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Bad news on the Murray

June 18th, 2008

Grim if unsurprising news from this Leaked report on the state of the Murray-Darling river system. The failure of the autumn rains (again) has wiped out the modest benefits from the (already fading) La Nina event. The problem has been generated by a long history of bad policy, but, at this point, even the best water policy in the world won’t help if it doesn’t rain.

The implications for places like the Coorong are dire. It seems likely, in view of problems like the buildup of acid sulphate soils, that the barrages separating the Lakes Alexandrina and Albert from the sea will have to be removed (this is being staved off by emergency measures for the moment). But the barrages were constructed as an early response to the expansion of irrigation upstream, which reduced flows and, as a result of sea water inflow, threatened to turn predominantly freshwater lakes into salt water (characteristically of such interventions, the barrages overcorrected, eliminating the occasional salt water phases, and changing the ecological balance in the lakes). So, the only sustainable response is to increase flows in the whole system which will require substantial reductions in extractive uses.

But, if the repeated failures of the autumn rains, and the higher frequency of drought represent a permanent climate change, it seems likely we will have to accept both substantial ecological damage and reduced agricultural output. My research group at UQ has been working on this for the Garnaut Review and we should have a report out fairly soon – some of the scenarios are indeed grim.

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  1. observa
    June 18th, 2008 at 11:57 | #1

    Adelaideans(really SA as I’ve pointed out previously) at the end of the big drain have been aware of the acuteness of the problem for much longer than those at its beginnings. My own view is that this is just another symptom of a fast failing CM which needs a complete rewrite and time is of the essence now. Simply put, this is merely a ‘tragedy of the common’ problem, which appropriate resource taxing could prevent/cure. Essentially raise the resource tax on water until measured long term average flows are equilibrated with the economic use that allows plus the deemed, appropriate environmental needs. Rightly the role of govt. We now see clearly the accrued costs of not paying that price in the past. To date my ideal CM has advocated carbon and resource taxing, the latter involving land use taxation, with zero for natural state land. Clearly MD Basin water falls under the umbrella of resource taxing here. Another important concept to understand here, insofar as this ideal CM is outlined, is the complete absence of frictional taxes that would hinder the players within its umbrella, from rapid response to emerging realities. With no income tax(and payroll tax, etc) there is no penalty for exertion and entrepreneurship or any drag on savings and concomitant, necessary investment. Also with no stamp duties, or GST there is no frictional drag in swapping land and capital between users, another critical factor if we are to be fleet of foot in response to new challenges. In that respect and with capital gains taxes piled on top, I’d love a quid for every player now who is stuck in such frictional glue under our current failing CM. Anecdotally if you want the Observa’s factory to modify and invest in to put to your best use, you would have to greenmail him exorbitantly to unstick it. Failing that you have to lease it as he sees fit to present it to you. These are critical factors to note in devising our new ideal CM. No doubt land owners and water rights holders along the MD are acutely aware of the same frictional losses among others.

    One more tangential note, while we’re into the really big picture here of that future CM. I doubt we could build it politically with the current seat based parliamentary system of Govt. Too much marginal seat pork barrelling and pandering to local, sectional interests for that (cap and traders take note) We’ll need a proportional based House of Reps to facilitate that I’ll warrant. All significant hurdles no doubt, but the MD problem is a glaring example of the need. Interestingly enough, the nation as a whole understands the need, but the frictional glue is those rural seats that need pandering to, rather than overriding in the national interest and theirs too in the long run.

  2. Hermit
    June 18th, 2008 at 13:08 | #2

    Of course Adelaide could let more water flow through to the Coorong/Murray Lakes if it took less water at the upstream intakes. Their view is that excessive water demands only occur before the river crosses the border. I believe SA has 3 desal plants planned for Adelaide (at Pt Stanvac), Whyalla (for Olympic Dam) and Pt Augusta. The latter will have solar assist but otherwise the energy sources have yet to be announced; it could be gas for example at great cost and with GHGs. That water will be too expensive for irrigation so higher food prices are certain on top of the perhaps inevitable destruction of the Coorong. If it’s any consolation it looks like SA has 40% of the world’s easily mined uranium.

  3. David
    June 18th, 2008 at 14:22 | #3

    Hermit, you may not be aware that SA irrigators are getting next to no water, and that all domestic users are still under water use restrictions. I can assure you that the really excessive water demands are not happening on _our_ side of the border (whining from irrigators not withstanding).

  4. observa
    June 18th, 2008 at 16:39 | #4

    “Of course Adelaide could let more water flow through to the Coorong/Murray Lakes if it took less water at the upstream intakes. Their view is that excessive water demands only occur before the river crosses the border.”

    Well no, more the point that socially uneconomic water demands are being allocated upstream by past quantity measures, rather than across the whole system via the more sensible price signalling mechanism. That applies to Adelaide users themselves. Urban and industrial use account for around 9-10% of useage now with the balance being used by agriculture of all kinds. Much of that is exported along with its inherent arid land topsoil, leaving behind much salt residue and now acid sulphate soils.

    At present SA Water deliver my water(when available) for $1.10/kl. Now the SA Govt is going ahead with a 50ML p.a desal plant-
    http://www.news.com.au/adelaidenow/story/0,22606,23883752-2682,00.html?from=public_rss
    with that water estimated to cost SA Water over $3.00/kl. Here’s some costings on what rice growing extracts from that same water-
    http://www.urbanecology.org.au/topics/waterforrice.html
    Notice 14.3ML p.a used (that 1.1kl/kgm of 1.3mill tonnes p.a of rice)and they get a maximum of 48c/kg export price or 44c/kl of water used. We Adelaideans could pay them 44c/kl p.a to put up their feet and relax and save all that CO2 from the desal plants. Ditto cotton growers and flood irrigators presumably. I don’t understand what their problem is really.

  5. Stephen L
    June 18th, 2008 at 17:26 | #5

    But, But, But, Jennifer Marohsay told us, and told us and told us that the Murray was fine. No problems at all. Since she’s never wrong about anything obviously this report is false.

  6. Ikonoclast
    June 18th, 2008 at 19:43 | #6

    LOL. I notice that Jennifer Marohasy (whom I’ve never heard of before) says;

    “Fox News accurately summarized my key points:”

    That would be enough to ring major alarm bells in any intelligent person’s thoughts.

    But seriously, isn’t the Riverina one of Australia’s major food bowls? Correct me if I’m wrong, I dont know much about this. Will this have a significant impact on our food prices? Sounds to me that certain industries like growing rice in the Riverina (for sure it was a dumb idea) are most definitely dead now.

  7. observa
    June 18th, 2008 at 20:45 | #7

    This rice vs desal tradeoff here is an excellent example of the superiority of market green policies over elected king’s whims, providing you think carefully about that CM umbrella. No matter, we can easily see how it works within the current flawed one. Notice how Adelaideans could pay all the rice growers 44c/kl to put their feet up and save on that desal water and CO2 at over $3/kl, but furthermore there’s adequate room there for them to pay for environmental flows as well. It’s estimated that the total MD Basin is 40% overallocated now on average. Let’s tack on say 10% to the ricegrowers’ use too for some environmental flows. What that means is Adelaideans could cough up that 44c/kl to ricegrowers, in the full knowledge they’re only going to get 50% of it for their hard-earned. That means they’re effectively paying 88c/kl, still way under that desal cost and the Coorong gets a cut too. As it stands now, the historical low cost has got eveyone knee deep in mud when there was always a natural cap. Now let’s suppose those ricegrowers need say 10% net profit on that 44c/kl at present(really 10% of the 48c/kg for 1.1kl used) to carry on business. That’s 4.4c/kl which a resource tax of that amount would have saved all that social malinvestment. Notice how resource taxing can easily be tailored by experience to wind up or ease the screw here, depending on circumstances. Price floors quantity manipulation any day for simplicity, level playing field and continuum for the players, although it’s important that the ultimate price signals they face are carefully constituted.

    Think of it like this green lefties. If you weren’t as dumb and stubborn as ricegrowers, you could set the ideal CM on autopilot and sit back on the verandah and enjoy your retirement. Instead you’ve got to worry about growing rice, sulphating Coorongs, salinity and how the hell Mr 60% reductions is gunna get there with that new desal plant that runs on Kyoto promises. Let properly constituted price signals be your friend for crying out loud.

  8. observa
    June 18th, 2008 at 21:01 | #8

    “Will this have a significant impact on our food prices?”

    Look at the bigger picture Ikon. Because MD water was grossly underpriced in the past, that was the signal to squander it on all sorts of enterprise, mostly agricultural ones. Basically we emptied the dams growing tropical crops in otherwise unsuitable arid lands. Fine and that gave us cheap food and cotton shirts for a while. Too cheap because now we can’t have them at any price until it rains and those dams fill up again. The glaring opportunity cost of Adelaide desal vs rice and cotton growing illustrates the folly. Had we priced the available water to equilibrate supply with demand, it’s true we would have paid more for food in the past, but we’d still be happily producing and paying that price now. As it is much perennial horticultural investment will die and be lost completely. We have not begun to pay that cost to get some of it back, but pay it we’ll have to.

  9. Peter Wood
    June 18th, 2008 at 22:28 | #9

    It seems unlikely to me that there will be enough rain (or policy intervention) in the near future to provide enough fresh water to avert the acid sulphate soils crisis, so it may be best to open the barrages sooner rather than later.

    Over the longer term, I doubt that a limited buyback over a period of 10 years will suffice, especially if climate change will increase the likelihood of drought in the MDB. Better to replace the current mess with a simpler system. One approach would be for each year have a central body (yes just one) determine how water is to be allocated to the environment, cities and irrigators, and auction permits to use given amounts of water (for one year) to irrigators. The transition to a simpler approach will require some compensation.

  10. Ikonoclast
    June 18th, 2008 at 22:29 | #10

    Over the last 20 years an enormous amount of Brisbane’s water was wasted growing green lawns for lawn grubs to eat. Then chemicals were used to kill the excess of lawn grubs. All that useless lawn growing and the associated annual exotics gardening industry was counted as a positive to our GDP. Makes no sense now of course.

    Hmmm, then again there was a time when the main purpose of the Wivenhoe was flood mitigation. Now it’s only about 20% full (although our total storages are at 39.5% combined.) Climate shifts can make past behaviours that were harmless enough (or even sensible at the time) into behaviours that are later unsustinable.

    There is no magic market geni with a guiding hand and a crystal ball which can factor in every unforeseen future shock. We have to rely on science and public planning a bit more.

    Free markets have a place but within a democratic, humanist and scientific planning nexus if I can put it like that.

  11. observa
    June 19th, 2008 at 01:09 | #11

    Ikon, Free markets have a FUNDAMENTAL place but within a democratic, humanist and scientific planning nexus if I can put it like that and stick around and I’ll explain how we can manage that over time. Essentially that’s how you set about designing the invisible hand that will quietly guide all our tillers. Overall direction, rather than some unwavering GPS plotted course. You look at the overall design of the current one, assess its shortcomings and think about how to improve upon it within the framework you outline. Looking at the inherited design at present I’d say it’s stuffed and needs a total rethink. Having said that, we need to understand that price is serene and all enveloping if thoughtfully constituted. It’s like the atmospheric pressure that acts equally and inexorably on a balloon and determines its overall symmetry and size. It can be adjusted accordingly and yet maintain that symmetry for all to enjoy. That’s what Adam Smith understood implicitly. Quantity controls are like some crude, childish hand that grasps and misshapes and causes it to bulge in all sorts of unforseen directions.
    Listen to yourself-
    “Over the last 20 years an enormous amount of Brisbane’s water was wasted growing green lawns for lawn grubs to eat. Then chemicals were used to kill the excess of lawn grubs. All that useless lawn growing and the associated annual exotics gardening industry was counted as a positive to our GDP. Makes no sense now of course.”
    Sounds like you want to ban lawns and gardens now, presumably after knocking off plastic shopping bags. Welcome all to the bagless concrete jungle. Either that or only with fruit trees bearing fruit Ikon likes the taste of. Well perhaps some flowers in the yard, providing you sell them like a true commercial horticulturist, otherwise we’ll cut your wasteful water off. Hang on a minute, who needs flowers anyway? Let the bees grow their own, if they can rustle up their own precious water. Bah humbug! Give me the serenity and liberty of price and keep your stultifying, strangulated death.

  12. James Haughton
    June 19th, 2008 at 10:18 | #12

    observa, what does CM stand for?

  13. Ian Gould
    June 19th, 2008 at 11:58 | #13

    Constitutional marketplace – it’s a bizarre neologism for “tax reform” because apparently imposing a carbon tax and abolishing all other taxes will produce Utopia overnight.

  14. Salient Green
    June 19th, 2008 at 13:03 | #14

    Observa, I think you did an excellent job comparing the value of water in growing rice with the value of water to Adelaide. It gets worse however, as the site you referenced was optimistic. This site,
    http://rivermurray.com/html/about_the_murray/murray_darling_basin.html
    gives rice a return per ML of $200, or $0.20/KL.

    Have you put this to the minister?

  15. paul walter
    June 19th, 2008 at 13:28 | #15

    Unfortunately, Ikonoclast, Marohasy looks like becoming a permanent fixture thanks to her friends at IPA, or was that CIS.
    Think of Albrechtsen and Devine except that she spouts flat earth medieval stuff about environment rather than authoritarianism or fertility.
    Useless as a hip pocket on a singlet.

  16. David
    June 19th, 2008 at 17:13 | #16

    Funny thing about Marohasy is that she _still_ claims the Murray-Darling isn’t in trouble (or at least she did a couple of weeks ago, the last time I looked at her website). I don’t see how someone with a PhD in a life science could actually be as dumb as Marohasy seems to be, so I reckon she’s a paid shill who doesn’t believe a word she says.

  17. paul walter
    June 19th, 2008 at 19:46 | #17

    David, she is indeed likely a “paid shill”. One or other of the thinktanks above does “run” her, and if I recall rightly, there was something mentioned a bit fishy about her post grad studies, to do with who was funding her I think, at one of the Queensland unis.

  18. Ikonoclast
    June 19th, 2008 at 20:02 | #18

    On a tangent… ever wondered how there is full gravity on all those spaceships in space in the Alien series? Well, a piece of dialogue in the original Alien (extended version anyway) explains it. Upon takeoff there is the line, “Engaging artificial gravity.” See! It explains everything!

    Marohasy only has to say, “Engaging artifical water flows.” And its all there! The Murray is full!

    EASY PEASY! :)

  19. Louis Hissink
    June 19th, 2008 at 21:45 | #19

    How intresting.

  20. observa
    June 20th, 2008 at 11:38 | #20

    “Constitutional marketplace – it’s a bizarre neologism for “tax reformâ€? because apparently imposing a carbon tax and abolishing all other taxes will produce Utopia overnight.”

    No I haven’t finished building my ideal CM yet Ian and I’ll get to that. The important points to note here are the frictional drags of things like stamp duty, capital gains(impacting housing affordability too notice)and the like in preventing fleet of foot adaptation to the new realities. Also that price beats quantity hands down as inexorable and constant pressure, not so amenable to special pleading and economic rent seeking. However if we’re to ask ourselves what price(really a systematic price design), then presumably we will have to address ability to pay within a shrinking economic pie. That should be obvious with the dilemma the Rudd Govt is facing now, in trying to tack environmental pricing on top the current mish mash. That’s because they haven’t really thought carefully about the overwhelming drawbacks of the current system. They won’t get away with such a piecemeal approach. It’s increasingly apparent they haven’t really done their homework in that regard.

  21. Enemy Combatant
    June 20th, 2008 at 19:44 | #21

    Fri June 20, 2008:
    http://www.smh.com.au/cartoons/

  22. TerjeP
    June 21st, 2008 at 00:50 | #22

    I’m not qualified to say if she is right or wrong but here is what Jennifer Marohasy is saying:-

    http://www.jennifermarohasy.com/blog/archives/003176.html

    The short version:-

    As I wrote in The Land on May 15, the main problem in the lower Murray is developing acidity from the drying of the lower lakes, and the simple solution is to open the barrages at the bottom of Lake Alexandrina and let the area reflood with seawater.

    Potential acid sulphate soils (ASS) are common along much of the Australian coastline. These soils formed after the last major sea level rise, which began about 10,000 years ago. The soils are harmless as long as they remain waterlogged. But, if the water table is lowered the sulphide in the soils will react with oxygen forming sulphuric acid.

    In the case of the lower lakes near the mouth of the Murray River in South Australia, the barrages built 80 years ago are stopping inundation from seawater; in the same way the dykes in Holland are used to reclaim land. Indeed the Dutch have been managing associated acid sulphate soil problems for more than four centuries.

    There is in fact a simple solution to the problem in the lower Murray, open the barrages and let seawater re-flood the area.

  23. frank luff
    June 21st, 2008 at 10:17 | #23

    Two industries about which I have changed my mind. I actively worked against “sugar” and “rice”.
    Both have reformed their irrigation practices in remarkable ways. Sugar refining feeds electricity to the grid, so profitably that now electricity is a larger part of growers income, ie sugar as little as 5 cents a kilo. Soaker hose, recycled tyres.
    Modern “flooding” to irrigate rice has been proved to be the best available. Me! defending rice growing, today it’s needed as are flexible minds.
    I lived on the Murray for a couple of years, in a canoe, a love as to be beyond imagination was fostered in me, now it is so sad to see places I marveled at, with no water. The history of “over allocation” on the Darling and the Murray is long and gruesome.
    Lets drop the blame game and remove the barrages.
    A too long delayed proposal to do just that requires a pipeline to service those whose doorsteps turn salt, not too hard! and building a barrage as the river enters the lakes.
    The river was this way last centary when the fish caught in the lakes tasted better, because they were salt water fish.
    All seems too easy, next thing is to repair systems upstream, the open leaking one in Vic first. An up to date Gwoyder{wrong spelling} line too would help.
    A world shortage of food demands changes too, what is grown with the water, end game for grapes?
    Or will we sit around awaiting a market to decide for us?
    fluff4

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