Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

The water market: speculating on the Murray-Darling River

By Michael Cathcart - posted Friday, 28 August 2009


The banks of a river may belong to one man or one industry or one State, but the waters which flow between the banks should belong to all the people. Lyndon B. Johnson, on signing the US CLEAN WATER ACT.

The ailing rivers of Australia betray a failure to develop the sense of stewardship, understanding and responsibility for country that is the sign of belonging. The heroic irrigation works of modern Australia - notably in the Murray-Darling Basin - have alienated themselves from the very rivers on which they rely. The vision was grand, and the intentions were often idealistic. But we have flogged those rivers to the edge of extinction in just four generations.

Until all users of the river overcome the imagined division between the “natural” environment and “artificial” human activity - until they deeply feel the interconnectedness of humanity and the natural world - Australians will continue to damage the lands and waters that sustain them.

Advertisement

The crisis

By the 1990s, salinity in the Murray-Darling Basin was out of control. Wasteful irrigation had raised the groundwater table, conveying ancient salts to the surface, poisoning productive country and leaching into the river. In recent years, salt levels in some of the drought-depleted wetlands of the catchment have reached three times the concentration of sea water, killing plants and animals. At the same time, the combined effects of drought and excessive irrigation have been bleeding the river dry.

Attitudes along the river have been changing. For the past century, most irrigators throughout the Murray-Darling Basin thought of the local river as little more than an open channel supplying them with water. However, that fallacy was unmasked in the summer of 1991, when the Darling River became clotted with a toxic mass of blue-green algae 1,000km long - the largest such bloom ever recorded anywhere in the world. The algae, which are an endemic plant, had become bloated on a cocktail of sewage, animal waste and fertiliser.

Vivid television images of the afflicted river alarmed the general population and galvanised the politicians. Normally sceptical irrigators now acknowledged that the environmental crisis on the river was systemic and that their own oversized industry was a principal cause.

The irrigators co-operated by fixing the “Murray-Darling Cap” in June 1995 - an agreement that set a maximum water use for the Basin at a level slightly below the prevailing rate of exploitation. The purpose was to allow a little more water for the river, known to the irrigators (you can hear the lingering resentment) as “duck water”.

The Cap did not fix the problem: too many people held entitlements to pump water from the river. It was “over-allocated”. In 2002, a group of prominent scientists, including the zoologist Tim Flannery and the water scientist Peter Cullen, entered the debate as the Wentworth Group. In a series of statements including their Blueprint for a Living Continent, they identified the disaster and called on governments to halve the volume of water being pumped from the river.

With policy makers, scientists and opinion leaders acknowledging the crisis, the Howard government instituted a national water policy which was reinforced by the Rudd government after it came to power in December 2007. By then, Australia’s largest river had not flowed at its mouth, without the assistance of dredging, for a decade. The waters in the adjoining Coorong wetlands were so diminished, and so toxic with salt and acid, that environmental scientists were declaring that only a mass-transfusion of water would save that idyllic region from annihilation.

Advertisement

Water trading

The chief instrument of these reforms is a mechanism generally referred to as “water trading”. In the world of water management, it seems that almost everyone - farmers, banks, water corporations, agribusinesses and environmentalists - is in favour of it.

The policy abandoned Alfred Deakin’s fundamental principle that irrigators should not hold property rights in water. Under Deakin’s scheme, the water, in effect, belonged to the river - and the irrigators had an entitlement to use an allocated amount on their farms, for which they paid a small annual fee.

By the 1980s, irrigation had earned a reputation as a wasteful and cavalier industry. Some producers practised flood irrigation, simply allowing water to slosh across their properties. Others grew pasture - an activity that would be unprofitable if they were required to buy water at a realistic market price. In any case, the devices used to meter water flowing on to the farm were unreliable and easy to circumvent. During the 1990s, I met three irrigators who confessed to jamming their meters or to secretly pumping directly from the river in the dead of night. Though such acts of theft were policed by official bailiffs, the penalties were inconsequential. As one of the irrigators told me, “It was all good sport”. This major industry was crying out for reform.

Water trading was introduced by various states in the 1990s to expose irrigators to “the discipline of the market”. Its purpose was to drive up the cost until water found its “true value”. If water was expensive, said the system’s advocates, then irrigators would use it more efficiently, reducing waste, lowering the groundwater table and helping to reduce salinity.

Under the new arrangement, the irrigator’s right to use water was converted into a form of tradable property called a “water access entitlement”, commonly referred to as a licence. This licence enables him to sell his water allocation. It works like this. Farmer Brown might decide to sell his entire allocation for the next six months to Farmer Green. This deal (or “transfer”) is generally managed by a water brokerage company such as Waterfind. There are several reasons why Brown might decide to sell. In a drought, he might prefer a guaranteed income over the gamble of planting a crop. In a wet year, Brown might have access to more water than he needs. Or he might be a speculator who has acquired hundreds of licences simply so that he can sell water.

The cost of water and licences rises and falls with the seasons. But over the past two decades, water has increased in price by an order of magnitude. In 2008/2009, the mean price of Murray water reached $1,060 a megalitre. By then, it was clear that some water-intensive crops, such as almond growing, were becoming unsustainable. Time will show how this process transforms the industry. Trading may eventually close small dairy farms and move the water to large-scale rice or cotton stations. Or it may favour the profitable fruit and vegetable market.

Water trading provides the irrigator with a second, more radical option. He can sell his water licence, once and for all. This effectively strips his irrigation block of its water. A farmer might do this for one of several reasons. He could be planning to retire - and regard the sale of his licence as a golden handshake. He might be a borrower under pressure from the bank. Or he might decide to cash in and buy his water from year to year, or to take advantage of schemes that allow him to lease back his water for a fixed period.

Buyers must themselves be accredited: a buyer could be another grower, a large agribusiness or a town council, or even one of the global corporations that are acquiring control over water across the planet. In the words of Tom Rooney, the chief executive of Waterfind, the Australian water market has transformed river water into a “commodity” - and just as open to speculation as oil or steel. This is a world-wide trend. As the global business magazine Fortune told its readers in May 2000, water has become “one of the world’s great business opportunities”.

All this buying and selling does not, of itself, advantage the environment. On the contrary, the new water market ensures that every litre in an already “over-allocated system” is horded on-farm, sold or put to immediate use. Even water that once ran, unused, past the farm gate, will now be sold out of the river. Unless the government intervenes.

This is precisely what has happened. In 2008, the federal government announced that it would enter the market on behalf of the environment, spending more than $3 billion to “buy back” water and water licences. Most stakeholders, including the Australian Conservation Foundation, believe that as long as the government buys from “willing sellers” then this multi-billion-dollar commitment to the environment is justified. However, there are a few dissenters.

The critics

The Canadian water campaigner Maude Barlow condemns this new water market as part of a global capture of water - and of the public commons in general - by corporate interests. Barlow maintains that plans to drive up the cost of water, thereby making recycled and desalinated water competitive, merely serve the interests of the water corporations. The market, she says, has a vested interest in neglecting clean, free rivers, and in ignoring the rights of the poor, because the big profits are to be made in providing expensive, processed water to those who can pay.

Barlow sounds a valid warning. The extensive discussions that preceded the Australian reforms assumed that the market would be orderly and rational. The reformers talked of irrigators trading water up and down the river as if they were so many shopkeepers swapping goods along the high street. But water is becoming big business. As the world is now learning, the market is not the perfect, self-regulating mechanism that the ideologues have been spruiking for the past 30 years. People who believe that their sole responsibility is to themselves or their shareholders are not worthy guardians of the planet.

There is reason to be alarmed that we are already seeing some Australian companies accumulating millions of dollars worth of licences with the clear intention of becoming traders and speculators in water. Some properties, especially some of the large cotton growers in Queensland, already have on-farm dams that dwarf Sydney Harbour. These growers are in position to hoard water and manipulate the costs and supplies of downstream users. Now there is talk that global corporations are also starting to acquire licences: early in 2009, for example, water broker Gil Sibley reported that “an important overseas interest” was bidding for a major package of licences that had just gone on sale. As many countries have found in the aftermath of privatising their water supplies, the short-term profit of global water corporations do not always serve the long-term needs or rights of local citizens.

There is other potential for harm. As I have explained, the sale of a licence can take an irrigation farm out of production regardless of its long-term viability. There is no doubt that the irrigation industry must reduce in size. But random property sales of this kind are no substitute for systematic planning. It would have been more effective to identify those regions where irrigation is sustainable - and to close it down in those regions where the ecological impact is severe or the infrastructure is too antiquated.

Politically, of course, this is difficult, because farmers maintain the fiction that their moral rights to their property outstrip the rights of shopkeepers or urban house owners, whose properties can be compulsorily acquired in the public interest (in order, say, to build a freeway). In any case, this “property right” is nothing more than a gift from their fellow tax-payers, who, having handed over the property, are now required to “buy it back” on behalf of the environment. Taxpayers have good reason to ask why a few individuals have been the beneficiaries of such largesse, why irrigators stand to receive billions of dollars of public money for an asset that, until recently, they did not even own. All this, because the river is now required to pay for its own water.

I don’t want to be misunderstood. Now that we have a water market, the government’s sweeping commitment to the environment is vital. It signifies a massive and welcome change of heart. But we need to question the logic that brought us to this point. The idea of buying water so that it can run down a river is bizarre.

Even so, it is too late to turn back. This market must now be made to work in the interests of rural communities, efficient food production and sustainable rivers. Just as we are, at last, realising that the global money markets require regulation, rigorous government supervision will be essential if this water auction is to produce a sustainable irrigation industry. The risk is great. The commodification of our rivers replicates white Australia’s oldest folly: it treats water as if it can be separated from the environment, as if it can be trucked around the country regardless of the logic of the land. It treats “the market” as more natural than nature itself.

The point is that a healthy river is not only a utility. Whether we are talking about the Rhine, the Nile, the Amazon or the Murray, the health of the river and the life that it sustains are essential to the spiritual wellbeing of its people. If we truly belong to the land in which we live, then our rivers are part of who we are.

  1. Pages:
  2. 1
  3. 2
  4. All

This is an extract from the book The Water Dreamers: The Remarkable History of Our Dry Continent (Text Publishing, 327pp, $34.95). Text Publishing, 2009.



Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

6 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Melbourne-born Michael Cathcart was educated at Melbourne Grammar, the University of Melbourne and the Australian National University and has worked as a schoolteacher and theatre director and is currently a lecturer in Australian Studies at the University of Melbourne. Cathcart has presented several Radio National programs, including Arts Today and the Radio National Quiz, and for ABC TV presented the history magazine show Rewind and the documentary series Rogue Nation. He is the author of Defending the National Tuckshop (1988) and has published an abridgement of Manning Clark’s epic A History of Australia. His latest book is The Water Dreamers (Text publishing, 2009).

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Article Tools
Comment 6 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy