Alluvium was engaged by DPIE Water to review approaches to trading water entitlement in two representative unregulated catchments in New South Wales. The purpose of the project was to test how different trading rules impact the availability of water and environmental risk. The information will be used to develop more consistent and transparent Water Sharing Plans across the state.

Firstly, we reviewed water plans from four different states to understand the range of planning prescriptions and trading rules that are commonly used to balance water availability and environmental risk around Australia. Secondly, we reviewed recent aquatic science on the connection between different parts of the flow regime and fish populations in eastern Australia.

Finally, we used a hydrological model to quantify water availability under scenarios that included different trading rules and levels of acceptable environmental risk.

The project demonstrated that significant volumes of water can be traded between unregulated catchments without increasing environmental risk if flow-based cease-to-pump rules are introduced and off-stream storages are constructed. In contrast, trading in entitlement that allows extraction at low flow rates can significantly increase environmental risk without substantially increasing the volume of water available for use.