Water trading
Under the National Water Initiative (NWI), water trade is the transfer of water access entitlements (permanent) and seasonal water allocations (temporary) between different entities, for example, irrigators, environmental water managers, and water authorities (water infrastructure operators).
Water trading is important because it allows scarce water resources to be transferred to their most productive uses.
Water trading also allows access to water resources to be reallocated over time in response to:
- changing commodity prices
- changing environmental conditions (e.g. salinity levels, river health)
- changes to the size of cities and towns
- the changing availability of water.
Creating an environment in which individual water access entitlement holders are able to trade water quickly and easily will contribute to a more productive and efficient use of Australia's water over time.
Water trading terminology
A major difficulty in encouraging water trading is the lack of consistent definitions to describe water access entitlements, allocations and transactions. Each jurisdiction has different terminology and definitions for these concepts. For specific jurisdictional terms and definitions see:
- Dictionary of terms for water access entitlements and transactions
- A water access entitlement and a pot of beer
Water trading and water reform
The 1994 Council of Australian Governments (COAG) water reforms required the separation of water rights from land - a necessary first step to expand trade in water. The reforms also sought to open up trading arrangements, including interstate trading.
COAG subsequently agreed in the National Water Initiative (NWI) to an 'expansion of permanent trade in water bringing about more profitable use of water and more cost effective and flexible recovery of water to achieve environmental outcomes'. This was primarily intended to expand the area of coverage and the volume of trade, and to overcome the barriers to some forms of water trade.
Progress
In its 2007 Biennial Assessment of progress against the NWI, the National Water Commission found that good progress has been made in introducing institutional, legislative and administrative arrangements that enable water trade. (See also 2009 Biennial Assessment).
Across the southern Murray-Darling Basin, New South Wales, Victoria and South Australia have put in place arrangements to allow for interstate trade in water access entitlements and water allocations.
The assessment also found that water trading, within and between states, has been effective in managing water in difficult circumstances. Water trading within Victoria and in South Australia was at record levels in the 2006-07 water year. There are also positive signs that interstate trade in the southern Murray-Darling Basin is opening up.