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2013 | OriginalPaper | Chapter

20. Principles for Economically Efficient and Environmentally Sustainable Water Markets: The Australian Experience

Authors : Jeffery D. Connor, David Kaczan

Published in: Drought in Arid and Semi-Arid Regions

Publisher: Springer Netherlands

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Abstract

With growing water demand for cities and irrigation, periods of low inflow increasingly lead to “operative” droughts when supply is insufficient to meet all consumptive and environmental water demands. This chapter focuses on water markets as a mechanism for sharing scarce water in drought. The institutional arrangements in the Australian Murray Darling Basin (MDB) that have allowed emergence of what is arguably the world’s most active water market are outlined. The evidence, consistent with economic theory, confirming significant economic benefits from water trade during the recent Murray Darling Basin drought is presented. The yet unresolved challenges arising from increased efficiency of water use in response to water market incentives eroding environmental flow are discussed. The conclusions outline institutional design principles from Australian experience for realizing efficiency benefits and avoiding adverse environmental impacts when introducing water trade.

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previous chapter Modeling Economic-Engineering Responses to Drought: The California Case
next chapter Drought Management Strategies in South Africa and the Potential for Economic Policy Instruments
Footnotes
1
In the northern part of the system, consisting of the Darling its tributaries and the Lachlan, a northern tributary to the Murray, little trade takes place. As inflows are extremely variable, water is captured in on-farm dams, with allowable diversions a function of flow, as opposed to a volumetric water right. With this allocation system, if an upstream party trades water downstream, water rights holders between the two could divert flows intended for the downstream party.
 
2
Calculations by the author are based on figures in Kaczan et al. (2011), Tables 2 and 7.
 
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Metadata
Title
Principles for Economically Efficient and Environmentally Sustainable Water Markets: The Australian Experience
Authors
Jeffery D. Connor
David Kaczan
Copyright Year
2013
Publisher
Springer Netherlands
Book
Drought in Arid and Semi-Arid Regions

Print ISBN: 978-94-007-6635-8

Electronic ISBN: 978-94-007-6636-5

Copyright Year: 2013

DOI
https://doi.org/10.1007/978-94-007-6636-5_20