Reviewing the adoption and impact of water markets in the Murray–Darling Basin, Australia

Abstract

• Water markets in Australia have become a common farm management tool. • Water policy over time in the Murray–Darling Basin is examined. • The economic, social and environmental impacts of trade are examined. • Various water market institutional, policy and informational changes are suggested. Water markets have increasingly been adopted as a reallocation tool around the world as water scarcity intensifies. Water markets were first introduced in Australia in the 1980s, and water entitlement and allocation trade have been increasingly adopted by both private individuals and governments. As well as providing an overview of water policy in Australia since the 1900s, this paper examines the adoption of water trading in the southern Murray–Darling Basin of Australia (the largest hydrologically connected water market in Australia), and investigates the associated social, economic and environmental impacts that have arisen from the implementation of water markets. This study found that up to 86% of irrigators in one state in the southern Murray–Darling Basin had undertaken at least one water market trade by 2010–2011, hence, water market strategies are now a common tool employed by irrigators to assist their farm management. A variety of institutional, policy and informational changes are identified to increase the benefits from water markets in the future. There is no doubt that managing the impact of climate change and water scarcity are intertwined, suggesting that policy, institutional and governance responses should be similarly structured and coordinated.