No abstract

Water trading in Australia is enabled by much historical institutional development, which had other objectives at the time that it was implemented. After 2 decades of institutional reform to enable water markets in the Murray Darling Basin, active markets are reallocating surface water entitlements among irrigation users. However, permanent water trading is currently limited in terms of the volume traded and reallocation among uses. Given these limitations, this paper seeks to assess the success of surface water markets in the Murray‐Darling Basin by comparing current practice against the six desirable characteristics for water markets suggested by Howe et al. (1986). Overall, it is argued that, despite the relatively low rate of reallocation, the market performs well against most criteria but that ongoing evolution of institutional arrangements is critical for improved success.

[1] Irrigation is important to many agricultural businesses but also has implications for catchment health. A considerable body of knowledge exists on how irrigation management affects farm business and catchment health. However, this knowledge is fragmentary; is available in many forms such as qualitative and quantitative; is dispersed in scientific literature, technical reports, and the minds of individuals; and is of varying degrees of certainty. Bayesian networks allow the integration of dispersed knowledge into quantitative systems models. This study describes the development, validation, and application of a Bayesian network model of farm irrigation in the Shepparton Irrigation Region of northern Victoria, Australia. In this first paper we describe the process used to integrate a range of sources of knowledge to develop a model of farm irrigation. We describe the principal model components and summarize the reaction to the model and its development process by local stakeholders. Subsequent papers in this series describe model validation and the application of the model to assess the regional impact of historical and future management intervention.

Water markets have great potential to increase the efficiency of water use. However, the very process of transferring a water entitlement can result in third party effects. Specifically, there are three types of impact that can affect the entitlements of third party irrigators: volumetric reliability, delivery reliability and water quality effects. In each case, policy makers must decide whether they will try to prevent the impacts and whether they will force traders to internalise third party effects. Potential strategies range from non-interventionist options, such as restricting trade, to market interventions, such as exchange rates, which adjust traded entitlements to account for volumetric externalities.

Improving the efficiency of water allocation has long been recognised as a key problem for the water resources management decision-makers. However, assessing the efficacy of management decision is difficult due to the complexity and interconnectivity of water resource systems. For this reason, it is vital that robust modelling approaches are employed to deal with the feedback loops inherent in the water resource systems. Whilst many studies have applied modelling to various aspects of water resource management, little attention has been given to innovations in modelling approaches to deal with the modelling challenges associated with improving decision-making.The aim of this study is to apply a System Dynamics modelling approach to improve the efficiency of water allocation incorporating a myriad of irrigation system constraints. The system dynamic approach allows the different system components to be organised as a collection of discrete objects that incorporate data, structure and function to generate complex system behaviour. Through the application of a system dynamic approach, a robust model (named the Economical Reallocating Water Model (ERWM)) was developed which was used to examine the options of re-allocating water resources that minimize the water cost all over an irrigated agricultural area. The ERWM incorporated a wide range of complexities likely to be encountered in water resource management: surface and ground water sources, water trading between sources, system constraint such as maximum ground water pumping, rates, maximum A. Elmahdi ( ) CSIRO, land and water, Springer 4 Environmentalist (2007) 27:3-12 possible trading volumes and differential water resource prices. Two hypothetical systems have been presented here as an example. The results show that the System Dynamics approach has a significant advantages in estimating and assessing the outcomes of alternative water management strategies through time and space.