On 31 March the Productivity Commission released a research report on Market Mechanisms for Recovering Water in the Murray-Darling Basin
. It is a weighty 366 page read, but a very good and in-depth discussion that is worth the effort. Some of the interesting findings of the Productivity Commisssion assessment were:
• The buyback is occurring before sustainable diversion limits (SDLs) are set under the Basin Plan
, creating uncertainty in the minds of irrigators and affecting the efficiency of the buyback.
• SDLs must be based on scientific assessments of the amount of water that is required to avoid compromising key environmental assets and processes. Good science is a necessary but not sufficient basis for optimising the use of the Basin’s water resources.
• Other water products (for example, seasonal allocations and options contracts) are potentially valuable in meeting short-term environmental needs.
• Subsidising infrastructure is rarely cost effective in obtaining water for the environment, nor is it likely to be the best way of sustaining irrigation communities.
• The 4 per cent limit on out-of-area trade of water entitlements should be eliminated as soon as possible. Limits on the amount of entitlements that can be sold to the Commonwealth through the buyback should also be eliminated.
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