Modelling Water Trade in the Southern Murray-Darling Basin

Abstract

Introduction 1 2 Water trade and irrigation in the southern Murray-Darling Basin 3 Irrigation water sources and irrigation districts 3 Water entitlements and seasonal allocations 5 Utility charges 6 Quantities of water traded 8 Water trade prices 9 Constraints on water trading 11 3 Overview of the modelling approach 19 Development of a water module within TERM 20 Incorporating water trade 23 Model simulation 27 4 Long run effects of reduced water availability with trade 29 Macroeconomic effects of water trade 29 Further analysis of a specific case 30 Model design considerations 39 5 Short run effects of reduced water availability with trade 43 IV CONTENTS A Irrigation industry data B Simulations Experimental framework Simulation details C Examples of regulatory arrangements affecting water trade Regulatory arrangements in selected districts Water trading across subdistricts in the Goulburn-Murray D Data tables and simulation results References BOXES 2.1 Trading water upstream 2.2 Trading water between rivers 3.1 Regional CGE modelling of water trade and use 3.2 TERM's water module 3.3 The price of water entitlements and seasonal allocations 3.4 Water substitution assumptions 3.5 Illustrative gains from trade in water 3.6 Trade experiments conducted using TERM FIGURES 2.1 Major Irrigation Districts in the Murray-Darling Basin 2.2 Average weekly prices per megalitre for seasonal allocations in major irrigation districts 2.3 Average monthly prices for trade in water entitlements, Goulburn-Murray Water and Murray Irrigation 3.1 Irrigation areas and statistical divisions A.1 Major irrigation districts in Australia CONTENTS V TABLES 2.1 Seasonal water allocations and usage 2.2 Examples of utility charges, 2000-01 2.3 Net New South Wales trade in seasonal allocations 2.4 Net trade in water entitlements, by state 2.5 Congestion constraints on major supply networks 4.1 GDP and GRP effects of trade after water availability reductions of different magnitudes 4.2 GDP and GRP effects under different trade and water availability experiments 4.3 Net water trades among industries in the southern MDB 4.4 GRP and GDP effects under different trade experiments 4.5 Changes in regional primary factor use 4.6 Sectoral differences in value added from expanded water trade 5.1 Reductions in water availability compared to 1996-97 5.2 GRP and GDP effects of 1997-98 water availability under different trade experiments 5.3 GRP and GDP effects of 1998-99 water availability under different trade experiments 5.4 GRP and GDP effects of 1999-2000 water availability under different trade experiments 5.5 GRP and GDP effects of 2000-01 water availability under different trade experiments 5.6 GRP and GDP effects of 2001-02 water availability under different trade experiments A.1 Net water consumption for selected industries, 1996-97 A.2 List of regions and their irrigation companies A.3 Irrigation scheme entitlements in the southern Murray-Darling Basin, 2001-02 A.4 Ratios of gross trade in seasonal allocations to total allocations, and trade in entit...

Third‐party effects of water trading and potential policy responses*

“…Most trade occurs in seasonal allocations, and it is common for 10 -20 per cent of allocations to be traded within an irrigation district in an irrigation season (Peterson et al 2004). Although trade in allocations has increased over recent years, trade in water entitlements remains small, at less than 1 per cent of diversions in [2001][2002].…”

“…Although water may become more mobile as these investments reach the end of their economic life, the demand for water for environmental purposes is likely to be an important driver of future trading patterns. Peterson et al (2004) used a computable general equilibrium model to estimate the regional impacts of expanding trade in the southern Murray-Darling Basin under a number of scenarios where water availability was reduced by 10, 20, and 30 per cent. With a 10 per cent reduction in water availability, total net water trade in the southern Murray-Darling Basin was found to be a relatively small proportion of total allocations, with only 2.3 per cent of allocations traded among regions.…”

Integrating Rural and Urban Water Markets in South East Australia: Preliminary Analysis

“…It could also provide greater flexibility for rural users to react to changing circumstances, such as changes in climatic conditions and water availability. Peterson et al (2004) examined the likely economic effects of expanding water trade among irrigators in the southern Murray-Darling Basin (MDB) using a computable general equilibrium (CGE) model, TERM-Water, developed by the Centre of Policy Studies at Monash University. This study found that allowing both intra-and interregional water trade among irrigators substantially lessens the impact of reducing water availability on gross regional product.…”

Further closing the integrated total water cycle in the Lockyer Valley: a catchment scale integrated water resource management conceptual model

“…Dwyer et al (2005) The gains from water trade between irrigators in Victoria were simulated in research by Peterson et al (2004). The simulation results indicated that, "water entitlements, … were significantly more expensive than temporary trades (Productivity Commission 2005; Peterson et al 2004).…”

“…The simulation results indicated that, "water entitlements, … were significantly more expensive than temporary trades (Productivity Commission 2005; Peterson et al 2004). Further this water trade had the potential to reduce the effects of water scarcity on gross regional product (Peterson et al 2004). …”