Water Policy in the Murray Darling Basin 21-22 October 2010 Discussant David Pannell ARC Federation Fellow.

Water Policy in the Murray Darling Basin21-22 October 2010

Discussant

David Pannell

ARC Federation Fellow

Jeff Connor

Will it help?

BCA in highly politicised debates e.g. NBN – calls for BCA in hope it will look bad

How would a non-market study fare in a red hot political debate? Not very well.

Do policy makers want it?

Would people believe it?

Various reasons for non-adoption of NMV Ignorance that it exists

No institutional framework for it to feed into

Prefer not to know – transparency creates constraints

Avoidance of transaction costs from controversy

High cost of doing it

Perhaps a judgement that value of the information would be modest

Suspicion due to controversy within economics

Satisfaction with existing methods

Preference for relying on expert or policy maker judgements

Timing – it would take too long for the policy time frame

Limitations on benefit transfer

Used for what?

Overall assessment of the policy

Prioritisation of options within the policy – targeting of effort and resources

Thilak Mallawaarachchi et al.

Which uncertainties included?

Aggregate rainfall

Allocation decisions

Uncertainties not included

Environmental outcomes High uncertainty about environmental benefits from changes in water

management – Mac Kirby

Human behaviour Predicting which irrigators will sell water is essentially impossible –

Peter Gooday Political outcomes

Uncertainty about behaviour

'I can calculate the motions of the heavenly bodies but not the madness of the people.’

Isaac Newton, 1720

Challenge of communicating risk Advising a govt department about metric for

prioritising projects

They used weighted additive function, as is common in MCA

Project score = w.Benefit + w.Risk (≈probability of success)

Proposed alternative

Project score = Benefit probability of success

Response: concern because this seems “more complex”

Risk and info issues are pervasive Our attempt to deal with them in one context

Experience with INFFER

A BCA disguised as an “integrated assessment”

System intended to be acceptable to and usable by non-economists/non-modellers

Developed based on experience with various govt departments and 20 regional NRM bodies

As simple as possible, but still rigorous

Risk/information elements in INFFER Elicits probabilities of project failure due to

several risk factors

Overall project score is an expected value

Risk/information elements in INFFER Scores information quality

Captures knowledge gaps

Requires explicit response to knowledge gaps

Risk/information elements in INFFER Reduces risk of dodgy analysis by providing

structured, guided approach with templates and elements automated

Encourages/facilitates parameter sensitivity analysis

Encourages feasibility phase at start of large projects

Encourages adaptive management Update project assessment over time

Observations

The balance between rigour and usability is very challenging

Is subject to high uncertainty in itself! Learning and adaptation over time

The best approach depends on capabilities of the relevant client organisations

John Quiggin

No cuts in allocations

“Communication failure”

Also some do understand and are focused on impact on “social infrastructure”

Local jobs Supporting local population Supporting local services and perhaps social capital

Risk bearing

NWI specified principles for risk bearing

Consistent with at least some reduced allocation

Was never a serious possibility

Even with govt offering to buy, very hot reaction

Political costs and transaction costs from reduced allocations would be larger

Basin plan position more politically realistic

Infrastructure

A politically-convenient alternative to buy-backs

Limits reduction in water to agriculture

2 to 4 times more expensive

Cost per job saved: $ millions

Spend on social infrastructure

Usually best for interventions to go for target outcomes directly

Needs more thought about specifics, particularly ongoing costs

A risk of such a program being distorted Landcare – captured by facilitators Emphasis on participation Little attention paid to outcomes

Mac Kirby

Key messages

Expected future loss of water to new dams, plantations etc. is modest

Second half of 20th century was relatively wet

History isn’t sufficient to guide future planning (characteristics of the drought)

Importance of amplifying effect of runoff

There are large uncertainties about climate change

Likely to see longer and drier droughts

Amounts to be saved by infrastructure may be modest