Water Resource Policy

1. Water Resource Policy

2. Who is winning? Who is bravest?

3. Water Policy Reform • Much in common • India, Vietnam, NZ, China, Australia and USA • Important Observations • Substantial gains from trading • But be careful, look beyond water prices and markets (infrastructure, governance) • Setting up markets is a long and tortuous process • Issues • Savings – who gets them? • Governance – what structure for large systems?

4. Water as commodity • Input into production system • Intensive margin (Technology) • Extensive margin (Land-use change) • Supplier of unpriced ecosystem services • Ground and surface systems are connected • Efficient production of all goods and services is the goal

5. Top down v’s bottom up market development • China and India are trialling bottom-up • Evolving • Progressively expanding the scale • Australia now trying to align its systems • Research Questions • Decide where and how entitlements should be defined • How many types? • Farmer, village, regional and system level? • Governance systems that work across scales – who is responsible

6. Social v’s Private Contracts – Meenakshi Social Contract (equity) Private Contract Tube well owners also have land without wells Repeat player game

7. Vietnam – Jim, Mark & Claudia • “Charge-subsidy” reveals problem with pricing approaches • Unusual way of describing the first step in a process of assigning quasi-entitlements and eventually establishing entitlement and allocation markets

8. Starting up markets – Irene Parminter • Very difficult to begin, systems takes time to build. • China is trialling bottom-up approach • Australia fixing up problems that a plethora of systems created • NZ is searching for a template for unregulated, fast changing systems • How many formal products in one region? • Sequencing is critical • Markets can allow you to trade into trouble and increase the cost of fixing problems • Theory • Trading prices for scarcity • Then only have to get a supply charges and contracts right and manage externality

9. China – Jinxia, Ric and Steve • Moving to trade but have not started on price • Challenges • Urban-Rural transfer (Australia & USA too) • Rural-Environment • Major warnings • Infrastructure capacity • Supply reliability (India on electricity) • g-water connectivity • Yellow River over-allocation solved administratively! (After 17 in 20 yrs no flow it reflowed in a drought)

10. Climate change and over-allocation John Quiggin • Need state-contingent allocation rules • Market v’s administrative control of storage?(Dams stop small floods) • Unbundle at two scales • Individual and system level • Design of robust instruments to manage for system uncertainty is in its infancy

11. Salinity and Wetlands – Keith & David • Reuse provides opportunity • Discounting • Compensating projects • Permit trading and banking

12. Environmental water management - Anna Heaney • As markets develop more and more products will emerge • State contingent instruments (Portfolio) • Entitlements • Option contracts • Leases • Counter-cyclic trading has big potential • but has challenging governance implications

13. Frontiers • Governance (Institutions) • Accounting • Flow reducing activities (risks) • System losses • Exchange rates • Infrastructure management (Privatize?) • Third party aspirations • Communication

14. Design Contact: Prof Mike Young Water Economics and Management Email: Mike.Young@adelaide.edu.au Phone: +61-8-8303.5279Mobile: +61-408-488.538