Abstract
ABSTRACT. Murray Basin water resources are under increasing pressure to satisfy often conflicting environmental and economic objectives. Governments, as the “environmental steward,” have several management options including water trading and banking water until it can be used to greatest effect and occasionally selling water back to irrigators. This is sometimes known as counter-cyclic trading. To examine the potential of the above options, a model of water trading and banking in a simple market is developed. The model combines a catchment hydrology model with economic information that drives land use practice and demand for water. Simulations are used to explore these options at a strategic level. The potential impacts of increased upland afforestation and climate change on catchment hydrology in the presence of a pro-active environmental steward are considered. It is concluded that in a system where entitlements are capped it is likely that the most cost-effective management system will involve counter-cyclic trading.
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