Shepherding WaterProfessor Mike Young Research Chair, Water Economics and Management Executive Director, The Environment Institute The University of Adelaide

MDBA Northern Basin Ecological Assets Forum, February 2009

“Careless shepherd make excellent dinner for wolf.“

Earl Derr Biggers

Regulated v’s unregulated systems

Capture of episodic flows as they go past1. Unregulated river systems2. Overland flow harvesting

Entitlement definition– Flow-rate thresholds announced on a daily basis– Maximum daily volume– Maximum storage volume

Entitlements can be complicated– Many licences operate under 2 or 3 flow-rate thresholds– Some licences contain more than 20 flow-rate thresholds

Questions1. How can trading be facilitated? 2. What administrative arrangements

needed to “shepherd” water to the end of the system?

3. What is the best way to deal with shifts– To a drier climatic regime?– In environmental preference?– In system state?

Sharing the available water

Complexity - a simple system or one that considers– System dryness– Health of downstream wetlands– Needs of downstream entitlement holders– Interests of landholders whose animals graze

on floodplainsThe more that flow is used, the more

sophisticated the system needs to be and the more it costs to manage!

Flow sharing

Flow rate (ML/day)

Volume in the system

Trading• Existing allocation system likely to be

sub-optimal in an ever changing world• Strong case for facilitating trade

– To allow better consumptive use– To allow purchase for environmental

asset enhancement• Within reaches• Among reaches• Among systems

Facilitating Trade• When entitlements defined solely by flow rate

at the pump or diversion structure, trading does not make sense when others can take it.

• Solution to divide system into reaches and define each entitlement by flow rate at the top of the reach => within-reach trading

• Trading among reaches requires capacity to raise or lower the flow rate announcement thresholds on event by event basis.

Between reach trading

Flow rate (ML/day)

Volume in the system

Flow rate (ML/day)

Volume in the system

Accounting for transmission losses

Options1. Conservative Exchange Rate

– Inefficient2. Tagged trading

– Assigns long-run exchange rate risk to trader

– Allows refinement of models

Upstream v’s downstream• When one moves the pumping or diversion point

upstream, the interests of other pumpers, landholders who benefit from grazing floodplains and the environment need to be taken into account.

• To protect floodplain and grazing interests– Only allow trading downstream?– Allow trials using tagged trading (esp. through reaches)

• But remember that, the further water is traded

downstream, the greater are the losses.

Shepherding water downstream

• From Queensland to South Australia– Every announcement threshold would

need to be changeable on an event by event basis

– Require a considerable degree of co-ordination and communication among river managers and jurisdictions

– Refinement of interstate water sharing agreements would be necessary

Adverse climate shifts• In most unregulated systems, entitlement

holders get access to a larger proportion of the volume of low flow events– Possible solution would be to define flow-rate

thresholds as a function of a long-run moving average

– Note also that if there is a shift to drier climatic regime, all downstream users will get fewer opportunities to harvest water.

Flow management?

Less water is required to optimise the value of ecological assets if the system form can be manipulated

Where to from here?1. A dynamic Basin Plan?2. New interstate water sharing agreement?3. Definition of reaches and monitoring

points at top of each reach?4. Redefinition of entitlements?5. New (tagged) trading rules?6. New governance system that allows

shepherding and empowers river and environmental managers?

7. System structure manipulation?

Contact:

Prof Mike YoungWater Economics and ManagementEmail: Mike.Young@adelaide.edu.auPhone: +61-8-8303.5279Mobile: +61-408-488.538 www.myoung.net.au

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The PowerPoint slides from this talk can be downloaded from our website