05 paul dalby activity a watertradinggame

ICEWaRM Water Trading Game

Objectives

Discover the principles of water trading

Discover the benefits and dangers of a market-based water system

Players

A Basin Authority is established to set allocations based on Sustainable Diversion Limits

A Water Broker is set up to facilitate trades

A Commodities Trader buys products at the end of each turn and tracks total economic output

10 Users of 2-3 people each

Users are allocated a Market Segment

Each Market Segment has a Water Allocation and a Starting Bank Balance

Each turn is a year

Playing the Game

For each turn:

The Basin Authority sets the allocation at the beginning of every year based on storages. The

Basin Authority can buy allocations on behalf of the environment

Users can use their allocation to support their business, or can sell it on the open market

The Water Broker helps buyers find sellers and records the transactions for every User

The Commodities Trader records the economic output

To make a trade, an allocation token must be exchanged for money

The Banker buys any products produced in the year

Cities and Power Stations must always buy

The turn is complete

6th AWS Chapter 05 of 20

ICEWaRM Water Trading Game Users

Industries

Coal Mine - medium user; sink from dewatering, polluter

Food processing - small user; polluter (organics)

Power Station - ash + user

Agriculture

Maize

Sweet potato

Cattle

Tobacco

Water Utility

Harare (3M people)

Environment

Aims for 70% of natural flows


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000

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L

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50)

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fit

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/ GL

Tob

acco

Pla

ntat

ion

100

1,

000

ha

20 G

L

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er G

L (1

40)

5 x

Pro

fit

Envi

ronm

ent

50

66

5 G

L

? ?



Year 1

Nothing special. Everyone has enough water. All transactions occur as normal

Blue-green Algal Outbreak

Due to nutrient run-off from the city and farms, this year there is a major blue-green algae

outbreak

The Water Utility must pay 50% extra on their allocations for extra treatment costs.

Due to community demand, the Water Utility will need to upgrade their water treatment

facility at a cost of $800k

Cattle producers cannot water their stock: no profit and no GDP this year from cattle

Power Demand Increases

Power demand has increased 25%.

The Power Station must buy another 12 GL every year in perpetuity.

The Power Station will need to upgrade their power plant at a cost of $1500k

The Power Station adds 10% to its contribution to GDP

Drought for two years

The Monsoons were weak. Rainfall was 20% less than normal, but runoff was 40% less.

All allocations are reduced by 40%.

Water Utility and Power Station MUST buy.

The Basin Authority enters the market to buy 50 GL of water for the environment.

Farmers must pay one year’s normal income as crop insurance

Annual GDP is adjusted accordingly

Greenpeace Campaign

Greenpeace runs a global campaign against environmental management of the river

The Basin Authority now buys 50 GL per year in perpetuity



Commodity Prices Crash

Due to an oversupply of commodities globally, prices crash

The Annual Profit for Mining goes to zero for the next three years, but contribution to

GDP stays the same.

The government budget is in trouble and so the Water Broker is privatised. The Water

Broker will now take a 10% fee on every water trade.

Coal prices are cheaper so the Power company makes an extra $50 per GL in profit

The Tobacco Plantation invests $1,000k to increase automation and reduce labour costs

GMO Breakthrough!

A new genetically modified maize variety has been developed that produces the same crop for

10% less water.

Maize farmers can rent 10% of their water in any year without reducing their income.

Maize farmers buy the new GM seed variety license at a cost of $500k

Government Land Release

The Government is releasing 400ha of land near Harare. Anyone can buy in the auction.

Harare can add another 200,000 people. The Water Utility will need another 1 GL of

water per year and will earn another $100k per year in Annual Profit

Maize can grow another 10% and will need an extra 40 GL of extra water.

Sweet potato can grow another 40% and will need 40 GL of extra water

Cattle can grow another 40% and will need 20 GL of extra water

Tobacco can grow another 40% and will need a further 8 GL of water

Adjust GDP and people fed accordingly

Anyone can buy, convert to plantation forest and earn $0.2 per ha ($80k). No water

allocations are required. But the forest will intercept 10 GL of water back to the River,

which the Authority will be required to buy every year in the marketplace for the

environment. GDP contribution is $800k per annum



Food Prices Surge

Due to a global reduction in food production this year, all food prices are double.

Farmers can lease their land and sell their allocation for others to plant their crops if they

wish, at whatever price they can negotiate.

Food processor receives a 50% increase in income per water allocation GL.

Food processors add new capacity at a cost of $500k

Adjust GDP and people fed accordingly

Flood

Everyone gets 150% of their allocation at no extra cost

All towns must pay 2x their annual income to repair flood damage

Australia Bans Live Export to Indonesia

The return of cattle per GL of water doubles for three years

Renewable Energy Initiative

An out of State provider has introduced renewable energy. This results in an energy price drop.

Annual income falls by 50% for coal mines and power stations in perpetuity.

Palm Oil Company wants to buy water

A major Sugarcane company has cleared some forest and is looking to lease 40 GL of

water at $2 per GL

Mine Pollution Event

No crops or cattle produced this year. They must pay 50% of their annual income in extra

costs. They can sell their allocations

Cities must pay 50% extra on their allocations for extra treatment costs



Review

What happened to GDP over time?

What happened to GDP per volume of water over time?

What happened to food production over time?

Water Utilities and Power Stations – did you maintain services in 100% of years?

Mining – were you always able to get water if you needed it?

Tobacco and Food Processors – did you grow your business?

Farmers – Did you increase your profit? Even in drought years?

What would have happened without the trading environment?


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05 paul dalby activity a watertradinggame

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