Search

Abstract: Temporary water trading is an established and growing phenomenon in the Australian irrigation sector. However, decision support and planning tools that incorporate economic and biophysical factors associated with temporary water trading are lacking. In this paper the integration of an economic trading model with a hydrologic water allocation model is discussed. The integrated model is used to estimate the impacts of temporary water trading and physical water transfers. The model can incorporate economic and biophysical drivers of water trading. The economic model incorporates the key trade drivers of commodity prices, seasonal water allocations and irrigation deliveries. The hydrologic model is based on the Resource Allocation Model (REALM) framework, which facilitates hydrologic network simulation modelling. It incorporates water delivery system properties and operating rules for the main irrigation and urban centres in a study area. The proposed integration method has been applied to a case study area in northern Victoria, Australia. Simulations were conducted for wet and dry spells, a range of commodity prices and different irrigation distribution system configurations. Some example analyses of scenarios incorporating water trading were undertaken. From these analyses potential bottlenecks to trade that constrain the economic benefits from temporary water trading were identified. Furthermore, it was found that in certain areas of the system, trading can make impacts of long drought spells worse for water users, e.g. irrigators. Thus, the integrated model can be used to quantify short-term and long-term third party impacts arising from temporary water trading. These findings also highlight the need to link “paper trades” (estimated by economic models) to physical water transfers (estimated by biophysical models). [Copyright &y& Elsevier]

Abstract: We discuss the role and characteristics of water markets in Australia in facilitating efficient water allocation. Administrative, regulatory and/or political barriers to effective functioning of water markets are reviewed with a focus on the southern Murray-Darling Basin (MDB) region of Australia. A mathematical model is developed to estimate the costs of existing restrictions and the benefits from potential changes in water markets (e.g., removing barriers in temporary water markets). The modelling results reveal that expanding trade leads to an increase in mean annual net returns from AU $2502 million to AU $2590 million (i.e., an increase of AU $88 million). When the current volume restrictions, exchange rates, and trading charges are accounted for, mean annual net returns reduced from AU $2590 million to AU $2573 million (i.e., a reduction of AU $17 million). The exclusion of any of the three southern MDB states from the interstate water trading imposes significant costs. If South Australia, New South Wales or Victoria withdraws from the water market, net returns are reduced by AU $27 million, AU $31 million and $63 million, respectively. The paper outlines the policy implications of strategies to remove market barriers and to facilitate efficient and effective water trading. [Copyright &y& Elsevier]