The need to rescue the Murray-Darling river system has given rise to some fairly outlandish cost estimates, as well as to the usual extremes of overdone pessimism and Panglossian optimism.
I thought of the following as a back-of-the-envelope exercise in cost estimation. Suppose the government bought back 1500GL of water at $40/ML/year, this would be an annual payment of $60 million, which could be financed from a capital sum of $1 billion at 6 per cent interest. I’d guess that increasing natural flows would solve about half the problem, which would imply a total cost of the order of $2 billion. This is incredibly crude, but I’d think the order of magnitude $1 billion – $10 billion is about right, and that we are likely to end up spending something around the low end of this range.
Update: My estimate doesn’t look too bad according to this report
Gary Sauer-Thompson has responded, arguing that the mess we’ve made of the Murray
puts into question the deployment of the modernist conception of the Baconian Enlightenment project by the liberal state to make Australia modern. This use of modernist science (reductionist and elimination of old ideas by new ones) involved an ahistorical, instrumental reason to improve the human condition coupled to an appeal to a tacit notion of progress. It has been thrown into question because its categories got things messed up
John Quiggin 
John,
Your suggestion seems eminently sensible to me.
After this is done why not price water on the basis we are the driest continent on the earth.
Surely this would mean agriculture that needs a lot of water such a tobacco, rice, cotton etc would go and agriculture that uses less water would get a substantial boost.
This would lead to greater flows as well.
I think this is where the Wentworth group is heading but I’m unsure.
Can someone explain to me in nice easy steps how shift water from low value users to high value users through water trading would lead to greater environmental flows and produce ecological benefits for the riverine environment?
I ask because I cannot see how it wowuld.
Despite having watched Four Corners on Monday I don’t understand the term environmental flows. It seems to be something that takes into account not just the amount of water that reaches the mouth but also at what points water is tapped and at what time of year.
In answer to Gary’s question (and on the basis of no expertise whatever) I would say that no one is asserting that a market in water will increase environmental flows (whatever they are). There are two seperate propositions: (1) a global reduction in irrigation permits increases environmental flows (whatever they are); and (2) tradable permits ensure that the water extracted is used efficiently.
“no one is asserting that a market in water will increase environmental flows?”
We seem to be at crosspurposes here. I hear it said all the time. The more efficient use of the water diverted from the Murray-Darling River system by irrigators will save water, and this water savings will benefit the River in an ecological sense.
Maybe ‘no one’ refers to economists? And it does not refer to politicians!
But I also hear it from neo-liberal economists who argue that efficiency (wise use) gives us sustainable river system. What we need to do right now is to set up the water market, get the property rights in place, and then sit back and watch the benefits for the river flow in.
Or am I misinterpreting what the neo-liberal economists are saying?
I’m really not sure, Gary. If there was a way to quantify and internalise all the benefits of the improved environmental flows (which someone will define for me eventually, I hope), then with clearer delineation of property rights and the creation of a market we would see private enterprise paying to increase those flows. Adelaidians would then pay for their water as for Evian, anglers would pay for their fishing as for a table at Doyle’s… But I must say John’s public solution sounds must simpler. In any case I’m floundering in this shallow water. Let’s just hope John comes to the resscue.
James,
Two quick method points. Environmental flows is a contested term like democracy or rationality.
Secondly, as I’m an Aristotlean my approach to definitions is with rough and ready and provisonal understandings; I avoid definitions as fundamental axioms upon which a mathematical model is constructed.
Here is a working definition:
An environmental flow is the provision of water down a river (broadly understood in terms of floodplains) that maintains the health of downstream ecosystems.
It is not just about the volume of water–eg., to keep the Murray Mouth open. It is also about how that water is used–eg. ensuring floods to give the Chowilla floodplain a drink, keep the trees fish and birds alive, and to flush the salt that is accumulating like a time bomb.
So the objective of environmental flows is to ensure the ecological health of the riverine system so that it keeps functioning as an ecosystem.
This definition has been “operationalised” in public policy terms as a healthy working river. All the emphasis to date has been on the working, and not on the healthy. Hence the talk about the river and its floodplains being sick and dying.
The history of the concept of environmental flows is also important. The Snowy Mountains Hydro-Electric scheme had a big design flaw. What should have happened is that environmental flows for the Murray-Darling Basin and Snowy were worked out first, then what was left could be used for human consumption–irrigation, drinking water etc.
It didn’t happen that way. It was a free for all (by state governments dishing out water licences to famers to enable development. It was assumed that the river could get by on what was left. It couldn’t–hence the cap in the mid-1990s.
The ecological way of looking at things was beyond the horizons of both the mid 20th century modernist technoscience and the policy makers.In other words they had no conception of environmental flows. (I’m being generous here)
And so we have inherited the mess. In dealing with it we now struggle to open up the fundamental categories of the social sciences to the ecological reality. It is one we now confront and we are working hard to gain some understanding of how it all actually works.
Unlike John I’m not sure the market paradigm can do this—-but that’s another debate.
I hope you will forgive me not adding to the thread but I don’t understand why farmers think that, just because rain falls on their (freehold?) land or a river flows past their block, that they have an inalienable right to water.
Rights that have been issued in the past should be renewable every year, or at least every couple of years, yes? Why does the Government have to use huge amounts of taxpayers money to compensate farmers that didn’t pay anything (or paid very little) for what should be a renewable entitlement?
If the Government simply revoked ALL existing water rights and started a new system based on a value that included environmental costs, this debate would become redundant. Water would be supplied at a cost that reflected the amount available – in good times more, in drought less.
Farmers who couldn’t afford to buy water in dry times would have to cease their enterprise – why should primary producers be protected from market forces that all other SME’s have to live with. If a sandwich shop cant afford the electricity to light his shop, do we subsidise him ? Why should farmers and their access to water be any different ?
Woodsy, I think your point is useful as a counterargument to advocates of inviolable property rights like Alan Moran. But I think there are good economic (not to mention political) reasons for not going back to zero as you suggest. I’ll be trying to develop this in the future, hopefully with blog posts.
It is certainly not guaranteed that reductions in farmer entitlements (by regulation or by higher price) would necessarily increase environmental flows. The water saved might simply be used to irrigate more land or be consumed by thirsty cities. That was my understanding of the 4 Corners piece, anyway. This seems to be the nub of Gary Sauer-Thompson’s difficulties?? John’s proposal – that the Government enter the market on behalf of the riverine ecosystem, as it were – would overcome this problem but maybe would leave the Govt. vulnerable in drought years (high prices and political pressure from farmers). The Govt. liability would also vary with the prices farmers got for their irrigated produce (high prices would allow them to compete more strongly for water, raising the price). Pressure on the Govt. to bid higher might also arise from speculators.
From Gary: “And so we have inherited the mess. In dealing with it we now struggle to open up the fundamental catagories of the social sciences to the ecological realities”
The mess isn’t just the sick river. The cultural values embedded in “property rights” is obviously part of that mess. Nor does it seem to me that pricing policies can adequately address the fundamental issues – water, air, land – these have substantive existence and it is only human activity which accords them relative value – as in a market place. The marketplace is a system mapped onto the natural system by human agency. But if any river dies, no amount of money will bring it back. But humans exist within an ‘ecological’ framework as well – and adapt their behaviours to environments, inclusive of the rules governing earned or conferred “rights”. Property rights are a case in point and are as bedrock in our culture. To take the action necessary to conserve the life of the Murray would simultaneously ? destroy ? the lives of those who, up to now, have invested their lives in particular places and activities assuming uninterrupted access to a resource, water. Compensation is, therefore, a just recognition of the unanticipated cost (loss) to the persons on the land – but trading water rights probably an idiotic compromise, given the speculation in water trading as touched on by 4 Corners. Water is a social resource – that is both an ecological and social ecological reality. In fact, the management of all natural resources inclusive of land require oversight – part of the Murray problem is salt, and salt is a problem with land as well – proper management would require a reduction in some possibly ‘high value exports’ in the short term, but increase the probablity of long-term productivity. So ecology and the social sciences do sit well together at the interface of human/natural domains.