Water trading is drought profiteering

November 24, 2006

The worst drought in 1000 years means that water shortage is as burning issue across Australia, cutting across the city-country divide. A Morgan poll, back in October 2005, found that 80% of Australians believe governments are not doing enough about water conservation, a view that has since been reinforced. But just how well will restrictions, water saving devices such as dual-flush toilets and rainwater tanks, and water trading schemes tackle the problem?

Geelong just became the latest of more than 140 Victorian towns on level 4 water restrictions. Brisbane and South-East Queensland, already on level 4(level 5 in Toowoomba), had water supply levels at only 25.51% of capacity as of November 16.

While Brisbane's water supply is the lowest of Australia's big cities, it is not unusual. As of November 16, Perth's water level was at 31%, while as of November 9, Sydney water was at 39.5%, and Melbourne 42.6%. Smaller cities in regional centres are often much worse off. Bendigo, in central Victoria, is in danger of running out of drinking water, as are many other towns across rural Australia.

Australian Conservation Foundation's (ACF) executive director Don Henry estimated that 75% of Sydney's annual use of 600 gigalitres of water a year is ultimately flushed into the ocean. He says that Sydney's water consumption could be half that by 2030 if there was greater investment in water recycling infrastructure, rainwater tanks and efficiencies.

Urban water shortages have prompted some governments, and opposition parties, to push for controversial desalination plants which turn salt water into drinkable water, either from the sea or from recycled waste water. The Liberal Party in Victoria, for instance, supports the construction of a desalination plant, which would soak up $20 million in annual running costs.

For the same amount of money, without factoring in the ongoing running costs, the ACF estimates that 200,000 rainwater tanks could be installed in Victorian households.

Desalination technology is also very expensive to operate, and it uses huge amounts of electricity. As Green Left Weekly has previously reported, a desalination plant in Sydney would require the equivalent to putting another 250,000 new cars on the road, or the energy usage of 120,000 households.

Logging also reduces the water catchment for cities. According to Victorian environment groups, the state government's own reports estimate that 20,000 megalitres of water would be saved every year if logging was stopped in just one Melbourne catchment. Friends of the Earth believes that this would be enough to supply 80,000 homes.

Rivers and irrigation

Rural water shortages seem more dire than urban ones, if only because the impact on the landscape is so stark. Agricultural water supplies are generally taken from rivers and groundwater, with often devastating effects on riverine and floodplain environments: ancient eucalypt stands are dying, wetlands are drying out, and rising water tables bring salt which renders soil infertile.

Nearly three times the annual average flow in the Murray River is stored in dams and weirs across the Murray-Darling Basin. But occasions when the Murray River mouth stops flowing have increased from one year in 20 under natural conditions, to one year in two today.

The devastated Murray-Darling Basin highlights the problems associated with Australia's agricultural water use. More than 80% of the average annual volume of water in the Murray is diverted for industry and domestic use, of which irrigation accounts for 95%. Water extracted for irrigation has increased by 76% from 1985 to 1996-97. Surface irrigation, such as flooding, accounted for more than 60% of irrigation in 2004-05, despite being the most wasteful method.

Despite the drought, water use is not following logical patterns of conservation. Figures from the Australian Bureau of Statistics (ABS) in July show that while most pastures and crops used less water over 2004-05, water for cotton crops (which have the second highest irrigation usage rate after rice) increased 45.7% on the previous year, as did the area of irrigated cotton.

The state and federal governments' response to the drought and growing water use has been to restrict water usage and introduce water trading schemes. But the much-advertised water use restrictions are a tokenistic response to a massive problem: reservoirs in major cities continue to fall despite restrictions of up to level four in some areas.

The major focus for governments now is water trading — a market mechanism to regulate the use of scarce water. Land title is separated from entitlements to water use, which can then be bought and sold.

As Professor Sharon Beder of the University of Wollongong explained in her Environmental Principles and Policies (UNSW Press 2006): "The idea is that water trading will enable those who can make the most money out of the water to buy it and for those who make less money out of it to sell it, rather than use it on 'low value' crops". While the amount of water available to be diverted from the river is subject to a cap (which varies depending on conditions), the water use is still over-allocated in dry years, as indicated by the ABS statistics cited above.

While measures being implemented under the National Water Initiative (NWI) may mean towns can purchase drinking water under the trading system, water trading is largely aimed at the agricultural industry, the bulk of the users.

The purpose of water trading for industry is to maximise profitability: environmental considerations don't make it onto the balance sheets. As Beder pointed out: "There has been a shift in Australia from wheat growing to cotton growing because cotton is a more profitable crop ... [but] cotton is much more dependent on water and agricultural chemicals than wheat."

Beder outlined other problems of water markets: speculation may disrupt the whole system. "[T]hose who need the water for their farms can't outbid the big players who are often not farmers at all. Real estate agent Neil Camm ... has found that water trading is more profitable than real estate trading and with an annual turnover of 100 000 megalitres claims to be Australia's biggest water trader."

Planning for efficiency

Household water saving devices, such as dual or non-flush toilets and rainwater tanks, are a worthwhile step. But as individual households only use a small amount of the overall water supply, the focus by governments on individual solutions are a distraction from solving the main problem: the huge waste of water by industry and agribusiness.

The gravity of the current drought should impel conservation measures that take account of the stability of food supply, the future of agricultural export crops and the water infrastructure for urban industry. The state and federal governments' response so far is to further privatise this precious resource. Relying on the market to solve the water crisis ultimately means handing more power over scarce supplies to unaccountable corporations.

A more rational and ecological approach would include mandated reductions in water use for industry, and returning water flows to rivers. While state and federal governments agreed to return 500 gigalitres to the Murray River over five years from November 2004, this has not yet begun (and it is only a third of the amount recommended by scientists). In fact, PM John Howard has even talked of diverting water from wetlands to water supplies, further destroying river environments to prop up agribusiness' voracious water usage.

Environment organisations are urging measures that would reduce industrial water usage, return significant flows to rivers and remove logging operations from supply catchments. Greens Senator Rachel Siewert has called for the buy-back of water allocations, and a shift away from crops such as cotton and rice. These measures should be the beginning of a much more comprehensive social and economic plan by governments to overhaul Australia's agriculture and water use.

The market is not geared to managing severe environmental problems. Instead of treating water and other resources as commodities to buy and sell without regard for their real usage value, the current water crisis demands a national plan to re-allocate farmland, upgrade water infrastructure to remove waste and reduce unnecessary use.

Nero fiddled while Rome burned. John Howard is holding a fire sale of the last water as drought burns the country.

[Ben Courtice is the convener of the Melbourne West branch of the Socialist Alliance.]

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