How do water markets function in droughts and other hard questions: Learning from law reform in Australia

Abstract

Parts of Australia are going through a period where rainfall is the lowest since records were collected. The drought has brought water issues to the forefront of national concern. Since 1994 Federal and state governments in Australia have embarked on an ambitious agenda for reform. The reforms were based on two main objectives – to introduce a water market while at the same time protecting environmental uses of water. Water entitlements were required to be specified in order to be traded. In 2004 the Council of Australian governments confirmed the direction for reform and agreed on a further reform agenda called the National Water Initiative (NWI). In this new phase, the tensions between the two main objectives of trade and sustainable management continue to be resolved through catchment wide planning processes. Reform has made progress for example the building of reliable registers of water entitlements roughly based on registers of land title. Water planning is in place in all jurisdictions and processes have improved. Significant challenges exist - overallocation of water has not been satisfactorily addressed; water plans are still not based on sustainable management; decision-making in planning needs to be made more transparent; engagement with stakeholders need improving, and the structure of legal entitlements to water needs refining.

Keywords: drought, jurisdictional disputes, Murray-Darling Basin, North Australia, overallocation, public participation, transboundary rivers, water entitlements, water markets, water plans