We lead the world on water

Queensland’s water plan is similar to plans in other arid parts of the world. But there is one major, vitally important difference: Queensland promotes water trading “to provide access to water and encourage high value use”.

Outside Australia, this approach of using the market to improve water allocation efficiency and enhance equity is rare. But Australia has it right, and the rest of the world should be paying more attention.

After almost four years of lower than average rainfall across Australia and with many reservoirs at lowest recorded levels, there are increasing shortages. Queensland is no exception, so how can water best be managed to ensure adequate supplies?

It makes sense to ask who uses the water in this rapidly expanding state. In Queensland about 70 per cent of harvested water is used for agriculture, which matches the global average. Urban use accounts for about 8 per cent and of that figure, about half is used in outdoor irrigation. Less than 2 per cent of water reticulated to households is used for drinking and cooking.

Given these figures it is obvious that improving water use in farming would allow for more use elsewhere.

The problem in Asia is far worse.

While many Queenslanders will feel they are suffering from water shortages, they are relatively well off. In Asia more than two million children die due to diarrhoea and other easily preventable water-borne diseases every year, despite 45 per cent having close access to decent sanitation and high quality drinking water. This not only exposes the majority to dangerous dysentery and other water-borne diseases, it requires back-breaking toil for those (usually women and children) who have to make long journeys to collect the water every day.

Indirect costs in India are even more staggering — salinity levels are rising so much in irrigation water that crops fail, farmers commit suicide and thousands of the poorest starve.

For Indians, and indeed for most people in the developing world, the main water allocation problem is the result of Soviet-style management of agricultural water.

Governments decide who gets how much water, when they can use it and often what for, and if they don’t use their allocation (regardless of how they use it) they will lose it.

Once governmental allocations are made, officials rarely reallocate, even when massive changes in agriculture, industry, mining, domestic and rural demand occur. The result is politically favoured allocation and grotesque situations where farmers often pay 100 times less than other types of users, and waste vast amounts.

Far less agricultural water is wasted in Australia than anywhere else in the region. Due to a burgeoning agricultural sector, China’s surface water is rapidly depleting, and according to the respected think-tank the Rand Corporation, water shortages could indefinitely lower annual growth by as much as 2 per cent. China needs to adopt individual and communal water rights.

India , which has rights but doesn’t allow trading, should legalise its own system. The reason is that countries that have redefined and traded water rights have seen water access for the rural poor increase in volume and fall in price. All users — agricultural, industrial and domestic — have seen supplies increase in reliability and quality with infrastructural improvements. Apart from making economic sense, there is a moral imperative for pushing for such a reform of water rights — access to better quality water reduces disease and death.

Chile , South Africa and Australia provide the best examples of how trading can take place, improving farm output while benefiting the poor. Australia’s trading system is now the most sophisticated and effective in the world and allows some users to trade water on the internet.

Trading has promoted a reduction in low-value cropping activity such as cereal production; it has encouraged non-farming enterprise owners (including municipalities for domestic water use) to buy traded water.

Trading in Australia has lowered water use and increased farmer productivity; as some farmers leave the business others flourish and choose crops more suitable to the climate.

But regardless of which specific sector buys the water, the clear pattern has been a shift to higher value production and more efficient water use. Over time more municipalities will buy spare water and hopefully reduce shortages.

Only time will tell whether China and India will adopt the sophisticated trading techniques of Australia, but it will be a great deal better than decision by government fiat.

Water trading allows time for individuals to adapt to changing conditions — man-made or natural — and the conditions are changing.

So while the situation may be difficult in Queensland at the moment, they would be a lot worse without water trading.

Dr Roger Bate is a Resident Fellow of the American Enterprise Institute in Washington DC and a director of health advocacy group Africa Fighting Malaria. He is in Australia as a guest of The Centre for Independent Studies. His book All The Water We Need was published this week.