1. Water Security and Regional Development in Australia ARCRNSISS-ANZRSAI Conference Adelaide, 2 nd December 2008 December 2008 Prof Mike Young, The Environment Institute The University of Adelaide

2. Drought & climate shifts

3. How did we get it wrong? Robust policies were not in place Lacked –Hydrological integrity –Economic integrity –Environmental integrity –Institutional integrity Our social and biophysical scientists failed to communicate messages adequately

4. Water withdrawals per capita Australia United Kingdom New Zealand Iraq (Australia = 135/161 countries) “We have a water management problem not a water supply problem!” Business Council of Australia 2006 Australia = “The driest inhabited continent in the world.”

5. Urban Water

6. Hydrological integrity – changing dsns - 1% - 3%

7. Economic integrity Lack competitive pressure –Full cost pricing –for every drop –at every location –Scarcity pricing Lack competitive pressure –Lack diversity –Recycling, stormwater, desalination, technology

8. Direct Costs of Water Supply/Demand Options (Sydney, Adelaide, Perth, Newcastle) Source: Marsden Jacob 2006 The price of urban water supply and security is rising! Who should bear the financial risk for increased security in a world of climate shifts and change? Security is expensive

9. Building and subdivision incentives 1.Developers required to source urban water entitlements prior to subdivision –Potential sources Irrigators Urban storm water credits Aquifer storage and recovery House design 2.Urban infill and extensions under same regulatory disciplines as new homes 3.Mandatory disclosure of water efficiency at house sale Developer & Builder ~ 80% Owners & Occupiers ~ 20% Source: Marsden Jacob 2005 PMSEIC 2007

10. Social integrity Inclining block tariffs are inequitable Especially when many fixed charges in place –Target directly Offer rebates to the needy Charge for volume used

11. Environmental integrity NWI.. full cost recovery for water services to ensure business viability and avoid monopoly rents, including recovery of environmental externalities, –Use separate instruments and differentiate by externality typ Upstream Local Downstream –Offset rewards –Stormwater credits –Sewage charges based on load and volume

12. Institutional integrity Pricing decisions involve politics! –Why? Appoint an independent price regulator –Move away from uniform pricing –Move toward cost-reflective pricing in a world where third parties can compete Institutional unbundling

13. South East Qld’s unbundled admin. structure GRID MANAGER

14. Rural Water - Murray Darling Basin

15. Long drys DRY WET Total River Murray System Inflows (including Darling River) 8 yrs 12 yrs 52 yrs

16. With half as much water Users Environment River Flow Environment River Flow Users

17. Hydrological Integrity Ground - surface water connectivity Interception by –Plantation forestry, small farm dams, overland flow capture, salinity interception Return flow erosion –Assign an entitlement to the environment –Require 100% offset of interception –Link ground & surface water entitlement systems

18. Environmental integrity Dredges in mouth since Oct 2002 Over-allocated and over-entitled –Secure entitlements for environment –New agreement once Act is passed –Transfer control of environmental entitlements in regional trusts

19. Social integrity Restrictions on trade and adjustment have impeded rather than facilitated and expedited change Focused on infrastructure rather than changing entitlement regime –Speedier buyback –Exit payments for sale of entire entitlement –No restrictions on trade out of district –Payment of termination fees

20. Economic Integrity Unrestricted water market Faster settlement Missing externality market –Settlement within two days –Linked registers –Allocate salinity credits to individuals

21. Water needed to ensure conveyance EntitlementsEnvironment Flood water Shared Water Entitlements Volume of water available Environment with a fully-specified share Institutional integrity All run by an independent Authority

22. The next MDB challenges 1.Backing the Murray Darling Basin Authority –Murray Darling Basin Authority and a new Basin Plan 2.Developing a Basin Plan that has climate and accounting integrity –A robust sharing regime 3.Securing an environmental share in a timely manner –Combine infrastructure and acquisition money ($3.1b is not enough) –Expedite expenditure 4.Reconfiguring the River, its lakes and wetlands What do we give up? How clever can we be? 5.Removing all barriers to trade and rationalising infrastructure investment

23. “We don’t have all the answers – nobody does – but before we start laying bricks and mortar, we have got to get the foundations right, otherwise the cathedral will tumble with the smallest of tremors.” Peter Cullen Wentworth Group of Concerned Scientists

24. Contact: Prof Mike Young Water Economics and Management Email: Mike.Young@adelaide.edu.au Phone: +61-8-8303.5279 Mobile: +61-408-488.538 www.myoung.net.auwww.myoung.net.au Download our reports and subscribe to Jim McColl and my droplets at www.myoung.net.au