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Rural Water Use and the Environment: The Role of Market Mechanisms

Author

Listed:
  • Productivity Commission
Abstract
The Productivity Commission released its final research report into ‘Rural Water Use and the Environment: The Role of Market Mechanisms’ in August 2006. The report indicates that there is scope for markets to play a greater role in improving the efficient use of water, including for environmental purposes. The Commission suggests that governments should give greater recognition to the integrated nature of water resources and use markets to more efficiently allocate water among competing users. Water for environmental purposes can be obtained cost effectively through purchasing a range of water products from willing sellers on the open market, including, but not limited to, water entitlements. This can often be more cost effective than investing in new infrastructure works: Markets can also be used to achieve other environmental goals, such as managing salinity, but need to be targeted to location and scale — no ’one size’ fits all. Unless accounted for, climate change, farm dams, vegetation and land-use change, groundwater extractions or changes in irrigation management have the potential to undermine efforts to achieve environmental goals and affect the reliability of existing entitlements. Governments should press ahead with the National Water Initiative, especially refining and clarifying property rights, undertaking further research on water systems and improving water accounting.

Suggested Citation

  • Productivity Commission, 2006. "Rural Water Use and the Environment: The Role of Market Mechanisms," Research Reports, Productivity Commission, Government of Australia, number 21.
    • Handle: RePEc:ris:prodcs:21
    Note: 369 pages
    as

    Download full text from publisher

    File URL: http://www.pc.gov.au/__data/assets/pdf_file/0004/14818/waterstudy.pdf
    Download Restriction: no
    File URL: http://www.pc.gov.au/projects/study/waterstudy/docs/finalreport
    Download Restriction: no
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    References listed on IDEAS

    as
    1. Jeff Bennett (ed.), 2005. "The Evolution of Markets for Water," Books, Edward Elgar Publishing, number 3836.
    2. Mike Young & Jim McColl, 2003. "Robust Reform: Implementing robust institutional arrangements to achieve efficient water use in Australia," Natural Resource Management Economics 03_003, Policy and Economic Research Unit, CSIRO Land and Water, Adelaide, Australia.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. R. Quentin Grafton & Tom Kompas, 2007. "Pricing Sydney water ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 227-241, September.
    2. Edwyna Harris, 2011. "The Impact of Institutional Path Dependence on Water Market Efficiency in Victoria, Australia," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 25(15), pages 4069-4080, December.
    3. R. Quentin Grafton & Clay Landry & Gary D. Libecap & R.J. (Bob) O'Brien, 2009. "Water Markets: Australia's Murray Darling Basin and the US Southwest," Centre for Water Economics, Environment and Policy Papers 0902, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
    4. R. Quentin Grafton & Tom Kompas, 2006. "Sydney Water : Pricing for Sustainability," Microeconomics Working Papers 21835, East Asian Bureau of Economic Research.
    5. Kym Anderson & Peter Lloyd & Donald Maclaren, 2007. "Distortions to Agricultural Incentives in Australia Since World War II," The Economic Record, The Economic Society of Australia, vol. 83(263), pages 461-482, December.
    6. Gavan Dwyer & Robert Douglas & Deb Peterson & Jo Chong & Kate Maddern, 2006. "Irrigation externalities: pricing and charges," Staff Working Papers 0603, Productivity Commission, Government of Australia.
    7. Agbola, Frank W. & Evans, Nigel, 2012. "Modelling rice and cotton acreage response in the Murray Darling Basin in Australia," Agricultural Systems, Elsevier, vol. 107(C), pages 74-82.
    8. O'Sullivan, Dan, 2006. "Emerging Rights and Risks in the Management of Water Quantity and Water Quality," 2006 Conference, August 24-25, 2006, Nelson, New Zealand 31960, New Zealand Agricultural and Resource Economics Society.
    9. Garrick, D. & Siebentritt, M.A. & Aylward, B. & Bauer, C.J. & Purkey, A., 2009. "Water markets and freshwater ecosystem services: Policy reform and implementation in the Columbia and Murray-Darling Basins," Ecological Economics, Elsevier, vol. 69(2), pages 366-379, December.
    10. Freebairn, John W., 2012. "Risk Aversion and Urban Water Decisions," 2012 Conference (56th), February 7-10, 2012, Fremantle, Australia 124206, Australian Agricultural and Resource Economics Society.
    11. Grafton, R. Quentin & Landry, Clay & Libecap, Gary D. & O’Brien, R.J. (Bob), 2009. "Water Markets and Scarcity: Australia’s Murray Darling Basin and the US Southwest," Research Reports 94943, Australian National University, Environmental Economics Research Hub.
    12. Robert Brooks & Edwyna Harris & Yovina Joymungul, 2013. "Price clustering in Australian water markets," Applied Economics, Taylor & Francis Journals, vol. 45(6), pages 677-685, February.
    13. Horne, Avril & Freebairn, John W. & O'Donnell, Erin, 2011. "Establishing and managing the environmental water reserve – the interaction between different government policies," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100561, Australian Agricultural and Resource Economics Society.
    14. R. Quentin Grafton, 2017. "Editorial — Water Reform and Planning in the Murray–Darling Basin, Australia," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1-18, July.
    15. McClintock, Anthea, 2009. "Investment in irrigation technology: an application of real options analysis," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 47934, Australian Agricultural and Resource Economics Society.
    16. Brooks, Robert & Harris, Edwyna, 2008. "Efficiency gains from water markets: Empirical analysis of Watermove in Australia," Agricultural Water Management, Elsevier, vol. 95(4), pages 391-399, April.
    17. Gary D. Libecap & R. Quentin Grafton & Clay Landry & J.R. O’Brien, 2009. "Markets - Water Markets: Australia’s Murray-Darling Basin and the US Southwest," ICER Working Papers 15-2009, ICER - International Centre for Economic Research.
    18. Biggar, Darryl, 2010. "Exit fees and termination fees revisited: funding irrigation infrastructure in a manner compatible with water trade," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 1-15.
    19. Heather Roper & Chris Sayers & Andrew Smith, 2006. "Stranded Irrigation Assets," Staff Working Papers 0605, Productivity Commission, Government of Australia.

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    More about this item

    Keywords

    Agriculture; Drinking water; Environment; Environmental impact; Environmental management; Environmental policy; Environmental protection; Farming; Irrigation; Natural resources; Regulations; Rivers; Renewable resources; Sustainable development; Water; Water conservation; Water management; Water supply;
    All these keywords.

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General

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