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Incorporating Temporary Trade with the Buy-Back of Water Entitlements inAustralia

Author

Listed:
  • Sarah Wheeler
  • Dustin Garrick
  • Adam Loch
  • Henning Bjornlund

Abstract

Alternatives to the current buy-back of water entitlements by the government in the Murray Darling Basin are assessed using multiple criteria based on the western U.S. experience, real options theory, scenario analysis and policy adoption criteria. This analysis suggests the following benefits of incorporating temporary water trade and buying entitlements gradually over a twenty-year period: incremental structural adjustment; increased flexibility and efficiency; enhanced environmental flows and increased irrigator willingness to participate. However, the inclusion of temporary trade will probably involve: i) more complex institutional arrangements; ii) different types of transaction costs as environmental managers and irrigators learn how to interact in the market; and iii) an increase in the direct costs of the scheme.

Suggested Citation

  • Sarah Wheeler & Dustin Garrick & Adam Loch & Henning Bjornlund, 2011. "Incorporating Temporary Trade with the Buy-Back of Water Entitlements inAustralia," Centre for Water Economics, Environment and Policy Papers 1101, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:cweanu:1101
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    File URL: http://cweep.anu.edu.au/pdf/publications/research_papers/11-01_wheeler.pdf
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    References listed on IDEAS

    as
    1. Qureshi, Muhammad Ejaz & Connor, Jeffery D. & Kirby, Mac & Mainuddin, Mohammed, 2007. "Economic assessment of acquiring water for environmental flows in the Murray Basin," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 1-21.
    2. McCann, Laura & Colby, Bonnie & Easter, K. William & Kasterine, Alexander & Kuperan, K.V., 2005. "Transaction cost measurement for evaluating environmental policies," Ecological Economics, Elsevier, vol. 52(4), pages 527-542, March.
    3. Anke Leroux & Lin Crase, 2010. "Advancing Water Trade: A Preliminary Investigation of Urban‐Irrigation Options Contracts in the Ovens Basin, Victoria, Australia," Economic Papers, The Economic Society of Australia, vol. 29(3), pages 251-266, September.
    4. English, Ben & Brearley, Taron & Coggan, Anthea, 2004. "Environmental flow allocation and counter-cyclical trading in the River Murray System," 2004 Conference (48th), February 11-13, 2004, Melbourne, Australia 58407, Australian Agricultural and Resource Economics Society.
    5. Conrad,Jon M., 2010. "Resource Economics," Cambridge Books, Cambridge University Press, number 9780521874953, January.
    6. Wheeler, Sarah & Bjornlund, Henning & Zuo, Alec & Shanahan, Martin, 2010. "The changing profile of water traders in the Goulburn-Murray Irrigation District, Australia," Agricultural Water Management, Elsevier, vol. 97(9), pages 1333-1343, September.
    7. Peter B. Dixon & Maureen T. Rimmer & Glyn Wittwer, 2011. "Saving the Southern Murray‐Darling Basin: The Economic Effects of a Buyback of Irrigation Water," The Economic Record, The Economic Society of Australia, vol. 87(276), pages 153-168, March.
    8. Sabrina Isé & David L. Sunding, 1998. "Reallocating Water from Agriculture to the Environment under a Voluntary Purchase Program," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 20(1), pages 214-226.
    9. Kristiana Hansen & Richard Howitt & Jeffrey Williams, 2008. "Valuing Risk: Options in California Water Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(5), pages 1336-1342.
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    11. Esther W. Mezey & Jon M. Conrad, 2010. "Real Options in Resource Economics," Annual Review of Resource Economics, Annual Reviews, vol. 2(1), pages 33-52, October.
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    Cited by:

    1. Ancev, Tiho, 2015. "The role of the commonwealth environmental water holder in annual water allocation markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 59(1), January.
    2. S. Wheeler & A. Zuo & H. Bjornlund & C. Lane Miller, 2012. "Selling the Farm Silver? Understanding Water Sales to the Australian Government," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 52(1), pages 133-154, May.
    3. Mac Kirby & Jeff Connor & Mobin-ud Din Ahmad & Lei Gao & Mohammed Mainuddin, 2015. "Irrigator and Environmental Water Management Adaptation to Climate Change and Water Reallocation in the Murray–Darling Basin," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 1(03), pages 1-31.

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