Solutions in Water
Issue No. 45 - Feb/March 2009
Policy reform creates opportunity
Water resource authority, Prof Mike Young of the University of Adelaide, articulated the way forward in a presentation to the CPA Congress in Adelaide late last year.
Prof Young is calling for more realistic water costing to accelerate water technology improvement by making it more profitable. However, he says, government moves to address water security disasters through grants and usage restrictions interfere with market play and are delaying the economically necessary water reforms.
Prof Young notes water trading effectively began in 1994 when National Competition Policy formally advocated reform for the water resource. The nascent policy called for full-cost pricing to include the costs of externalities –all the consequences of water usage.
In 2004 came an internationally significant template for ongoing reform in the National Water Initiative. Although lacking urban policy detail, the NWI commits urban Australia to efficient water use. It allowed all states, and all state-owned utilities, to break away from the tranche-payment incentive mechanism.
But since 2005, Prof Young says, growing alarm over water security has caused governments to lose sight of the need for competition and market-creating reforms.
Grants, subsidies and restrictions have become the norm and NWI progress has been slower than expected. “As a Nation, we have been backsliding on reform fundamentals.” he says.
Prof Young maintains policy imperatives should be to achieve environmental sustainability, greater certainty for investment and capacity for water management regimes to change
“responsively and fairly” when required. This demands full costing and free play of market forces, including trading in water rights.
Prof Young says trading has enabled new technology adoption and “greenfield" development but entitlement and accounting systems still remain flawed. New water licences have been activated without reducing allocations to o...
