of the Koyukon Athabascan village of Ruby, Alaska. Geoforum 57:1–11CrossRefGoogle Scholar
  63. World Bank (1993) Water resources management. A World Bank policy paper, WashingtonCrossRefGoogle Scholar
  64. World Economic Forum (WEF) (2015) Global risks 2015, tenth edn. WEF, SwitzerlandGoogle Scholar
  65. Young M (2014) Designing water entitlement regimes for an ever-changing and ever-varying future. Agric Water Manag 145:32–38CrossRefGoogle Scholar
  66. Zetland D (2011) The end of abundance: economic solutions to water scarcity. Aguanomics Press, AmsterdamGoogle Scholar
  67. Zuo A, Nauges C, Wheeler S (2014) Farmers’ exposure to risk and their temporary water trading. Europ Rev Agric Econ 42:1–24CrossRefGoogle Scholar
  68. Zuo A, Wheeler S, Bjornlund H, Edwards J, Xu W (2015) Exploring generational differences towards water resources and policy preferences of water Re-allocation in Alberta. Canada Water Resour Manag 29:5073–5089CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  • R. Quentin Grafton
    • 1
  • James Horne
    • 1
  • Sarah Ann Wheeler
    • 2
    • 3
  1. 1.Crawford School of Public Policy, ANUActonAustralia
  2. 2.Global Food StudiesUniversity of AdelaideAdelaideAustralia
  3. 3.School of CommerceUniversity of South AustraliaAdelaideAustralia

Personalised recommendations