Water trading in the Melbourne region
Water trading in the Melbourne region
Since the Millennial Drought, the Melbourne Region has moved towards a more secure water supply system through the construction of a desalination plant and the North-South Pipeline. In addition, there has been considerable progress in the use of recycled water, rainwater and stormwater. Despite these advances, the challenges of rapid population growth and a drying climate can still put the region’s water supply under stress in the mid to long term. In recent years, the concept of trading water over a highly connected water system has gained interest as part of a range of options. The Melbourne water supply system enjoys a high degree of interconnectedness with the adjacent systems of Western Water, Barwon Water, Westernport Water, Gippsland Water, South Gippsland Water and Southern Rural Water. These systems are further connected to their neighbours. Through the North-South Pipeline, the Melbourne system is connected to the Goulburn-Murray Irrigation District in northern Victoria. Melbourne’s three water retailers and a number of adjacent water corporations currently have the right to individual delivery entitlements from water catchments and the desalination plants in a way that facilitates trading of these entitlements. This article combines literature review with insights from industry representatives to examine the drivers and barriers to water trading in the Melbourne Region. In all, six interviews were undertaken with water industry professionals. The literature highlights the role of markets in supporting efficient water use so that water is transferred to the highest value uses and water security benefits are shared, while costly supply augmentations may be delayed or avoided. On the other hand, such efficiency may not take social and environmental aspects into account, resulting in negative public perceptions and less water for the environment. Transactional costs in transferring water can also offset efficiency gains.
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