Economic assessment of acquiring water for environmental flows in the Murray Basin*

Authors

  • M. Ejaz Qureshi,

    1. Policy and Economic Research Unit in Land and Water of CSIRO, Canberra
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  • Jeff Connor,

    1. Policy and Economic Research Unit in Land and Water Division of CSIRO, Adelaide
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  • Mac Kirby,

    1. Land and Water Division of CSIRO, Canberra
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  • Mohammed Mainuddin

    1. Land and Water Division of CSIRO, Canberra
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    • M. Ejaz Qureshi (Ejaz.Qureshi@csiro.au) is Senior Economist and Policy Analyst in the Policy and Economic Research Unit in Land and Water of CSIRO, Canberra, Jeff Connor is a Senior Economist in the Policy and Economic Research Unit in Land and Water Division of CSIRO, Adelaide, Mac Kirby is a Research Scientist in Land and Water Division of CSIRO, Canberra, Mohammed Mainuddin is a Hydrologist in Land and Water Division of CSIRO, Canberra.


  • *

    This paper was produced as part of the CSIRO Flagship Program Water for a Healthy Country. Mike Young, Glyn Wittwer, Lindsay White and Geoff Podger made some valuable comments and provided useful suggestions. We also acknowledge suggestions, comments and recommendations provided by the editors and reviewers of the journal. Editorial assistance provided by David Kaczan is also acknowledged.

Abstract

This article is an economic analysis of reallocating River Murray Basin water from agriculture to the environment with and without the possibility of interregional water trade. Acquiring environmental flows as an equal percentage of water allocations from all irrigation regions in the Basin is estimated to reduce returns to irrigation. When the same volume of water is taken from selected low-value regions only, the net revenue reduction is less. In all scenarios considered, net revenue gains from freeing trade are estimated to outweigh the negative revenue effects of reallocating water for environmental flows. The model accounts for how stochastic weather affects market water demand, supply and requirements for environmental flows. Net irrigation revenue is estimated to be inline image75 million less than the baseline level for a scenario involving reallocating a constant volume of water for the environment in both wet and dry years. For a more realistic scenario involving more water for the environment in wet and less in dry years, estimated net revenue loss is reduced by 48 per cent to inline image39 million. Finally, the external salinity-related costs of water trading are estimated at around inline image1 million per annum, a quite modest amount compared to the direct irrigation benefits of trade.

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