Donna C. Brennan

The Welfare Costs of Urban Outdoor Water Restrictions

Outdoor water restrictions are usually implemented as bans on a particular type of watering technology (sprinklers), which allow households to substitute for labour-intensive (hand-held) watering. This paper presents a household production model approach to analysing the impact of sprinkler restrictions on consumer welfare and their efficacy as a demand management tool. Central to our empirical analysis is an experimentally derived production function which describes the relationship between irrigation and lawn quality. We demonstrate that for a typical consumer complete sprinkler bans may be little more effective than milder restrictions policies, but are substantially more costly to the household.

Water Policy Reform in Australia: Lessons from the Victorian Seasonal Water Market

The nature of the seasonal water market is examined using a theoretical model and empirical evidence from the Victorian market. Drivers of the seasonal opportunity cost of water include the underlying nature of investment in the industry made in the context of risky entitlement yields; and the timing and nature of information regarding seasonal water availability and rainfall. Seasonal water markets facilitate the reallocation of water availability according to this short-run opportunity cost. Evidence from the market suggests that transactions costs are low and most of the existing constraints to trade in seasonal allocations are the result of hydrological conditions. Analysis of market data suggests that the price response of the market to water availability is much more pronounced in years of low rainfall. The implications of the paper for wider policy reform are that attention should be paid to improving property rights for the management of intertemporal risk before other reforms, such as broadening of permanent water markets and institutionalising environmental flows, are implemented. This is because these other reforms will change the spatial and temporal pattern of water use and thus affect reliability, which underpins the value of water in irrigated agriculture.

Capitalized Amenity Value of Urban Wetlands: A Hedonic Property Price Approach to Urban Wetlands in Perth, Western Australia

Up to 60 per cent of potable water supplied to Perth, Western Australia, is extracted from the groundwater system that lies below the northern part of the metropolitan area. Many of the urban wetlands are groundwater-dependent and excessive groundwater extraction and climate change have resulted in a decline in water levels in the wetlands. In order to inform decisions on conserving existing urban wetlands, it is beneficial to be able to estimate the economic value of the urban wetlands. Applying the Hedonic Property Price approach to value urban wetlands, we found that distance to the nearest wetland and the number of wetlands within 1.5 km of a property significantly influence house sales price. For a property that is 943 m away from the nearest wetland, which is the average distance to the wetland in this study, reducing the wetland distance by 1 m will increase the property price by AU

Factors affecting the economic benefits of sprinkler uniformity and their implications for irrigation water use

42.40. Similarly, the existence of an additional wetland within 1.5 km of the property will increase the sales price by AU

Missing markets for storage and the potential economic cost of expanding the spatial scope of water trade

6976. For a randomly selected wetland, assuming a 20 ha isolated circular wetland surrounded by uniform density housing, the total sales premium to surrounding properties was estimated to be around AU

Policy interventions to promote the adoption of water saving sprinkler systems: the case of lettuce on the Gnangara Mound

140 million (AU

Capitalized amenity value of urban wetlands: A hedonic property price approach to urban wetlands in Perth

40 million and AU

Household willingness to pay to avoid drought water restrictions :A case study of Perth, Western Australia

230 million).

INVESTING IN GRAIN STORAGE FACILITIES UNDER FLUCTUATING PRODUCTION

Adoption of more uniform sprinkler systems involves a trade off between increased capital expenditure on equipment and the benefits associated with reduced water application when application is uniform. An empirical analysis of the economics of lettuce production, grown using sprinkler systems under the windy conditions of the Swan Coastal plain in Western Australia is presented, where the yield response to water exhibits eventual declining marginal productivity. A range of sprinkler designs that have been field-tested for performance were examined. The optimal per-crop water application for the least efficient system was up to double the application rate of the most efficient system. However, the economic analysis demonstrates that there are clear incentives for adopting more water-efficient systems despite the higher capital cost, because of the yield depressing effect of over-watering. Sensitivity analysis demonstrates substantially poorer incentives for improving irrigation efficiency when yield relationships follow a Mitscherlich functional form.

Valuing Urban Wetlands of the Gnangara Mound: A Hedonic Property Price Approach in Western Australia

A great deal of attention has been given in recent years to the question of externalities associated with water entitlements and how third parties can be protected without restricting opportunities for water trade. Yet one market failure that has received no attention at all is the missing market for storage that arises from the specification of water entitlements, particularly in Victoria where historically all storage decisions were made at the centralised level and where any additional carryover was treated as common property. The economic significance of the missing market for storage is demonstrated using an empirical model that represents the spatial-temporal pattern of irrigation water demand in the Goulburn Valley and decisions regarding inter-year storage of water in Lake Eildon. It is shown that, because irrigators have no incentive to trade-off the benefit of current use (or sale) with the value of water storage, there is an erosion of reliability when opportunities for trade are broadened. The empirical results demonstrate that the loss in economic value associated with reduced reliability are as large as the gains from trade, so there is no net benefit from trade.