1. A future-proofed MDB? Prof. Mike Young
Research Chair, Water Economics and Management The University of Adelaide
CEDA Luncheon, Melbourne, 22nd February 2008

2. The Murray Darling Basin?
What’s the problem?

3. Changes in rain and water supply
- 1%
- 3%

4. If it gets drier
Less rain
means
much less run-off
much less water

5. Total River Murray System Inflows (including Darling River)
DRY
WET

6. 2014 Re-live from 1938 2007 is the blue year
2014 is when it gets wet again
Run from 1938

7. Problems Over-allocation Interception
Over-entitlement ground & surface water
Inefficient storage management
Governance and administrative failure
Lack of planning for long dry periods

8. Elements of a solution Hydrological integrity
Complete and full accounting for all water use including groundwater and interception
A step-change to a new future-proofed bulk entitlement system
Designed to cope with long dry periods
An environmental entitlement
Empower environmental managers
Timely, just and fair financial recompense
Empower irrigators
Empower irrigation companies

9. A template for a future-proofed regime
Volume of Water in the System
Volumetric allocation for evaporation, required transfers and losses

10. Detail Decide how hard to work the River
What % of shared water for the environment?
Issue bulk entitlement shares in surface water bodies to states in proportion to their share of the cap
Establish an Authority to make allocations to shared water in all ground and surface water systems
Allow water all allocations to be carried forward
but carry-forward spills first and may need a delivery entitlement
Guaranteed allocations & disciplined announcements
Offset of all forms interception
All effects of forestry, farm dams and salinity interception must be offset

11. $5 billion now or up to $10 billion over 10 years?

12. A way forward (continued)
Empower the water market to facilitate change
Instantaneous allocation trading
Unencumbered entitlement trades within two days
Option to move individual entitlements to bulk register
Retain key State responsibilities for land use control
Leave water delivery businesses as they are
Review river-configuration
Explore opportunities to reduce evaporative losses and facilitate efficient management of environmental water
Incentive payments for State
Competition payments

13. A fair and equitable transition
A new Agreement that assigns bulk entitlement shares to each state and to environment trusts
Individual entitlements can remain in place
But allow migration to system register
Timely Financial recompense
Payment up-front so that all can plan with confidence
Option 1 - Put around $0.5 billion aside for the Darling and $1 billion for restructuring, then transfer the remainder to industry as soon as a new MDB Agreement is in place
Cheques to irrigators
Cheques to irrigation companies (= Termination fee)
Waive govt. entitlement trading charges
Option 2 – Start with smaller environmental share and use major share buy back to secure remaining percent as quickly as possible
Environment starts with, say, 10% of shared water
Tender to buy the rest

14. Which future is best? One that gets the fundamentals right, now?
A system that can confidently explained as able to cope -- whatever future arrives
One that commits all to more decades of reform and uncertainty?
Incrementalism

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Water Economics and Management
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16. Adverse climate change
In Mediterranean climates, a 10% decline in mean rainfall results in around a 30% decline in mean storage inflow
Mean supply ,000
River & Storage Evap 2,000
Flow to sea ,000
Deliverable water ,000
Environment Use 1,500
Consumptive Use 4,500
Mean supply ,000
River & Storage Evap 2,000
Flow to sea ,000
Deliverable water ,000
Environment Use 1,500
Consumptive Use 1,500
10% less rain water means a 67% reduction in allocations unless the system is resized