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Upstream demand for water use by new tree plantations imposes externalities on downstream irrigated agriculture and wetlands

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Large-scale tree plantations in high rainfall upstream areas can reduce fresh water
inflows to river systems, thereby imposing external costs on downstream irrigation,
stock and domestic water users and wetland interests. We take the novel approach of
expressing all benefits and costs of establishing plantations in terms of $ per gigalitre
(GL) of water removed annually from river flows, setting upstream demands on the
same basis as downstream demands. For the Macquarie Valley, a New South Wales
sub-catchment of Australia’s Murray-Darling Basin, we project changes in land and
water use and changes in economic surpluses under two policy settings: without and
with a policy requiring permanent water entitlements to be purchased from downstream
parties, before plantation establishment. Without the policy, and given a high
stumpage value for trees ($70/m3), upstream gains in economic surplus projected from
expanding plantations are $639 million; balanced against $233 million in economic
losses by downstream irrigators and stock and domestic water users for a net gain of
$406 million, but 345 GL lower mean annual environmental flows. With the policy,
smaller gains in upstream economic surplus from trees ($192 million), added to net
downstream gains ($138 million) from sale of water, result in gains of $330 million
with no reduction in environmental flows. Sustaining the 345 GL flow for a $76 million
(406–330) reduction in gains to economic surplus may be seen to cost only $0.22
million/GL; but this is much lower than the market value of the first units of that
water to agriculture and forestry.
Key words: catchment, demand, downstream externality, entitlement, environmental services,
evapotranspiration, forest, interception, irrigation, market, Murray-Darling Basin, supply,
urban water, watershed, wetlands.

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Informasi Detail

Judul Seri

The Australian Journal of Agricultural and Resource Economics

No. Panggil

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Penerbit

: Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd., 2012

Deskripsi Fisik

The Australian Journal of Agricultural and Resource Economics, 56, pp. 455–474

Bahasa

English

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Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

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Subjek

PERTANIAN.

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