Lessons in Sustainability from the Murray–Darling Basin
Edited by John Quiggin, Thilak Mallawaarachchi and Sarah Chambers
Chapter 2: Water Markets, Property Rights and Managing Environmental Water Reserves
JOBNAME: Quiggin PAGE: 1 SESS: 2 OUTPUT: Fri Feb 10 09:39:43 2012 2. Water markets, property rights and managing environmental water reserves Lin Crase INTRODUCTION It is not uncommon to encounter the view that the over-allocation of water resources in the Basin is directly attributable to markets and the individualistic incentives that attend them. However, what is often not recognized is that the over-allocation of water in the Basin can be directly traced to decades of failed government policy rather than water markets per se (for more on this see Chapter 1). Moreover, the negative view of markets belies the substantive comparative benefits inherent in market mechanisms. For example, the buyback of water rights via tenders has been consistently shown to outperform the wasteful and failed attempts to address overallocation by publicly contrived irrigation infrastructure initiatives (see, for example, Productivity Commission, 2010; Crase and O’Keefe, 2009). There are also important potential advantages to the use of markets in the management of environmental water reserves (see, for example, Bennett, 2010; Young, 2010). This is important because Keogh (2010) and the Productivity Commission (2010) have estimated that water buybacks and other recovery measures can be expected to deliver close to 20 per cent of all extractive water rights as an environmental reserve to help address the impacts of over-allocation. In addition, the Guide intimates that this reserve will increase to around 27 to 37 per cent of all extractive water rights as part of the Basin planning process. Against this...
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