The Environment Institute Where ideas grow Securing our Water Supplies Mike Young Executive Director, The Environment Institute.

The Environment InstituteWhere ideas grow

Securing our Water Supplies

Mike Young Executive Director, The Environment Institute

The Environment Institute

Life Impact The University of Adelaide

Millennium Development Goals• 3,900 children under 5 die every day from

water supply & sanitation related diseases• MDG to halve the number people without

access to drinking water and sanitation by 2015– Drinking water goal expected to be met– Sanitation goal will not be met



Current global water scarcity

After Molden 2007



Water stressed people!

By 2030 half the world will live in a water stressed region

After OECD 2009

Water stress = Opportunity for Australia



Water scarcity gap – billions m3

After 2030 Water Resources Group

How big is the opportunity?



Clever green economies• Reflect the full costs of resource use

• Water Storage• Water Use • Water Returned to Rivers, Aquifers, the Sea, etc.

• Commitment to prevent renewable resource depletion• Promote the restoration of degraded environments.• Recognise value ecosystem services

• In green economies, pricing matters



General messages1. By 2030, over half the world’s population is expected to be living in a

water stressed region.2. Failure to provide reliable access to water and sanitation services is one

of humankind’s greatest failings.3. Demand is growing and supply costs rising.4. Health and quality of many rivers and aquifers is declining. Restoration

is a non-trivial challenge!5. The aggregate affect of climate change on water supplies is expected to

be negative.– By 2030 child malnutrition is predicted to increase by 20%.

6. The rate of change and structural adjustment necessary to resolve existing challenges and cope with the new ones expected as a result of climate change and a larger more affluent global population is an order of magnitude faster than has been achieved in recent times.



Pricing arrangements1. Lack of economic discipline is crowding out the

innovation and investment needed to solve water scarcity and investment challenges.

2. This raises the cost of solving water supply problems and decreases the rate of economic development.

3. In many cases, the poorest would be better off paying the full cost of supply rather than exposing themselves to the extremely high cost of obtaining access to water from other sources.

4. The more targeted cross-subsidies are the better. Blanket subsidies should be avoided.



Australian investment mistakes• Grants to States to pay for desalination plants• Grants to “upgrade” irrigation systems• Restrictions on water trade• Restrictions on carry forward• Postage stamp pricing



Water

Tradable Right Price

Land

Single Title to

Land with aWater Licence

Entitlement Shares

in PerpetuityBank-like Allocations

Use licences with limits & obligations

Delivery Capacity Shares

Delivery Capacity Allocations

SalinityShares

SalinityAllocations

National CompetitionPolicy 1993/94Plus Cap

National Water Initiative2004

Australian water management innovations



Returns to investment in entitlement systems & trading

After Bjornlund & Rossini 2007



Water accounting 101• River Murray• Dredge in Oct 2002• A few accounting flaws in our entitlements

– Forests– Dams– Groundwater– Return flow– Salinity interception



Users

Environment

River Flow

Environment

River Flow

Users

River Flow

Environment

Users

Impact of adverse climate change



Volu

me o

f W

ate

r in

th

e S

yste

mIndicative template – regulated river systems


Life Impact The University of Adelaide15

Water needed to ensure conveyance

Entitlements Environment

Flood water

Shared WaterEntitlements

Vo

lum

e of w

ater availab

le

Environment with a fully-specified share



Clever governance1. Need for a much more disciplined approach to

the management and administration of water resources.

– Independent expertise-based Authorities2. Need processes and mechanisms that promote

change and structural adjustment.3. Must be able to cope with sudden climatic shifts

and the rapid emergence of extreme water scarcity.

4. Independent price regulators.



Clever finance1. There has been insufficient attention to the economic

scrutiny of proposals to invest in new infrastructure and renew existing infrastructure.

2. Proposals need to take much greater account of likely population shifts and vulnerability to climate variability and change.

3. Costs will be less if parallel investments are made in the development of mechanisms to enable widespread use of market-based instruments.

4. Greater use of the private sector is possible.



Financing investment (3 T’s)

After Marin and OECD 2009



text

Summary• At the global level Australia is leading in water

policy

• But we are way behind where we should be in this ever changing world

• Huge business opportunity if we get it right

The Environment InstituteWhere ideas grow

www.adelaide.edu.au/environment

www.myoung.net.au

The Environment Institute Where ideas grow Securing our Water Supplies Mike Young Executive Director, The Environment Institute.

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