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November 2016

Numerous newspaper and other media stories emerged over the last couple of weeks reporting on the dispute between South Australian Government and the rest of the MDB partners (VIC, NSW and QLD state governments, plus the Federal government) over environmental flows to be delivered under the MDB plan signed in 2012.

I wrote early this year about the problems with environmental flows and it seems that the situation is escalating further.

The current dispute is about two related, but independent issues: one is the reneging on the MDB plan’s conditional provision (one has to question the wisdom of agreeing to a condition of ‘not being detrimental to river communities’ in the first place!) of additional 450 GL for environmental flows by 2024, which are in addition to the provisioned and likely to be delivered 2750 GL (the CEWH already holds entitlements for nearly 2500 GL); the second is about a proposal by the MDB Authority to reduce recovery of water for environmental purposes in the Northern Basin from the earlier planned 390 GL to 320 GL.

So, overall we talk about a reduction of 520 GL of environmental water: not peanuts, but also not a catastrophe as some present it, when you compare it to nearly 2500 GL that are already there for environmental flows.

However, a key point seems to be missed here: the stipulation of the MDB plan is that the additional 450 GL have to come from willing sellers or from state government infrastructure projects that will improve irrigation efficiency and thus reduce the irrigation demand for water, allowing the 450 GL to go to the environment. NSW, VIC and QLD are reckoning that this second option is too expensive for them, and are not going ahead with it. And they are probably right: as has been argued many times by economists, investing in improving irrigation efficiency is not the most cost-effective way to secure water for the environment.

On the other hand, the Commonwealth is worried about the ‘willing sellers’ bit. Not that there are no willing sellers – there will always be for the right price–, but that’s exactly what the Feds are worried about: they don’t want to let the CEWH bump up the price at which they are buying back water. The extra 450 GL could be secured from willing sellers and delivered for environmental flows, but it might be at a price that is very high, which the Commonwealth does not want to pay under the current fiscal situation.

So, at the end it is all about inter state and federal politics, and very little about the environment or about economics! Why am I not surprised! It has been the way of dealing with Murray-Darling since irrigation first started in Australia, and it unfortunately seems to continue that way!

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As the second Tuesday of November is getting closer, all eyes are turning to the US, where presidential elections of unprecedented significance are about to take place. In Australia, the main concern around the election outcome has been the implication that it may have on the US-Australia strategic alliance, predominantly around national defense issues.

Not much attention has been given to the possible effects that US presidential election outcome might have on the environment, globally and in Australia. The positions of the two candidates on the environment are quite clear, and clearly reflecting the predominant views of the respective constituencies.

In particular, possible Trump presidency is seen as a big threat to global climate negotiations and treaties. This is in sharp contrast to Clinton, who is likely to continue the path that Obama’s presidency has set, although perhaps treading more cautiously in light of the possible opposition at home.

What does this all mean for Australia?

Barrack Obama subtly criticised the Australian government for not doing enough on climate change and for not putting sufficient safeguards to preserve the Great Barrier Reef. A Clinton administration is likely to continue with looking for a global leadership on dealing with climate change, and is likely to put some pressure on Australia to follow suit.

In contrast, a win for Trump is going to resonate strongly with the skeptical views on climate change in Australia, which are alive and well, and indeed well represented in our Parliament. The implication is likely to be that policy will move further away from economically effective mechanisms for pricing carbon, which have been strongly advocated by the economics profession.

So, those of us who believe that something needs to be done about carbon emissions, and that the right way to go about it is by adequately pricing them, are going to be hoping for the outcome of the US presidential election that it seems most of the world is hoping for. But, will the US voters play to those hopes? I am really not so sure about it any more! Sort of dreading the news that is about to hit us this week!

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