Murray Darling Water Trading

The Murray Darling Basin

The Murray Darling Basin (MDB) catchment is the lifeblood of the southeast of Australia, made up of 77,000 kilometers of river, spanning across four states and one territory with over 40 First Nations in the Basin. The Basin supports the irrigation of 7,300 agricultural business, contributing over $22 billion to the Australian economy. The Basin contains over 100 nationally important ecological or cultural sites, including many internationally important sites protected under the Ramsar Convention. It is managed by the Murray-Darling Basin Authority (MDBA) together with the Murray Lower Darling Rivers Indigenous Nations (MLDRIN) and the Northern Basin Aboriginal Nations (NBAN); The two main First-Nation based organizations that primarily focus on natural resource management.

Managing the MDB is a constant juggling act between the amount of water available and the urgency of environmental and agricultural needs, achieved through the constant trading of water and water level management through flooding, draining, and storage practices. With climate change comes additional challenges, like more extreme drought events, rainfall and flooding events. Recently the MDBA has announced a forty billion gigalitres trading surplus at the Barmah Choke portion of the Murray River. How does water trading work, where did this surplus come from, and how does this help the management of the MDB?

Murray Darling river basin water map
The boundary of the Murray–Darling Basin, including the boundaries of the northern and southern basins. Credit: Murray Darling Basin Authority/ Geoscience Australia

Trading Water

Water is traded as entitlements, which are a perpetual right to a share of water from a particular resource, such as a river or underground aquifer. Water allocations are the right to access a volume of water, made available under a water entitlement, in a given year. This water can be used, traded (sold) or carried over. The entitlement always remains the same each year, but the allocation will differ depending on water availability and need. For example, if a farmer had an entitlement of 100 megalitres a year, but it was a particularly dry year, they may only receive a 50% allocation of their entitlement, equal to 50 megalitres.

The main driver of water allocation prices in this open water market are driven by water supply, which is highly reliant on rainfall. During the Millennium drought (that spanned from 1996-2010), rainfall dropped by 17%, which led to an allocation price highs. When floods occurred during 2011, 2012 and 2016, prices declined to near zero. Since then, because of recent droughts, prices have risen again.

From 2008, the federal government began a buyback scheme to purchase water entitlements for environmental use. While this somewhat controversial scheme ended in 2020, over 2,877,111 megalitres of entitlements were purchased for environmental water holdings, though not without the hefty pricetag of A$2.6 billion.

“There are the state and federal water holders, for example there’s the Victorian Environmental Water Holder, and then there is the Commonwealth Environmental Water Office which holds the majority of the water,” explains Keith Ward, the senior wetland ecologist for the Victorian side of the Goulburn Broken Catchment Management Authority.

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