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Like California, Australia has a highly variable climate and has been plagued by droughts.
Also like California, for most of its history successive Australian governments sought to address increases in demand for water through taxpayer-funded infrastructure projects and mandated diversions (for environmental demand, such as maintaining flows to conserve fish species). But the infrastructure projects failed to keep pace with demand, especially during droughts, while the mandatory diversions resulted in conflicts, especially between agricultural users and environmental pressure groups.
The brief describes how, in response to a water crisis of similar proportions to that being experienced by California, Australia reformed its system for allocating water, creating better defined and more readily tradable rights. The result has been water prices that better reflect its scarcity value as well as delivery cost. As a result, farmers have …show more content…
Such a solution harks back to the approach taken early in California’s history, when miners and farmers developed highly functional and effective systems of water ownership and trading, enabling water to be used by those who valued it most and both incentivizing the enabling development of private irrigation projects.3 Even today, in some cases,
Californians who place a high value on water, including cities and some farmers, have been able to purchase water from those with rights to water but who value the water less.4
Unfortunately, however, a series of interventions going back to the late 19th century have tilted the “playing field” by undermining property rights and impeding market transactions in water, with the result that today only a small fraction of all the state’s water is eligible to be traded, prices have become distorted, and entrepreneurs have neither the ability nor the incentive to provide solutions. The main problems are:
1. The “use it or lose it” provision. The requirement that appropriative water rights