We found a match
Your institution may have rights to this item. Sign in to continue.
- Title
'Sub-Prime' Water, Low-Security Entitlements and Policy Challenges in Over-Allocated River Basins: the Case of the Murray–Darling Basin.
- Authors
Moore, Harriet Elizabeth; Rutherfurd, Ian D.; Peel, Murray C.; Horne, Avril
- Abstract
Environmental policy is often implemented using market instruments. In some cases, including carbon taxing, the links between financial products and the environmental objectives, are transparent. In other cases, including water markets, the links are less transparent. In Australia's Murray–Darling Basin (MDB), financial water products are known as 'entitlements', and are similar to traditional financial products, such as shares. The Australian water market includes 'Low Security' entitlements, which are similar to 'sub-prime' mortgage bonds because they are unlikely to yield an amount equal to their financial worth. Nearly half the water purchased under the Murray–Darling Basin Plan for environmental purposes is 'Low Security'. We suggest that the current portfolio of water held by the Australian Government for environmental purposes reflects the mortgage market in the lead-up to the global financial crisis. Banks assumed that the future value of the mortgage market would reflect past trends. Similarly, it is assumed that the future value of water products will reflect past trends, without considering climate change. Historic records of allocations to 'Low Security' entitlements in the MDB suggest that, in the context of climate change, the Basin Plan water portfolio may fall short of the target annual average yield of 2075 GL by 511 GL. We recommend adopting finance sector methods including 'hedging' 'Low Security' entitlements by purchasing an additional 322–2755 GL of 'Low Security', or 160–511 GL of 'High Security' entitlements. Securing reliable environmental water is a global problem. Finance economics present opportunities for increasing the reliability of environmental flows.
- Subjects
WATERSHEDS; MORTGAGE bonds; WATER currents; HISTORICAL source material; CARBON taxes
- Publication
Environmental Management, 2020, Vol 66, Issue 2, p202
- ISSN
0364-152X
- Publication type
Article
- DOI
10.1007/s00267-020-01303-7