Water Policy in the MDBThe Basin Plan - have we finally got it right?

University of Queensland workshop, Brisbane

Jim Donaldson21 October 2010

The Basin

Murray-Darling Basin

• Directly supports 3 million people

• Feeds approximately 20 million people

• Significant environmental values

• 14% of Australia (size of Spain & France)

• Australia’s three longest rivers

• 40% Australia’s farmers

• Agricultural exports earn $9b/year

• Gross value of agricultural production $15b (40% Australia) – irrigation: $5.5b (15%)

• Home to 34 major Indigenous groups

Value of MDB Irrigated Agricultural Production

(07/08 GVIAP not yet available)

($ Million)

Flow generation

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Hydrological complexity of the Basin

“dreams of taming the rivers, greening the desert, and making land productive, run deep in the national psyche”

Major water storages in the MDB

Change?

Total Water Water Use

Historical Climate 23,417 11,327 (48%)

2030 Median Climate 20,936 10,876 (52%)

2030 Dry Extreme 15,524 8,962 (58%)

(CSIRO Water Availability – 2008)

Amplification -decreases in runoff

Ecosystem Health Assessments 2004-07

Growth in Basin diversions

15

The Need for Reform

• Return extraction to a more sustainable level

• Building a more certain future

• Managing Basin Water resources for future generations

• Support ecological health of the Basin

• Sustained economic output

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1901Constitution

Building on past reform

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1914River Murray Commission

1987Murray-Darling

Basin Commission

1990’s Cap on Diversions

&Water markets

2004 National Water

Initiative&

The Living Murray First

Step

2007 Commonwealth

Water Act&

Murray-Darling Basin Authority

2008COAG

Agreement

2010 Guide to the

proposed Basin Plan

Brief history of water policy

• 1890’s – 1980’s development era: “drought, royal commission, new dam”

• 1994 COAG reforms: environmental flows, unbundling water and land “titles”

• 1995 MDB “Cap” on more extractions

• National Water Initiative 2004: reaffirms commitments to reform agenda, e-flows and role of markets in reallocating water

• 2007: Water Act

What does the Water Act say?

• Water Act sets out quite specific basis for developing the Basin Plan – environment!

• There is a hierarchy of objectives and considerations guiding Basin planning

• Socio-economic related objectives are to be pursued to the extent they do not compromise other objects of the Act– such as ensuring return to environmentally

sustainable levels of extraction

Objectives of the proposed Basin Plan

• Ecological health– optimise social, cultural and economic

wellbeing

• Sustainable limits on take

• Environmental resilience

• Appropriate water quality

• Efficient and effective water markets

• Transition path to implementation20

Phases and Timelines

After the Basin Plan

Key Elements of the Basin PlanPage 8 of the Concept Statement

Conceptual Cycle

• Identify Key Environmental Assets and Key Ecosystem Functions

• Determine environmental water requirements of the Key Environmental Assets and Key Ecosystem Functions

• Calculate possible SDL

• Assess socio-economic impact

• Consider alternative scenarios

• Implement thru Environmental Watering Plan

• Simplicity belies complexity

How much additional water does the

environment need?

SDL proposals - process

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What are the potential impacts on the

community?

How to manage the transition?

What are the sustainable diversion

limit proposals?

Env Water Requirements

Determined using 2 integrated components1. Assessment of indicator assets

– Detailed assessment of 18 floodplain and wetland sites– Environmental water requirements are typically high

flows/floods– High flows contribute most volume, so biggest impact on

SDLs

2. Assessment of key ecosystem functions– Broader assessment of flows at 88 sites across the Basin– Main contribution are low flow environmental water

requirements (high flows already assessed by assets)– Also provides a mechanism to check the impact of the

indicator asset approach on high flows across the whole Basin (other key environmental assets)

Lower Balonne River Floodplain System Gwydir Wetlands

Narran Lakes

Macquarie Marshes

Lower Darling River System

Riverland – Chowilla Floodplain

Coorong, Lower Lakes and Murray Mouth

Hattah Lakes

Wimmera River Terminal Wetlands

Mid Murrumbidgee Wetlands

Booligal Wetlands

Lachlan Swamps

Great Cumbung Swamp

Lower Murrumbidgee Wetlands

Edward Wakool River System

Gunbower Koondrook Perricoota Forests

Barmah Millewa Forest

Lower Goulburn River Floodplain

Indicator Assets

2,442 key environmental assets

4 key ecosystem functions

2828

Range of additional surface water for the

environment:3,000 - 7,600 GL/y

106 hydrological indicator sites

18 KEAs 88 KEFs

30,000 wetlands

Flow Events & Frequency

Env Water RequirementsExamples of

Environmental Water

Requirements

Key Ecosystem Functions

Assessment of flows required by 4 physical processes• Creation and maintenance of habitats - for use by

plants and animals • Transportation and dilution of nutrients, organic

matter and sediment • Providing connections along the river - for migration

and recolonisation by plants and animals (incl. fish)• Providing connections across floodplains, adjacent

wetlands and billabongs - for foraging, migration and recolonisation by plants and animals

Key Ecosystem Functions

• The 4 processes require a variety of flow types• Each flow type is important• Each flow type is assessed

Modelling and SDLs

• SDLs informed by modelling of environmental water requirements (assets and functions), and other analysis

• SDL in each region is affected by environmental water requirements in that region, and also downstream requirements

• Models are very important tools, but they can’t answer all policy challenges and therefore can’t determine SDLs on their own

Paroo IQQM

Warrego IQQMNebine IQQM

Condamine MODFLOW

Middle Condamine IQQM

St George SGCS13NT

Lower Balonne IQQM

Upper Condamine IQQM

Border R. and Mac B. IQQMBorder Rivers MODFLOW

Moonie IQQM

Gwydir IQQMLower Gwydir MODFLOW

Eastern Mt Lofty Ranges 6*WATERCRESS

DailyWeeklyMonthly

Barwon-Darling IQQM

Menindee IQQM

Peel IQQMUpper Namoi MODFLOW

Namoi IQQMLower Namoi MODFLOWMacq-Castlereagh 6*IQQMMacquarie MODFLOW

Wimmera REALMLachlan IQQMMid-Lachlan MODFLOWLower Lachlan MODFLOW

Ovens REALMGSM REALM

Avoca REALMSnowy SIM_V9

Murray BigModMurray MSM

Southern Riverine Plains MODFLOW

Upper Bidgee IQQMACTEW REALM

Mid Bidgee MODFLOW

Bidgee IQQMLower Bidgee MODFLOW

MDB Surface and groundwater models

Current diversion limits

• Includes all take (total 13,700 GL/y)

• For surface water this includes: – Watercourse diversions (10,940 GL/y)

• Diversions from streams• Floodplain harvesting

– Interception activities (2,740 GL/y)• Farm dams• Forestry plantations

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• Draws on social and economic assessments and environmental water requirements

• Indicates a range of reductions:– 3,000 GL/y, 3,500 GL/y and 4,000 GL/y

• Surface water reductions > 4,000 GL/y– Unacceptable social and economic outcomes

• Surface water reductions < 3,000 GL/y– Outcomes do not meet the environmental

requirements

• Groundwater:– Aggregate 186 GL/y reduction across 11 aquifers

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SDL proposals

• Satisfy environmental water needs in each tributary catchment

• Connected catchments can contribute to Murray or Darling environmental water needs

• Some disconnected catchments – e.g. Paroo, Lachlan

• Darling River system – limited ability to contribute to Murray needs

• More highly developed catchments can make bigger contribution to environment water needs

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SDL proposals - considerations

• Equal % reductions in current diversion limits (watercourse diversions and interception)

• Where reductions large to satisfy internal catchment needs, no further reductions

• Constrain maximum reduction in watercourse diversion component

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SDL proposals - considerations

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Water resource plan areas

19 surface water resource plan areas(29 SDLs)

SDL proposals

Surface water:

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Basin-wide

Current diversion limits

13,700 GL/y 13,700 GL/y 13,700 GL/y

SDL proposals 10,700 GL/y 10,200 GL/y 9,700 GL/y

Reduction 3,000 GL/y(22%)

3,500 GL/y(26%)

4,000 GL/y(29%)

% reduction in watercourse diversion component*

27% 32% 37%

Max reduction for an SDL area

26% 30 % 35%

Max reduction in watercourse diversion component*

40% 40 % 45%

* If only this component is reduced

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When it takes effect

proposed Basin Plan

Final Basin Plan

2010 2014 2020

Assessing impact on communities

• Impact of different reductions

• Impact of reductions on different farming sectors

• Off-farm (flow-on) impacts

• Impact of reduction at Basin and regional scales

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What we were asked to do

• Assess the likely economic and social implications of setting SDLs and developing the Basin Plan

– Inform setting of SDLs – Report on implications to government

Socio-economics beyond SDL’s

• Socio-economic info can also be used to: • Advise on mitigation arrangements

– Temporary Diversion Provisions, risk allocation, trade rules, Buyback

• Inform state water resource plan requirements and development

Socio-economic impact assessments

Studies undertaken:• Baseline socio-economic circumstances• Review of previous studies in the Basin• Review of structural adjustment pressures• Economic modelling and analysis• Local profiles and assessments• Indicators of community vulnerability & adaptive capacity• Effects of change in water availability on Indigenous

people• Assessment of benefits• Responses of financial institutions to changes

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0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Agriculture Mining Manufacturing Other

industries

Households Water supply

industry

GL

Consumptive water use

ABARE Economic Modelling

• Modelling of economic implications of potential reductions in water availability

• Focus of project: – Basin-wide, inter-regional, economic modelling

– Consider scenarios of reductions

– Agricultural sector and regional flow-on effects

• Report on changes in value of irrigated agriculture, land use and water use – Magnitude and indicative distribution of impacts

– Report on impacts at national, basin, regional levels

ABARE’s Approach

• Irrigated agriculture model of MDB– Shocked with changes in SDLs– Regional level estimates

– Industry crop estimates • AusRegion CGE model

– Regional economy impacts (GRP, employment)• Some downscaling possible but limitations

• Impacts of reduced farm expenditure on towns• Results compared with other models

– UQ, Monash CoPS, PC, Wentworth

Local profiles & analyses (Marsden Jacob Associates)

• Socio-economic assessments of likely local implications of reductions in SDLs

• Focus of project:

– Community profiles for regional communities

– Identify industry impacts and flow-on effects

– Assess vulnerability and adaptive capacity at local scale in 12 targeted irrigation districts

– Interviews with regional stakeholders and business and community phone surveys

– Consider a range of water use reduction scenarios

Project overview

• To assist the MDBA with– enhanced understanding of social and

economic circumstances of communities– likely impacts of reduced water availability

• Vulnerability• Adaptability

• Consortium led by Marsden Jacob Associates– RMCG, Geoff McLeod, Tim Cummins, and

expert advisors EBC, Anthony Hogan, DBM

Irrigation districts (15)

Scenarios (surface water)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

Lwr B

alon

ne

Bord

er R

iver

s

Gw

ydir

Nam

oi

Mac

quar

ie

Lach

lan

Mur

rum

bidg

ee

NSW

Cen

tral

Mur

ray

GM

ID

Nya

h to

Bor

der (

incl

. NSW

&

Vic

Sun

rays

ia)

Rive

rland

LTCE

(G

L, a

ppro

x, ro

unde

d)

Irrigation Region

Efficiency project savings (Committed)

Buybacks (GL) (already delivered, or committed to)

LTCE allocation volume less buybacks and recent or near future efficiency

-20% of LTCE

-40% of LTCE

-60% of LTCE

Context of study

• ‘Near-worst case’– No compensation– No government transition support– Then discuss impact mitigation (better than

‘worst’)

• Impact analysis methods provide a spectrum of results– Consultative approach – ‘stated intentions’ of

respondents, consensus across sectors and regions, at a regional scale, validation of results

Conclusions (MJA)

• Impacts of change vary by sector and region– 1 in 4 surveyed would exit at 20% adjustment and 1 in 3 at 40%– Magnitude of impact of 20% reduction varies across sectors – Impact of 40%+ reduction significant for all sectors

• Flow on impacts– Impacts on towns may be great but will be lost at the larger region,

basin or national scale– Small irrigation dependent towns likely to be most impacted– Given 75% of farm expenditure is local, impacts will quickly flow to

towns

• Range of factors will influence the impact

Indigenous interests

• Review and synthesis of current knowledge of Aboriginal interests

• Case studies – Barmah-Millewa, Brewarrina, Hay – Mixture of interests – consumption,

environmental, relationship with country – Paucity of information – Desire for greater role in determining

allocations to meet their water interests

Economic impacts

Gross impacts

* with inter-regional trade

All scenarios include groundwater reduction of 186 GL/y

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Scale Surface water sustainable diversion limit

10,700 GL/y 10,200 GL/y 9,700 GL/y

National • minor• - 0.11 % GDP

• minor• - 0.13 % GDP

• minor• - 0. 15 % GDP

Basin-wide • - 13% GVIAP*• - 1.1% GRP

• - 15% GVIAP*• - 1.3% GRP

• - 17.0 % GVIAP* • - 1.5% GRP

Socio-economic impact assessment

Impacts net of Government investments

* with inter-regional trade

All scenarios include groundwater reduction of 186 GL/y

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Scale 10,200 GL/ y surface water diversion limit

Gross impacts Net impacts

National • minor• - 0.13 % GDP

• minor• - 0.12 % GDP

Basin-wide • - 15% GVIAP*• - 1.3% GRP

• - 10.1% GVIAP*• - 0.72% GRP

Socio-economic impact assessment

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Industry impacts

High Irrigated broadacre agriculture

Medium Cotton and dairy

Low High value perennial horticulture (trade a major contributing factor)

Regions most impacted (by $ value)

Southern Basin

Murrumbidgee, Goulburn-Broken, NSW & Vic Murray, Loddon-Avoca

Northern Basin

Gwydir, Condamine-Balonne, Namoi, Macquarie-Castlereagh

Basin Plan analysis context

• Rebalancing water use in the MDB– Between consumption and environment – Set environmentally sustainable limits on

the extraction of water (SDLs)

• Trade-offs: optimise economic, social and environmental outcomes

• What’s the baseline for comparison?

• Scale of analysis: Basin-wide to local? – Inform decisions to be made by MDBA

What’s the issue?

• Rebalancing water use in the MDB– What’s the right balance?

Optimal water allocation?

What’s the issue?

• Rebalancing water use in the MDB– What’s the right balance?

• Nature of the problem: optimise outcomes – Measuring the benefits and the costs – Water Act sets environmental thresholds

Costs (and benefits)

• Agriculture – Irrigated– Non-irrigated (e.g. floodplain grazing)

• Other industries – Mining, manufacturing, forestry, fishing

• Household water supply

• Tourism and recreation

• How do these values change with SDLs?

Benefits

• Diffuse and difficult to measure in consistent units, including monetary– Ecological values – Environmental valuation review done

• Non-use values (eg fish, birds, veg etc)– e.g. 1% improvement in native veg: $143m

• Avoided costs, e.g. salinity & WQ ($353m)

• Tourism and recreation ($57m/yr Coorong)

• How do these values change with SDLs?

What’s the impact of SDLs?

• It depends … – many factors influence the impacts

• Structural adjustment is ongoing – climate, markets, policy

– mining, GFC, wine grapes, redgums • Basin Plan and state water plans • How the SDLs and Basin Plan are

implemented

Main insights …

• Financial costs of water availability reduction on irrigators depends on extent of risk assignment and Buybacks

• Social and economic impacts could be significant for dependent local communities which are not directly compensated – particularly in short term

Factors affecting impacts

• Implications of reduced water availability depends on a range of factors: – Magnitude of reductions – Where environmental water is sourced – Whether losses are compensated or not – Support for regional community adjustment?– Water market flexibility – trade and adjustment – How environmental water portfolios are managed – Information, consistency, trust, confidence, certainty – Timing and sequencing of transition arrangements

Future directions

• Analyse potential transitional arrangements– Structural adjustment support, risk sharing etc.– Identify community preferences for adaptation– Provide clarity for people to plan on– Crosses multiple agencies/portfolios/tiers of gov’t

• Understand likely impacts with effective transition support – at a sub- and regional level

Predicting the Future

Prediction is very difficult, especially about the future

(Niels Bohr)

Analysis to inform judgement

Issues and challenges

• Scope of research – Costs and benefits to other industries, urban

and manufacturing uses – Land use changes / interception activities – Infrastructure and water delivery efficiency

• Scale of analysis and interpretation is important

• Assessment needs to be whole of basin yet relate to local level

• It is difficult to predict the future! • What next?

Other issues

• Environmental works and measures• River operations• Relationship to NRM activities• Critical human water needs• Aboriginal cultural flows• Evidence base• Overbank flows• Environmental water holdings

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end