The Great Water Plan
I’ve been reading the PM’s Water Plan announced last week. While the Plan gets the scale of the problem about right, the near-exclusive emphasis on engineering repeats the mistakes of the past on a larger scale.
The big problem is the primary focus on engineering solutions such as lining and piping of channels. No benefit-cost analysis is presented and the aggregate numbers are worrying. The proposal is to spend $6 billion on efficiency improvements that are
aim to achieve efficiency gains of around 25 per cent of total irrigation water use. This programme will generate water savings of over 3,000 GL per year, with over 2,500 GL per year saved in the MDB. Water savings will be shared 50 per cent with irrigators to help meet the challenge of declining water availability, and 50 per cent to address over-allocation and sustain river health.
On the good side, if I read it correctly, the implied return of water to the Murray-Darling Basin is around 1250 GL, which is close to the 1500 GL recommended by the Living Murray program as the minimum needed for sustainability.
But the average cost of $2 million per GL saved ($2000 a megalitre) is very high. While the drought and evidence suggesting a long-term decline in inflows have raised the market price of irrigation water entitlements, it is still below this value in most markets as far as I can observe. Here’s some recent data from the MIA .
By contrast, market purchases of entitlements continue to be treated as a last resort. This is bad policy. Proposed engineering schemes should be tested for cost-effectiveness with a water price set by the value of water to irrigators, as indicated by the price at which they are willing to sell (or buy).
The other feature of the plan (not surprising with Howard) is a Commonwealth takeover of the whole sector. I don’t see the need for this. There are plenty of problems in water policy, and plenty of mistakes have been made, but there’s plenty of blame to go around. There’s no evidence that the Commonwealth would do a better job on the Murray-Darling by itself than through the long-standing co-operative arrangements, let alone, as Hal Colebatch points out (in a piece for which the link I had is broken), that it has any business running the water sector in states like WA and Tasmania.
And, as Kevin Rudd pointed out just before being trumped by Howard on this one, it’s not as though having the Commonwealth control the issue ensures a co-ordinated approach. There are a bunch of different departments and agencies with a finger in the pie, and they aren’t obviously more co-ordinated with each other than with their state counterparts.