Policy Object Lesson: Australia’s Water Woes

We haven’t written much about the environment since the credit markets got to be so much fun, but in the early days of the blog we did give it more attention than we do now, so this post isn’t as off topic as it might seem.

With all the tooth-gnashing about oil, food, and greenhouse gasses, the critical resource is shortest supply is water. However, the one advantage water has over all those other scarce resources is that it can be reused. Nevertheless, a tremendous amount of water is wasted though leaking distribution systems (this is no joke, the losses are massive), evaporation, and good old fashioned profligate habits.

Australia makes for a particularly interesting case, since water has never been abundant there. The reason it has a land area close to that of the continental US with only 20 million people is the lack of any inland river systems save the Murray-Darling. 70% of the nation’s irrigation systems are connected to it and the farms that use its water provide roughly 40% of the nation’s food.

Far and away the biggest use of Australian water is agriculture (when I lived there a few years ago, the estimates were 75%), yet a detailed model of Australia that looked at its physical inputs and outputs concluded that the country was not adequately compensated for the water contained in its agricultural exports. And Australia’s problems are affecting commodity prices. The country is in the throes of a multi-year drought, and exports of wheat and rice have fallen dramatically, putting pressure on grain prices.

Australian economist John Quiggin provides a short overview of the choices that now face Australia and underscores that failure to take actions that were called for years ago have now left the country with unattractive options.

From Quiggin:

The best water policy in the world is useless when there is no water. We are now finding this out, as we struggle with yet another year of near-record low inflows to the Murray-Darling river system.

The most immediate crisis is that affecting Lakes Albert and Alexandrina at the mouth of the Murray River. Flows in the lower section of the Murray River have been low, or non-existent,most of the time since 2002. However, water in the lakes has been maintained, until now through a system of barrages constructed in the 1930s.

As water levels have continued to fall, however, the lakes have become unsustainable in their present form. Lake levels are now below sea level. If current conditions continue, it is likely that drying will result in the formation and exposure of acid sulfate soils, causing severe and permanent environmental damage.

It is become increasingly likely that the only feasible response is to remove the barrages and allow the lakes to be flooded with seawater. This would require the abandonment of irrigation in the area, and imply a loss of supply for urban water users.

Some commentators have argued that removing the barrages would represent a return to natural conditions. This is, at best, half-true. The barrages converted an estuarine system which fluctuated between fresh water, brackish and saline conditions into a purely freshwater system,.

But the barrages were themselves a response to an increase in the frequency of low flow conditions arising from earlier interventions upstream. Removing the barrages without restoring natural flows is a recipe for environmental disaster.

The problem is that there are no realistic options left for increasing flows. There have been calls to acquire water upstream, for example by buying large irrigation farms in Queensland, the best known of which is Cubbie Station. But conditions are so dry in the Darling and Murray systems that, according to the Murray-Darling Basin Commission, 80 per cent of any water released upstream would be lost to evaporation or absorbed into the water table along the way.

Things didn’t have to be this way. When I started working on this issue in the that we were taking too much water out of the system. As biologist David Paton, the leadng expert on the Coorong, has pointed out, the well known rule of thumb that management of a healthy river requires the maintenance of 30 per cent of natural flows was being put forward as a basis for management in the early 1990s.

These proposals were ignored. A subsequent study suggested that restoring flows of 1500 GL (a little less than 15 per cent of natural flows) would be needed to give the Murray a moderate chance of recovery. The nation’s leaders, meeting at COAG, promised 500. GL.

Years of inaction followed, with no move towards buying back irrigation rights. Finally, the Rudd government has spent $50 million to buy back water rights. Unfortunately, in most cases, these are general security rights that will receive a zero allocation while the drought continues.

The restoration of some environmental flows would not have prevented low flows in the current drought. But it would avoid the situation where low flows are the norm, and an extended drought is sufficient to push the whole system over the edge.

At this point, calls for compulsory purchase of irrigation rights are growing louder. Unless there are significant inflows of water soon, it is hard to see how the voluntary market-based approach can be sustained.

The desperate choices now facing us with respect to the Murray Darling Basin are a small indication of what we will face if the world fails to act quickly to control emissions of carbon dioxide and slow the rate of global warming. Sooner or later the necessity for action will become undeniable, but by then the relatively easy options available today will have been foreclosed.

Instead of market-friendly options like emissions trading, we will be looking at command-and-control measures like the water restrictions now prevailing in most Australian cities. As far as the environment goes, the kind of triage operation now being applied to the icon sites of the Murray will be routine. Some vital ecosystems will be saved, at the cost of abandoning others.

Perhaps, when this happens, those who have urged inaction will be called to account. Or perhaps, as with the Murray, most of those responsible will have moved on, and their successors will be left to pick up the pieces.

Paul Kedrosky highlights a New Scientist article that contends there isn’t, or more accurately, shouldn’t be a water crisis, that there is enough water if we manage it properly. But the Australia illustrates that even a country that has long had limited water supplies got religion too late in the game. Even if New Scientist is right in theory, I harbor serious doubts as to how right it will be in practice.