Weekend reflections

Weekend Reflections is on again. Please comment on any topic of interest (civilised discussion and no coarse language, please). Feel free to put in contributions more lengthy than for the Monday Message Board or standard comments.

29 thoughts on “Weekend reflections

  1. I can see the point of Kevin Cox’s WaterFunds suggestion but there is one critical element to ‘currency’ schemes and that’s how they interact with the mainstream economy. In this case it’s the definition of ‘ways to increase the supply of water’. In other words how much of my waterfunds savings can I spend on polypipe for my “indoor plant nursery”? Without a clear definition such schemes are open to rorting.
    I think such schemes will work better if confined to a catchment or a quasi-catchment (e.g. coastal river systems). Consider the potential outcry of say, Perth or Launceston citizens over their water savings being spent in Brisbane rather than reducing their own water rates. I’m finding it difficult to see how, nationwide, catchment authorities could trade and manage at the same time given that they would have to initiate much (or all) of the expenditure. What’s to stop them become captive of an ENRON style rort. Also,it’s hard to see how political considerations (catchments=electorates) will not force it to become a two tiered system inevitably. So I’d go with the flow (sorry) and limit trading to catchments and catchment authorities.
    Taking it catchment by catchment, also reduces the problem of groundwater assessment. I think that in many cases the problem with groundwater is largely political rather than technical. It’s getting meters installed rather than coming up with expensive new ways to measure consumption that’s the problem. The other problem is ownership, which is where the definition of quasi-catchment might need to be argued over. Consider Yarragadee aquifer which could be argued by Perthites to be part of the West Coastal aquifer system but not by any of the Shires that it lies under!

    I don’t think this is an easy problem and au contraire TIm Flannery’s request that the Murray Darling system should be managed by an authority that can operated at arm’s length from politicians seems like a good place to start. But I think that it will be inevitable that trading between catchments will be mediated by political considerations.

  2. Kyan the definition of ways to increase water supply as you say is critical. The investments are measured by the return to the spender and so the natural market forces of getting the best return will take care of most rorting. It is not too difficult to define
    what are acceptable projects as we are already doing this in defining ways we can increase water supply from the water recycling schemes of SE Queensland, to the desalination in WA, to subsidises for water tanks in Canberra, to weirs in South Australia. The schemes as designed are voluntary schemes – not compulsory. You do not have to participate if you do not want to and the schemes will be controlled by members who will be able to stop any attempt at rorting.

    Remember too that the money being spent is money that individuals control – it is not government money – so individuals are making the decisions and so if they decide that they will get a better return on their Water Rewards from the other side of the continent then they should be allowed to do so. Remember too that money is not spent on water but on ways of increasing the utilisation of available water. We do not have any trouble with Tasmanian money being used to fund WA iron ore mines so why should we worry about investment funds funding water recycling projects in other parts of the country.

    I would be most interested in hearing about other “currency” schemes. The only ones I have been able to find are the Australian Compulsory Super scheme and the Singapore Health schemes – both of which seem to be successful.

    Groundwater allocations are a problem no matter how you do things and it is not confined to Water Rewards and so is not an argument against Water Rewards per se. Personally I would simply give everyone who is currently living anywhere on the aquifer a water allocation and if someone wanted to use ground water they would have to buy it from someone who in turn would have to spend the money on making better use of existing water.

    For those interested there should be an article on Urban Water Rewards in Wednesday’s Canberra Times.

  3. RE, “currency schemes”
    Sorry, it was a gut reaction to this sentence :- “Let us call this money WaterFunds.” It sounded like some kind of LETS scheme, but as a kind of Super Scheme it makes more sense. However, I would still contend that rorting could be a problem because while voluntary schemes are self limiting in this regard, it’s a different matter when it’s compulsory. Which I think is inevitable. I know that Super is compulsory but the benefits from super (or a health insurance scheme) are purely personal not tradeable.

    The problem is that spending money to make ‘better use of existing water’ is hand waving away the issue of self interest. It’s a laudable aim but nobody is gonna take it seriously.

    OTOH it strikes me as a major market failure( or perhaps it’s just a plain rip off) that the govenrment is under the greatest pressure to pay top dollar for water allocations during a drought because of the ecological consequences if they don’t. Sounds more like blackmail than a market to me.

  4. Kyan thanks for the comments. To implement the system we create a new currency that is only to be used for water purposes. Common examples of special currencies are frequent flyer and other rewards programs (and other currencies). An important part of the system is the ability for the new currency to be sold for other currencies. Thus you can put your Water Funds up for sale and get paid in another currency but the Water Funds themselves still retain the property that they have to be used on Water things.

    By rorting I presume you mean people using the system in ways that it was not intended. In other words not using the Funds for Water supply enhancement. This is an issue but the reasons why it is unlikely to be a major problem are:

    1. If someone cannot use their Water Funds they can sell them to someone who can. We expect most people to take this option.
    2. The schemes on which they can be used have to be registered and approved.
    3. Funds flowing into projects will be visible and public. (Who puts funds into what project is not made public but is available to investigators).
    4. Fraudulent use of funds is illegal and the transactions related to them can be easily reversed.

    For example one way of rorting the system is to pretend to purchase say water tanks but to have an arrangement with a supplier who splits the “profit” but does not deliver any water tank. These sorts of arrangements are obviously fraudulent but they are easy to detect and they leave a “paper trail” and they normally require two parties to conspire.

    There is less chance of rorting than there is in schemes where projects are approved and then money given. Examples are dollar for dollar matching projects. One of the major reasons money has been slow in being spent by the Water Commission is the difficult of ensuring that the projects being put up mainly by the States are genuine projects that will cost what they say they cost.

    Schemes of simply buying back water allocations for cash is money that is unlikely to go to increasing the amount of usable water.

    The Water Funds market will be difficult to manipulate as was the case of electricity and Enron because the Funds are restricted in use and there will be little volatility in price because of these restrictions and because of the price ceiling of the face value of Water Funds.

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