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GTAP Resource #987

"Modelling the Impact of Environmental Policy Reforms on Water Markets and Irrigation Use in Australia"
by Wittwer, Glyn and Randy Stringer

The policies, incentives and management practices shaping the future availability, access, use and quality of water have enormous implications for Australia's agricultural sector. Water-related environmental issues are a key factor motivating change in Australia's water institutions. Water has moved to the forefront of national policy debates aimed at meeting expanding social, economic and environmental objectives.

This paper explores the key factors motivating change in national, regional and local water institutions. In particular, it focuses on how environmental policy reforms affect water markets, water use and the profitability of agricultural producers. Irrigation activities in Australia have developed historically without due attention to water scarcity, this on the driest inhabited continent on earth. The process of introducing market mechanisms to water allocation requires a regional focus, particularly as winners and losers may occur in relatively isolated communities in inland Australia.

For this purpose, we use FEDSA-WATER, a multi-regional, multi-sectoral CGE model of Australia to examine: (a) the purchase of irrigation water rights for the environment; (b) the removal of implicit subsidies on water usage in irrigation industries in New South Wales and Victoria; and (c) the removal of small implicit taxes on usage in South Australia. The database for the study includes the main irrigation activities in each region, distinguishing activities with high returns to water inputs from those with relatively low returns. In an additional scenario, irrigation industries are taxed for salinity arising from production. In calculating the impacts of each scenario, environmental benefits are calculated in addition to regional welfare changes. The available disaggregation reveals that pricing reforms and environmental taxes may have a marked effect on activities at the regional level.

Resource Details (Export Citation) GTAP Keywords
Category: 2002 Conference Paper
Status: Published
By/In: Presented at the 5th Annual Conference on Global Economic Analysis, Taipei, Taiwan
Date: 2002
Created: Wittwer, G. (4/26/2002)
Updated: Bacou, M. (6/20/2002)
Visits: 2,732
No keywords have been specified.

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