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Published: 04 May 2018   •   Media fact files

The Murray Darling Basin Plan contains strict requirements to protect the value of water, including maintaining the reliability of water entitlements.

This is why water recovery has been achieved through acquiring water rights and investing in irrigation and environmental efficiencies. Water recovered for the environment has been paid for and will not impact the value of other water entitlements.

Banks and financial advisors should not use cap factors in assessing the value of water entitlements as an asset.

This is because cap factors reflect average use of water allocations and are not a measure of the actual amount of water entitlement holders can access.

Cap factors describe the average extent to which water allocations made by state governments to entitlement holders are actually used.

Cap factors do not affect the sustainable diversion limits (limits on water take) set under the Basin Plan that will come into effect in 2019.

The Basin Plan is a long-term reform which will provide certainty and reliability for all entitlement holders.

Background

Everyone in the Basin needs to be confident that the volume of water recovered for the environment under the Basin Plan has been accurately calculated using a consistent approach across the Basin.

There are over 150 different classes of water entitlement in the Murray–Darling Basin—this means that, in recovering water for the environment, the Commonwealth Environmental Water Holder has acquired a variety of classes of water entitlements from across the Basin.

It is important that we can verify that the right amount of water has been recovered, to meet the requirements of the Basin Plan.

To allow us to measure water recovery in a way that is consistent and accurate across the Basin, each valley's entitlement classes are given a conversion factor to translate through to average use—so they can be counted on equal terms.

This conversion factor is mostly commonly called the 'cap factor'.

Cap factors reflect estimates of the long-term average actual water use—this is different to the reliability of an entitlement, which is relevant to value.

ENDS

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