The Evolution of Markets for Water

The Evolution of Markets for Water

Theory and Practice in Australia

New Horizons in Environmental Economics series

Edited by Jeff Bennett

This book presents a detailed picture of the evolutionary processes at work in water markets with a particular focus on theory and practice in Australia. Policymakers are striving to strike a balance between the pros and cons of a property rights/market based approach to the allocation of water resources, as opposed to an approach that centres on government regulation. The current movement in Australia is toward the use of markets, and numerous reforms are either underway or under consideration in that direction. This provides an ideal opportunity to observe the factors at play in determining the balance and hence the mix of policy instruments at work. The distinguished contributors offer a range of perspectives – economic, legal, environmental – and combine conceptual analysis with evidence from real policy decisions.

Chapter 5: A Property Framework for Water Markets: The Role of Law

Poh-Ling Tan

Subjects: business and management, management and sustainability, development studies, agricultural economics, economics and finance, agricultural economics, environmental economics, environment, agricultural economics, ecological economics, environmental economics, environmental management, water

Extract

Poh-Ling Tan INTRODUCTION In 1994 the Council of Australian Governments agreed to reform the Australian water industry because water use was inefficient, river systems were seriously degraded, and a better balance in water resource use was required. Water would need to be re-allocated to ‘higher-value’ and sustainable use. Re-allocation through the water market was chosen because it fitted current ideology and probably was least contentious politically. Trade in water required it to be separated from land, and defined as a commodity by itself. To do this, a wide range of specific measures was required including a system of title for water. Because trade might cause detrimental effects to rivers and their communities, water for environmental contingencies would need to be allocated. The policy placed property rights at the heart of reform. In 2004 several Australian States and the federal government have agreed on a further raft of measures referred to as the National Water Initiative (NWI). The debate over the central objective of the current reforms – to develop a water market – initially took place on an ideological plane between the advocates of markets and advocates of regulation.1 Yet in western USA, where water markets have been recommended since the 1960s and a common reality since the mid 1980s, water practitioners have accepted a role for both markets and regulation.2 This view also has been accepted by Australian policy makers. Public debate then shifted to the issue of the characterisation of property. This tended to focus on whether existing water licences...

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