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Transcript of Water What can the nut industry learn from Australia? Peanut and Tree Nut Processors Association...
Water What can the nut industry learn from Australia?
Peanut and Tree Nut Processors Association ConventionBahamas, January 2009
Prof Mike Young Executive Director, The Environment Institute Research Chair, Water Economics and Management The University of Adelaide
Water
• Many nut crops depend on access to irrigation
• Adapting to change– Urban and industrial demand is drawing
water away from agriculture;and
– Supply may be decreasing• Nut industry prosperity will depend in
part on rapid access to water in an ever changing world.
Some Australian mistakes
• Climate shifts– We forgot to plan for long drys
• Rights, policy and governance– We embraced water reform without
establishing a property right system that was designed for trading
River Murray Inflows (GL)
In 2006/07, we broke the month by month inflow record for 11 months
Inflows have been well below evaporative losses
Managed by running down stocks and reducing evaporation by closing off wetlands and not replenishing lakes
Symptoms - The River Murray
• Over-allocation– Dredges in its
mouth since Oct 2002
– Level below the sea– Rising salinity– Serious acid-
sulphate soil problems
– Bottom in strife!– High security
allocations in SA on 18%
Long drys
DRY WET
Total River Murray System Inflows (including Darling River)
8 yrs 12 yrs 52 yrs
0
500
1000
1500
2000
19
11
19
14
19
17
19
20
19
23
19
26
19
29
19
32
19
35
19
38
19
41
19
44
19
47
19
50
19
53
19
56
19
59
19
62
19
65
19
68
19
71
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
Ra
infa
ll (
mm
)
14% less 20% less
Rainfall for Jarrahdale
0
100
200
300
400
500
600
700
800
900
1000
19
11
19
14
19
17
19
20
19
23
19
26
19
29
19
32
19
35
19
38
19
41
19
44
19
47
19
50
19
53
19
56
19
59
19
62
19
65
19
68
19
71
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
Str
ea
mfl
ow
(G
L)
N o te s : S tre a m flo w is fro m Ma y o f la b e lle d ye a r to th e fo l lo w in g Ap ri l
48% less
66% less
S tre a m in flo w fo r P e rth d a m s (P rio r to S tirlin g D a m )
PERTH
Insufficient planning for step changes
- 1%
- 3%
With half as much water
Users
Environment
River Flow
Environment
River Flow
Users
Water needed to ensure conveyance
Entitlements Environment
Flood water
Shared WaterEntitlements
Vo
lum
e of w
ater availab
le
Environment with a
fully-specified share
A robust sharing system
Now buying back water for the environment
$3.1 billion
With half as much water
Users
Environment
River Flow
Environment
River Flow
Users
River Flow
Environment
Users
Which nut industry future is best?
• One that gets water fundamentals right, now?
• A system that can be confidently explained as one that will enable the nut industry to cope -- whatever future arrives
• One that facilitates autonomous adjustment and change
• One that creates opportunity
• One that is always behind, always playing catch up?
• No guarantee of resolution of current problems• Lots of impediments to change
Australian water policy and reform
• Share rather than seniority system– In rivers, usually two surface water pools
• High security pool• Low or general security pool
• Formal volumetric allocation systems– All use is metered and use limited to allocation
• Minimal role for courts and lawyers– Allocations and rules decided by government
of the day– Right to trade held by individual water users
not districts
Water Rights & Reform in Australia
Water
Tradable Right Price
Land
Single Title to
Land with aWater Licence
Entitlement Shares
in PerpetuityBank-like Allocations
Use licences with limits & obligations
Delivery Capacity Shares
Delivery Capacity Allocations
SalinityShares
SalinityAllocations
National CompetitionPolicy 1993/94Plus Cap
National Water Initiative2004
Now trying to fix the problems created by the naive introduction of markets bolted onto an entitlement regimes that lacked hydrological, environmental & economic integrity
Scarcity and Trading
Source: Murray Darling Basin Commission, 2007.
Murray-Darling Basin Water Entitlement Transfers - 1983/84 to 2003/04
0
100
200
300
400
500
600
700
800
900
1 000
1 100
1 200
198
3/8
4
198
4/8
5
198
5/8
6
198
6/8
7
198
7/8
8
198
8/8
9
198
9/9
0
199
0/9
1
199
1/9
2
199
2/9
3
199
3/9
4
199
4/9
5
199
5/9
6
199
6/9
7
199
7/9
8
199
8/9
9
199
9/0
0
200
0/0
1
200
1/0
2
200
2/0
3
200
3/0
4
Tra
ns
fer
Vo
lum
e (
GL
)
0
100
200
300
400
500
600
700
800
900
1 000
1 100
1 200
1983/8
4
1984/8
5
1985/8
6
1986/8
7
1987/8
8
1988/8
9
1989/9
0
1990/9
1
1991/9
2
1992/9
3
1993/9
4
1994/9
5
1995/9
6
1996/9
7
1997/9
8
1998/9
9
1999/0
0
2000/0
1
2001/0
2
2002/0
3
2003/0
4
Intrastate Temporary (GL)
Intrastate Permanent (GL)
Interstate Temporary (GL)
Interstate Permanent (GL)
Trading has been good for the Australia’s nut industry
Water Reform Trading opened up
Reform Outcomes
• Positive– Facilitated considerable greenfield development
• Grapes• Almonds
– Massive innovation– Massive wealth creation– Many more irrigators survived the current long
dry– Movement of water out of areas with salinity
environmental problems
• Negative– Over-allocation still not solved
Water reform created Wealth
400
500
600
700
800
900
1000
1100
1200
2000 2001 2002 2003 2004 2005 2006
Year
Cotton Index
Sugar Index
Total crops sector Index
Total Livestock sectorIndexMilk Index
Total prices received Index
Total Grains Index
Waterdex
Psi-Delta 2007
Bjornlund and Rossini 2007
Water reform
• Driven by political realization about the importance of getting water right
• States have referred MDB planning powers to Federal Government– New independent Authority of 6 people to
produce a new Basin Plan
• Buying water entitlements for the Environment
• Investing in water efficiency• Trying to remove remaining barriers to
trade• Taking climate change risk seriously
CSIRO Sustainable Yield Project, 2008
CSIRO Sustainable Yield Project, 2008
CSIRO Sustainable Yield Project, 2008
Advice from the lessons we have learned
Regime arrangements1. System connectivity – manage GW and SW as one2. Capped the wrong thing – cap entitlement potential not
use3. Return flows – account for them4. Unmetered uses – include them5. Climate change – plan for an adverse shift6. The environment’s share – define it and allocate to it7. Storage Management – include in trading regime
Individual licence arrangements1. Registers – validate them early2. Entitlements - define entitlements as shares3. Trading – forgot to get the costs and time to settle down4. Not enough instruments – needed to unbundle5. Inter-seasonal risk management – allow markets to
optimize carry forward6. Exit fees – Need to allocate to individuals or allow trade
out of districts7. Trading risk – develop tagged trading
Water reform and the nut industry
1. Encourage discussion of and planning for very long drys
2. Encourage transfer of ownership to individuals
3. Encourage replacement of seniority system with a share system
4. Encourage integrated management of ground and surface water
5. Encourage preparedness for a different water future and need to trade water on a daily basis
Embrace water reform – trial it It will be good for your future!
Contact:
Prof Mike YoungWater Economics and ManagementEmail: [email protected]: +61-8-8303.5279Mobile: +61-408-488.538 www.myoung.net.au
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www.myoung.net.au