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Water Policy in the Murray Darling Basin 21-22 October 2010 Discussant

Water Policy in the Murray Darling Basin 21-22 October 2010 Discussant. David Pannell ARC Federation Fellow. Jeff Connor. Will it help?. BCA in highly politicised debates e.g. NBN – calls for BCA in hope it will look bad

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Water Policy in the Murray Darling Basin 21-22 October 2010 Discussant

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  1. Water Policy in the Murray Darling Basin21-22 October 2010 Discussant David Pannell ARC Federation Fellow

  2. Jeff Connor

  3. Will it help? • BCA in highly politicised debates • e.g. NBN – calls for BCA in hope it will look bad • How would a non-market study fare in a red hot political debate? Not very well. • Do policy makers want it? • Would people believe it?

  4. Various reasons for non-adoption of NMV • Ignorance that it exists • No institutional framework for it to feed into • Prefer not to know – transparency creates constraints • Avoidance of transaction costs from controversy • High cost of doing it • Perhaps a judgement that value of the information would be modest • Suspicion due to controversy within economics • Satisfaction with existing methods • Preference for relying on expert or policy maker judgements • Timing – it would take too long for the policy time frame • Limitations on benefit transfer

  5. Used for what? • Overall assessment of the policy • Prioritisation of options within the policy – targeting of effort and resources

  6. Thilak Mallawaarachchi et al.

  7. Which uncertainties included? • Aggregate rainfall • Allocation decisions

  8. Uncertainties not included • Environmental outcomes • High uncertainty about environmental benefits from changes in water management – Mac Kirby • Human behaviour • Predicting which irrigators will sell water is essentially impossible – Peter Gooday • Political outcomes

  9. Uncertainty about behaviour 'I can calculate the motions of the heavenly bodies but not the madness of the people.’ Isaac Newton, 1720

  10. Challenge of communicating risk • Advising a govt department about metric for prioritising projects • They used weighted additive function, as is common in MCA Project score = w.Benefit + w.Risk (≈probability of success) • Proposed alternative Project score = Benefit  probability of success • Response: concern because this seems “more complex”

  11. Risk and info issues are pervasive • Our attempt to deal with them in one context

  12. Experience with INFFER • A BCA disguised as an “integrated assessment” • System intended to be acceptable to and usable by non-economists/non-modellers • Developed based on experience with various govt departments and 20 regional NRM bodies • As simple as possible, but still rigorous

  13. Risk/information elements in INFFER • Elicits probabilities of project failure due to several risk factors • Overall project score is an expected value

  14. Risk/information elements in INFFER • Scores information quality • Captures knowledge gaps • Requires explicit response to knowledge gaps

  15. Risk/information elements in INFFER • Reduces risk of dodgy analysis by providing structured, guided approach with templates and elements automated • Encourages/facilitates parameter sensitivity analysis • Encourages feasibility phase at start of large projects • Encourages adaptive management • Update project assessment over time

  16. Observations • The balance between rigour and usability is very challenging • Is subject to high uncertainty in itself! • Learning and adaptation over time • The best approach depends on capabilities of the relevant client organisations

  17. John Quiggin

  18. No cuts in allocations • “Communication failure” • Also some do understand and are focused on impact on “social infrastructure” • Local jobs • Supporting local population • Supporting local services and perhaps social capital

  19. Risk bearing • NWI specified principles for risk bearing • Consistent with at least some reduced allocation • Was never a serious possibility • Even with govt offering to buy, very hot reaction • Political costs and transaction costs from reduced allocations would be larger • Basin plan position more politically realistic

  20. Infrastructure • A politically-convenient alternative to buy-backs • Limits reduction in water to agriculture • 2 to 4 times more expensive • Cost per job saved: $ millions

  21. Spend on social infrastructure • Usually best for interventions to go for target outcomes directly • Needs more thought about specifics, particularly ongoing costs • A risk of such a program being distorted • Landcare – captured by facilitators • Emphasis on participation • Little attention paid to outcomes

  22. Mac Kirby

  23. Key messages • Expected future loss of water to new dams, plantations etc. is modest • Second half of 20th century was relatively wet • History isn’t sufficient to guide future planning (characteristics of the drought) • Importance of amplifying effect of runoff • There are large uncertainties about climate change • Likely to see longer and drier droughts • Amounts to be saved by infrastructure may be modest

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