See also
Water Trading
The Pilot Interstate Water Trading Project

The Pilot Interstate Water Trading Project

Schedule E of the Agreement requires that a review be conducted every two years on the economic and environmental impacts of the pilot project for permanent interstate water trading. The first such review was completed in December 2000, and the Ministerial Council agreed to public release of the report at its meeting in March 2001

Download full Review Report [PDF] 377kb [Word 6] 722kb

The major outcomes of the report relate to: the need to improve State licensing systems and streamline trade administration, potential negative salinity impacts, positive economic impacts of trade for buyers and sellers, implementation of environmental clearances in the long-term, and poor understanding of exchange rates. More specifically, the report indicates:

1. Positive

1. interstate water trading is increasing the value and economic efficiency of water use in the Murray-Darling Basin;
2. interstate trading during the two year trial period has had no measurable adverse social implications for the districts that have sold water interstate, and in some districts water trading has had significant positive benefits, Water trading has had very positive social implications for the districts that have acquired water;
3. the environmental flow impact of interstate water trading has probably been positive, but in reality the volumes traded to-date are too small for the gain to be measured (10 GL); and
4. provided that the current spirit of adaptation and willingness to solve problems as they emerge continues, the pilot should continue, albeit with improvements.

1. Negative

1. water licensing registration, report keeping procedures and administrative systems need to be improved (water brokers have expressed the view that the pilot project should not be expanded until administrative arrangements are improved significantly);
2. from a salinity perspective and in the long-run, inter-state trading can be expected to have a negative impact on river salinity. If salinity prevention obligations are enforced then the long-term net effect of trades could be neutral. Any resulting environmental impacts depends on the degree to which environmental plans are enforced and the adequacy of the standards they set - all States express problems in monitoring compliance with the plans. All States need to improve the mechanisms for enforcement. Salinity Prevention Obligations should be recorded on the water licence;
3. exchange rates are poorly understood by buyers and sellers in the water market; and
4. fines and penalties for exceeding water allocations need to increased in South Australia, because it is cheaper to pay the fine than to buy water on the temporary market.

One issue that has quickly been considered by the Ministerial Council is the need for full and frequent public disclosure of prices paid for water traded in the pilot zone. While cognisant of some concerns regarding privacy, pricing disclosure is essential for market development and transparency, and for consumer confidence. Consideration is now being given to the release of such information, subject to jurisdictional clearance.