Transcript Water policy reform – moving ahead

Water policy reform – moving ahead
Presentation for the Water Policy in the MDB Workshop
22 October 2010
Will Fargher, General Manager
Water Markets and Efficiency Group
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National policy developments
National Water Initiative
A nationally compatible market,
regulatory and planning based system
Fundamental NWI reforms
• Unbundled water rights and markets
• Clarity and security; efficient allocation; flexibility during
challenging times
• Pricing and best practice institutional arrangements
• Encourage efficient and sustainable water use; promote
efficient investment; encourage innovation and ensure
appropriate service delivery; manage externalities
• Environmental water management
• Plans to include clear and measurable objectives and
associated water required; secure entitlements;
accountability in management and reporting
Reform agenda, implementation
and assessment
Some Commission assessment
and information products
Biennial Assessment of
Australian Water Reform
• First published in 2007
• Provides independent assessment
of progress in water reform
National Performance Reports (NPR)
Australian Water Markets
Report
• Published annually (2008, 2009)
• Statement of market trends
and activities
• Market performance
as an institution
Impacts of water trading in the sMDB
• Published annually
• Published 2010
(2007,2008,2009)
• Assessment of economic,
• Reports on performance
urban and rural water
service providers
social and environmental
impacts in southern MDB
• Produced again in 2012
Water entitlement reform
Water trading
Achievements of tradable entitlements
and markets
• Major benefits in managing the drought, facilitating
autonomous adjustment, accessing finance, and
encouraging investment
• Realising benefits at farm, industry and regional level
• Total trade in 2008-09 of around $2.8 billion
• High reliability entitlements trade around $2000/ML
• Total trade of entitlements was 1800GL in 2008-09,
up 95% from the previous year
• Around 7% of total entitlement volume was traded in
Australia in 2008-09
Achievements of best practice pricing
and institutional reforms
• Separation of policy, regulatory, service delivery functions
• Prices set independently to recover efficient costs and
return on investment
• Increased transparency; cross-subsidies largely eliminated
• Elimination of allowances and property value based charges
• Application of two part tariff; uniform usage charge applying
to all water used and based on long run marginal cost
• Efficiency improvements and greater utilisation of capital
enabled real price reductions in 1990s
• Profitability has improved and businesses can expect a
commercially viable return
Achievements of environmental
reforms
• Increased awareness of environmental water
• Improved water plans to promote environmental water
management
• A view expressed on how much is needed for
sustainability (versus how much can be spared)
• Institutional arrangements in place for
• Purchase of entitlements for environmental purposes
• Environmental water managers established
• Conditions on licences (particularly in absence of
extensive water plans, i.e. TAS, NT, WA)
Climate change and drought
Climate change and flood
New pricing and institutional
challenges
• Planning and institutional failure – evidenced by
shortages, suspensions, protracted restrictions and
rush for government to invest in new infrastructure
• Evidence of inefficiency in supply augmentation and
demand management measures
• Risks (e.g. climate change, growth, population,
energy nexus) and responses mean a new highercost path for water supply and management
• Not enabling or incentivising the emergence of an
optimal mix of supply and demand side measures for
efficient and sustainable water management
Future reforms to underpin markets
and pricing
• Further unbundling of surface and groundwater
• Clearer specification of entitlements to new sources
and products
• Tradable entitlements for major urban water users
and groundwater
• Improving timeliness and quality of information
• Accounting, registers, metering, compliance
• Structural reform of the urban water sector to create
competitive pressures for water supply and delivery
• Scarcity and externality pricing
• Further institutional and governance reform
Falling short on holistic
environmental water management
NWI goal
• Sustainable water management
Determination
Review
Commitment
Compliance
Further opportunities for
environmental water reform
• Plans clearly specifying conservation values and
achievable environmental outcomes
• More clearly defined and delivered held and
planned environmental water
• Authority and resources to provide sufficient water
at right time and place to achieve identified
outcomes, including across borders
• Monitoring, review and reporting on outcomes, and
the adequacy of water provision and management
arrangements in achieving outcomes
• Reconsider objectives and mechanisms in an
adaptive management approach
Deal with structural adjustment
• Remove measures to address concerns about the
localised community impacts which cause confusion,
distort smooth adjustment, add unnecessary cost, and
undermine confidence in water management
• Recognise that NWI fundamentals are critical to
dealing with change
• Encourage individuals and entities to make decisions
• Invest to understand and monitor adjustment issues
The success of national water reform may depend on
how well the adjustment process proceeds in
irrigation dependent communities
Get the soft stuff right – community
partnerships and communication
• To ensure that water reforms endure, it is essential that
they be accepted by the community
• Tough decisions still need to be made, but Australians
are more likely to accept decisions involving some
hardship if they understand and support the goal
• Better communicate costs and benefits
• Especially those benefits flowing from more sustainable
levels of extraction and a more sustainable, confident
and certain irrigation sector
• Public and industry not always clear on the case for
reform
What the NWC is doing
• Priority rural and urban projects in 2010-11 include
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Review of water pricing reform under the NWI
Australian water markets report 2009-2010
Assessing factors affecting the development of water markets
Storage access provisions: costs and benefits of further reform
Investigating structural adjustment programs and policies
Australian environmental water management report
Making the economic case for reform
Developing future directions in the urban water sector
• Focussing on concerns about optimal investment in and
use of a mix of supply and demand side measures
• Informing the need for, the shape and key elements of
contemporary national water reform
www.nwc.gov.au
[email protected]