Prof. Mike Young Executive Director The Environment Institute The University of Adelaide

1. There’s a hole in the bucket Dear Liza, Dear Liza, a hole! Prof. Mike Young Executive DirectorThe Environment Institute The University of Adelaide Singapore 3rd Tuesday, 19th May 2009

2. There’s a hole in the bucket There's a hole in the bucket, dear Liza …So fix it, Dear Henry … With what should I fix it, … With straw, Dear Henry … But the straw is too long, ...So cut it, Dear Henry… With what should I cut it, … Use an axe, …But the axe is too dull, … So, sharpen it, … With what should I sharpen it, … Use the stone, ...But the stone is too dry, … So wet it, … With what should I wet it, … With water, … With what should I carry it, … With the bucket, Dear Henry, …There's a hole in the bucket, Dear Liza, … a hole!

3. Australia has been running out of water. Why?

4. Small declines in rainfall mean big declines in run-off - 1% - 3%

5. With half as much water? Users Users Environment Environment River Flow River Flow

6. How should we share the water? Dear Henry, Dear Henry

7. Volume of Water in the System

8. Language & concepts matter • Water to maintain the system • Conveyance • Evaporation • Shared water • Users get X% • Environment gets (1-X)% • Major floods managed separately • Several reliability pools possible

9. How do we facilitate adjustment in a changing world? Dear Henry, Dear Henry

10. By unbundling licences and allowing trading, Dear Liza, Dear Liza

11. Single Title to Land with a Water Licence National CompetitionPolicy 1993/94Plus Cap Water Land Tradable Licence Price Entitlement Sharesin Perpetuity Use licences with limits & obligations Bank-like Allocations Delivery Capacity Allocations SalinityShares SalinityAllocations Delivery Capacity Shares National Water Initiative2004

12. Unbundle & enable trading, Dear Liza Source: Murray Darling Basin Commission, 2007.

13. But there is not enough water for our cities, Dear Henry, Dear Henry

14. And people don’t like restrictions, Dear Henry, Dear Henry

15. Water restrictions cost • Cost Sydney $223 million/yr (Grafton, 2007)

16. Diversify, Dear Liza, Dear Liza • Desalination • Gold Coast, Sydney, Melbourne, Adelaide, Perth • Stormwater capture and storage • Recycling sewage to parks and gardens

17. But water is too cheap, Dear Henry, Dear Henry

18. Competitive pricing • Raise prices • Charge full costs to everyone • Get rid of rising block tariffs and fixed charges • Set water security caps and introduce scarcity pricing • Give credits to those who save water • Give businesses an entitlement and allow them to trade • Appoint independent regulators to set supply charges and prices

19. This is part of the Green New Deal, Dear Liza, Dear Liza

20. We all have to pay our way, Dear Liza, Dear Liza

21. But making all people pay full cost is inequitable, Dear Henry, Dear Henry

22. What about the poor, Dear Henry, Dear Henry

23. Tinbergen, Dear Liza • A separate instrument for every objective • Unbundle to get control in a changing world • Don’t compromise everything • Give the real poor rebates and targeted assistance • Get the pricing right

24. Then industry will invest, Dear Liza, Dear Liza

25. Cost of water supply

26. What about infrastructure,where’s the future, Dear Henry, Dear Henry?

27. Developer & Builder ~ 80% Build for the future Source: Marsden Jacob 2005 PMSEIC 2007 Owners & Occupiers ~ 20% Raise subdivision and building standards

28. The are lots of opportunities • We could • Make developers source urban water entitlements prior to subdivision • Place urban infill and extensions under same regulatory disciplines as new homes • Require mandatory disclosure of water efficiency at a house sale

29. What about governance, Dear Henry, Dear Henry

30. We could unbundle the management system, Dear Liza, Dear Liza

31. How many businesses? Water source management Storm water Water retailing Storm water Waste water purification, use & disposal Water distribution

32. We are running out of water, Dear Henry …There's a hole in the bucket, Dear Liza …So fix it, Dear Henry, … With what should I fix it, Dear Liza … With shares, give the environment a share, Dear Henry … • But how shall we adjust, Dear Liza … By allowing trading, Dear Henry … But what about security for our cities, Dear Liza, … Diversity, Dear Henry, … Recycle it, use groundwater, stormwater & seawater, Dear Henry, … • But water is too cheap, Dear Liza …Business can’t compete, Dear Henry, Dear Liza …So charge for the full cost, Dear Henry… But they will charge too much, Dear Liza… Appoint an independent price regulator, Dear Henry... • But there is still not enough water, Dear Liza, … Set a security cap and let industry invest, Dear Henry … But what about population growth, Dear Liza …Improve building regulations, Dear Henry, …And unbundle the supply system, Dear Henry … • Water businesses are growing, Dear Liza, …That’s good, Dear Henry, Dear Henry, that’s good!So we don’t need restrictions, Dear Liza, Dear Liza …That’s right, Dear Henry, Dear Henry, …You have fixed it, Dear Henry, fixed it!

33. Subscribe to Droplets at www.myoung.net.au Prof. Mike Young Water Economics and Management Email: Mike.Young@adelaide.edu.au Phone: +61-8-8303.5279Mobile: +61-408-488.538

35. There is a hole in the bucket There's a hole in the bucket, dear Liza …So fix it, dear Henry, … With what should I fix it, dear Liza … With business, dear Henry …But we have postage stamp pricing, dear Liza … So change the price, dear Henry … But what about equity, dear Liza, … Use rebates, dear Henry, …But business needs access, dear Liza … So charge for access, dear Henry… So who sets the charge, dear Liza… An independent price regulator, dear Henry...But SA Water owns all the water, dear Liza… So lease some of it to business, dear Henry… But there is not enough water, dear Liza, … Recycle it, use groundwater, stormwater & seawater, dear Henry, …But we might need more, dear Liza …Let people trade water, dear Henry …Water businesses are growing, dear Liza, …That’s good, dear Henry, dear Henry, that’s good!So we don’t need restrictions, dear Liza, dear Liza …That’s right, dear Henry, dear Henry, …I think you have got it, dear Henry, we’ve got it!