WaterThe development of rural water markets in Australia: Assessing - - PowerPoint PPT Presentation

Water—The development of rural water markets in Australia: Assessing progress, looking ahead

Chloe Munro, Chair, National Water Commission ACCC Regulatory Conference July 2011

Profile of Australian water markets

All states and territories support trading but market activity is mostly concentrated in the MDB

402 666

VIC

1276 1479

NSW

150 119

SA

24 13

WA

27 4

TAS

Entitlement trade Allocation trade

70 214

QLD

Notes: Not drawn to scale Trade volumes in gigalitres Trade volumes for each state equal to the sum of Internal state trades plus outbound trades

Entitlement and allocation trade in 2009-10

Trade has been a huge success

Entitlement and allocation trade - southern MDB 1983-84 to 2009-10

250 500 750 1,000 1,250 1,500 1,750 1983-84 1987-88 1991-92 1995-96 1999-00 2003-04 2007-08 GL sMDB allocation trade sMDB entitlement trade sMDB entitlement trade to CEWH

Large volumes of water reallocated

Why trade?

Largest imports and exports of allocation trade 2007-08

Flexibility and resilience in changing conditions

Largest imports and exports of allocation trade 2008-09

Why trade?

Flexibility and resilience in changing conditions

Largest imports and exports of allocation trade 2009-10

Why trade?

Flexibility and resilience in changing conditions

Rice production, rice prices and water allocation price, Murrumbidgee 2005-06 to 2009-10

200 400 600 250 500 750 1000 1250 2005-06 2006-07 2007-08 2008-09 2009-10

Price ($) Production (kilotonnes) Rice (kilotonnes) Water allocation price in Murrumbidgee ($/ML)

Fundamental elements of efficient water markets

Efficient water market

Clear rights supported by planning

Robust governance

Effective administration

Information access Monitoring & compliance

Scarcity-induced demand for trade Physical capacity to trade Many potential traders STRUCTURAL ELEMENTS

EXOGENOUS FACTORS

Initiatives in progress for market strengthening

Principal initiatives

Basin Plan water trading rules

    

Water market rules

 

Water charge rules

 

National Water Market System

 

Australian Water Resources Information System

 

National Water Account

 

National compliance framework



Clear rights supported by planning Monitoring & compliance Information access Robust governance Effective administration

Outstanding issues

Planning & entitlements in unregulated systems  Trade processing methods    Conflicts of interest in the market    Allocation announcement processes   Availability of price information   Confidence in intermediaries    Need for institutional strengthening in formative markets  

Key outstanding issues and gaps

Clear rights supported by planning Monitoring & compliance Information access Robust governance Effective administration

Summary of key priorities

Information access Rights and planning Governance Administration Monitoring and compliance

Unbundling & improved planning Simplification of trading rules Disclosure on processes Establish complaints handling Streamline handling Disclosure of potential conflicts Ring-fencing or separation Compliance against codes of conduct Mandatory collection and disclosure Verification, monitoring and compliance Disclosure of processes and

• utcome

Compliance with disclosure rules Disclosure of business practices Formalise complaints handling Compliance with code of conduct

Limited groundwater trade Conflicts of interest Transparency of approval processes Inadequate price information Transparency of allocation processes Confidence in intermediaries

Information access

Recommended actions Information disclosure and access

• Prices for all trades
• Allocation determination processes
• Trade approval processes
• Processing times at granular level
• Conflicts of interest
• Broker compliance information with

industry code of conduct

Recommended actions Planning and rights definition

Clear rights supported by planning

• Adopt a systematic approach to

improve planning and rights in groundwater systems to promote trade

• Benefit-cost analysis
• Public reporting of results
• Review trade rules and simplify
• Investigate new rights-based

instruments

Effective administration

Recommended actions Administrative reforms

• Simplification of trade

approvals where multiple authorities are involved

• Consideration to be given to
• Rationalising the number of

approval authorities

• Cross-delegating approval

functions for interstate trades

Monitoring & compliance

Recommended actions Monitoring and compliance

• Improved monitoring and

compliance enforcement systems are needed

• Compliance with
• Codes of conduct
• Performance standards
• Allocation determination and

trade approval processes

• Price disclosure

Robust governance

Recommended actions Governance

• Formal complaints handling

processes – Trade approvals – Water intermediaries

• Prevention of conflicts of interest

– Ring-fencing – Structural separation

Benefits of the reforms

• Increased market confidence
• Detection of market irregularities
• Reduced perceptions of conflicts of interest
• Additional security of water rights
• More efficient allocation of groundwater
• More efficient investment in assessment

Information access Monitoring & compliance Governance Administrative reforms GW planning & rights

• Reduced transaction costs
• More timely price information
• Lower risk to traders from market movements

prior to settlement

• Supports self regulation
• Better performance through public disclosure
• More educated market

Benefits

Pathways for implementation

• The package of reforms

is substantial

• Will require leadership

and commitment through COAG

• Coordination of water

market policy and design will be needed

www.nwc.gov.au