Water markets and trade
Water trading has become a vital business tool for many irrigators, providing flexibility to respond to variable water availability.
Water markets allow water to flow to where it can be used most productively. This is particularly valuable as different users have to manage the water demands of annual crops and permanent plantings.
The water markets in the basin are based on a 'cap and trade' system where the cap represents the total pool of water available for consumptive use. Available water is distributed to users via water rights administered by the basin states. There are two main types of rights traded in the basin-entitlements and allocations:
- Water access entitlements are rights to an ongoing share of the total amount of water available in a system.
- Water allocations are the actual amount of water available under water access entitlements in a given season.
During the year, water is distributed or 'allocated' against entitlements by state governments in response to factors such as changes in rainfall and storages. This provides people with certainty as to the water they will receive, while allowing states to manage water availability through different climactic conditions.
- permanent trade is the trade of water entitlements, known as entitlement trade
- temporary trade is the trade of water allocations, known as allocation trade.
Users determine whether they need to buy or sell their water at a particular time. The price of water is a reflection of these demand and supply factors. The price of water differs across regions, type of water rights and time. More information is available in the water markets in the Murray-Darling Basin brochure.
The amount of water available for users in a year varies according to rainfall, inflows into storages and how water in storage is managed by the Basin states.
At the start of each water year (1 July), each Basin state makes water allocation announcements based on seasonal availability.
In regulated river systems, allocations are reviewed throughout the year. If water conditions and storage levels improve, the allocation can be increased if it is less than 100%.
Seasonal flows are the basis for allocations in unregulated systems. Once predetermined flow conditions are met, water may be taken. Extraction of water is limited by placing restrictions on maximum daily extraction, and the timing of extractions.
More information is available on state websites:
Water trading rules
There are a number of sets of rules regulating water trade in the Basin. These rules all operate together to ensure the continued development and operation of the water market.
Basin Plan water trading rules
The Basin Plan water trading rules came into effect on 1 July 2014. The rules introduced a common framework for water trade, which aims to allow the water market to operate more efficiently and effectively.
They deal with various aspects of the trade of surface water and groundwater rights in the Basin, including:
- Creating opportunities to trade within and between Basin states through the removal of trade barriers
- Enabling the development of compatible entitlement, regulatory and other arrangements across Basin states
- Providing appropriate protection of third parties
- Facilitating good information flows into the markets through the publication of trade rules and product information.
The Basin Plan water trading rules complement existing rules. In the event of inconsistencies between the sets of rules, the Basin Plan water trading rules apply. More information on these rules is available on the Basin Plan water trading rules page or in the Basin Plan water trading rules - what to expect brochure.
The Australian Competition and Consumer Commission (ACCC) water market and charge rules
The ACCC has monitoring, enforcement, advisory and, in some cases price-setting roles, for the water market rules and water charge rules. The Commonwealth Water Minister under the Water Act makes these rules.
The ACCC is responsible for:
- regulating the charging practices of Irrigation Infrastructure Operators (IIOs) on certain matters
- reducing barriers to trade
- improving irrigators’ access to markets
- ensuring greater price transparency.
More information on these rules is available on the ACCC website.
Basin State trade rules
The Basin states are responsible for:
- determining water allocations
- developing policies and procedures for trade
- monitoring water use
- developing water resource plans that set the rules for sharing water between users and the environment
- day-to-day trade operations such as trade applications and approvals.
The Basin Plan water trading rules require Basin states to provide their trading rules to us. These rules are available on the Basin state water trading rules page.
Irrigation infrastructure operator (IIO) rules
The IIOs create and maintain trading rules within their irrigation network. These rules ensure the operation, maintenance and accounting of trades that occur within their networks. An IIO owns or operates water service infrastructure for delivering water for the primary purpose of irrigation.
The Basin Plan water trading rules require IIOs to provide their trading rules to us. These rules are available on the water trading rules within irrigation infrastructure operator networks page.