4628.0.55.001 - Completing the Picture - Environmental Accounting in Practice, May 2012
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 10/05/2012 Final
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CHARACTERISTICS OF THE MURRAY-DARLING BASIN The Murray-Darling is the longest river system in Australia and ranked fifteenth in the world in terms of length. The Murray-Darling Basin covers an area of 1.06 million square kilometres (14% of Australia's land area) and contains more than twenty major rivers as well as important groundwater systems(footnote 1) . It drains one-seventh of the Australian land mass and spans four states - New South Wales, Victoria, Queensland and South Australia - as well as the Australian Capital Territory (Figure 6.1 Map of Murray-Darling Basin). The Murray-Darling Basin supports a wide range of complex and dynamic ecosystems, including river red gum forests, over 77,000 km of rivers, 25,000 wetlands, floodplain forests and the Coorong and Lower Lakes. The Murray-Darling Basin also has great cultural significance for indigenous people and the broader community with two million people (or around 10 % of the Australian population) living within the region (ABS 2006 Population Census). Adelaide (with a population of over 1.2m people) while being outside the Murray-Darling Basin is dependent on Basin Water. The Murray-Darling Basin is Australia's most important agriculture region, accounting for $15 billion (40%) of the total gross value of agricultural production(footnote 2) . Irrigation is an integral part of agriculture in the region with the Murray-Darling Basin containing 65% of Australia's irrigated farms. Agricultural production also supplies raw materials for much of the region's manufacturing activity as well as many businesses beyond, catering for both the domestic and overseas markets. The settlement and development of the Murray-Darling Basin, primarily for agriculture, has placed considerable pressure on the natural environment. In particular, the clearing of native vegetation and the regulation of water flows, through the construction and operation of large dams for irrigation, has led to concerns about the ability of the Murray-Darling Basin to support a growing population and economy while maintaining the environment. In recognition of the need to better manage the Murray-Darling Basin to meet a range of social, economic and environmental objectives the Australian Government established the Murray-Darling Basin Authority (MDBA) and developed a Basin wide plan. THE MURRAY-DARLING BASIN MANAGEMENT AND GOVERNING POLICIES In November 2011 the MDBA released the "Proposed Murray-Darling Basin Plan" for consultation, outlining its plan to secure the long-term ecological health of the Murray-Darling Basin. The purpose of the plan is to provide integrated management of the Murray-Darling Basin's water resources in a way that promotes the objectives of the Water Act 2007. The MDBA has developed four outcomes:
ENVIRONMENTAL-ECONOMIC ACCOUNTING FOR THE MURRAY-DARLING BASIN There is a wealth of statistics available on the Murray-Darling Basin, however they are typically not integrated, come from a variety of sources, are spread over a number of years and are for different geographical boundaries. Environmental-economic accounts for the Murray-Darling Basin would provide a consistent, integrated framework from which to derive regular integrated environmental and economic information for the region. Land accounting Beyond the assessment of ownership and use of land as part of economic production, some issues that can be considered in the context of land accounts include - the impacts of urbanisation, the intensity of crop and animal production, afforestation and deforestation, the use of water resources, and other direct and indirect uses of land. Land use is the activity which occurs on land, for example agriculture, forestry, mining and residential. Land use has a major effect on the condition of natural resources - for example land and water quality and the abundance of native species. There is also a strong link between land use and the economic and social benefits obtained. In the Murray-Darling Basin, 84% of land is used for agricultural production. A summary of major land use activities in the Murray-Darling Basin region identified in 2008 are shown in Figure 6.2.
Land cover refers to the physical surface of the earth, including various combinations of vegetation types, soils, exposed rocks and water bodies as well as anthropogenic elements, such as agriculture and built environments(footnote 3) . Some land uses, have a characteristic land cover pattern, for example, land used to grow wheat is covered by wheat. However, for other land uses the relationship between cover and use may not be so obvious. For example grasslands may be used for agriculture (e.g. cattle grazing) but they could also be used for conservation (e.g. a national park). Similarly a forest may be used for forestry (e.g. providing timber) or could be used for conservation purposes. Figure 6.3 gives a summary of land cover change from pre-1750 to 2006. A detailed account of the land cover for pre-1750 and 2006 is given in the Appendix. Data on land cover has been extracted from the National Vegetation Information System (NVIS) and has been derived from a variety of methods, such as field surveys and combining information from a number of years. As such, the data should be interpreted cautiously and with reference to the information on the methods associated with the NVIS(footnote 4) .
The changes in land cover between pre-1750 and 2006 (Figure 6.3) could be due to human activities or natural causes. By continuing systematic measurement of land cover in combination with other information on human activities, the drivers of changes over time can be better understood and, a more regular and complete picture of the Murray-Darling Basin land can be developed. An integration of land cover and land use is useful in developing a more complete picture of the Murray-Darling Basin. The dynamic land cover data has been used to create a land cover account for the Murray-Darling Basin for 2008. This has been compiled from satellite images between 2000 to 2008. A sample table of dynamic land cover by land use is shown in the Appendix.Land use and land values Land use has a significant influence on land values. For example, land with greater access to water resources (either higher rainfall or access to ground or surface water) will normally attract a higher price than land with fewer water resources or land with salinity or other environmental degradation. The Australian Bureau of Statistics (ABS) values land at the national level on an annual basis, but does not estimate values for land at the regional level.Forest accounts Forests (including woodlands) are an important environmental asset being diverse, dynamic and complex ecosystems, proving habitat for flora and fauna. They also contain valuable renewable resources, such as timber that provides inputs for construction and production of paper and other products, as well as important ecosystem services such as maintaining water quality and recreational use. Much of the Murray-Darling Basin's native forests are in national parks and other reserves, and large areas of state forests are also reserved for conservation(footnote 5) . The extent of forest in the Murray-Darling Basin for 2008 and 2011 are presented in the Appendix. Changes in the stock of forests due to afforestation and deforestation are one indicator of the health of ecosystems - an expected outcome of the Basin Plan. The monetary value of timber in Australian forests is reported annually in the ABS Australian System of National Accounts (cat. no. 5204.0), however regional estimates are not compiled. WATER ACCOUNTING Water accounts are one of the most common forms of environmental account implemented internationally(footnote 6) and are applied at a variety of levels, from individual business, to geographic regions up to national level. In Australia water accounts are used in the analysis of water issues at the national and regional levels(footnote 7) (footnote 8) (footnote 9) . Effective water management requires an understanding of the benefits of current allocations of water, anticipation of future water demands, and evaluation of different policy options for meeting those demands. Management options include increasing the effective supply of water from efficiency improvements, wastewater reuse, demand management, and other measures. Policy analyses using water accounts can address a broad range of issues, such as:
Figure 6.4 summarises the supply and use of water in the Murray-Darling Basin for 2009-10(footnote 10) . Total distributed water supplied to economic units by all water suppliers was 4,573 GL, a 2% decrease from 4,666 GL in 2008-09(footnote 11) . Total supply of reuse water was 130 GL, a 12% increase from 116 GL in 2008-09. Total use of self-extracted water was 16,601 GL, this represents a 9% increase from 15,250 GL in 2008-09. Examples of physical and experimental monetary supply and use of water tables are presented in the Appendix. These accounts illustrate how water is used in industries and households and can be used to guide Murray-Darling Basin communities to adapt to changes in water availability. Figure 6.5 illustrates the proportion of physical and monetary use of distributed water across industries and households in the Murray-Darling Basin region. Figure 6.6 provides details of physical and monetary supply and use of distributed (urban and rural) water for 2009-10 and 2008-09 in the Murray-Darling Basin. Figure 6.6 includes only the water supply and sewerage services industry (referred to as the water supply industry) in the supply side as no monetary data is currently available for other industries also supplying water. The water supply industry supplies the majority of the water, however a small amount is also supplied by the electricity generation, mining and manufacturing industries. No monetary values are assigned to self-extracted water and hence it is also excluded from Figure 6.6. There was a 6% increase in the volume of water supplied by the water supply industry between 2008-09 and 2009-10 to 3,120 GL. The revenue earned by selling water to other economic units by the water supply industry rose by 11% over the same period. Different industries pay different prices for the water they receive. The agriculture industry used 90% of the total volume of water supplied however only represented 32% of the total water expenditure. By contrast, households used 6% of the total volume of water but contributed 40% of the total expenditure. The reason for the disparity is that the agriculture industry mainly receives rural water, which does not require the same level of treatment as in the case of urban potable (drinking) water. There was also a small (4%) decrease in the volume of water used by households between 2008-09 and 2009-10 and expenditure increased by 11% over the same period. A similar trend was also seen in other industries. Monetary estimates of water use are at basic prices, i.e. subsidies and taxes on products are not included as no data are available at a regional level.
The combined physical and monetary supply and use tables highlight industries that are using the most water and what economic benefits (e.g. industry value added) are obtained from this use. Revenue earned from supplying water can be used to determine the productivity of the water supply industry.Water assets Unlike other natural resources, such as forests or mineral deposits that are subject to relatively slow rates of natural changes, water is in continuous movement through the water cycle. In the case of the Murray-Darling Basin, where water resources are shared among several jurisdictions, water asset accounts can explicitly identify information on the part of the water resources occurring in each jurisdiction and the origin and destination of water flows between jurisdictions. The water asset accounts describe the stocks of water resources and changes over time. The structure of a water asset account consists of the opening balance or stock of water, increases in stocks due to human activities (e.g. returns) and natural causes (e.g. inflows, precipitation), decreases in stocks due to human activities (e.g. abstraction) and natural causes (e.g. evaporation/evapotranspiration, outflows etc.) and closing stock of water. These accounts are particularly relevant because they link water use by the economy (represented by abstraction and returns) and natural flows of water to the stocks of water in a particular geographical location. These types of accounts are currently constructed by the Bureau of Meteorology (BoM) although the presentation of the accounts is not the same as in the SEEA. A SEEA style asset account could be constructed from this data(footnote 12) . A century of construction of dams, weirs, and barrages has enabled 35,000 GL of water to be stored within the Murray-Darling Basin. An account of the value of the water infrastructure assets is important for measuring productivity of the water supply industry. Currently there is insufficient data and differences in asset valuation methods used by water suppliers to value their assets and hence a water infrastructure asset account for the Murray-Darling Basin cannot currently be produced. However, the ABS has given consideration to this matter and is planning to produce values for the water infrastructure assets in the future at the national level(footnote 13) . This could also guide the production of a similar account for the Murray-Darling Basin. Water trading One of the expected outcomes of the proposed Murray-Darling Basin Plan is for an efficient water trading regime to be achieved by reducing barriers to trade and creating greater transparency for users of the water market(footnote 14) . The water trading activity in the Murray-Darling Basin accounts for between 70% and 80% of all water traded in Australia (by volume) and is the focus of water market reforms and market monitoring. Most water trading occurs in the southern part of the Murray-Darling Basin(footnote 15) . Trade in the region predominantly involves surface water entitlements (80-90%). However, groundwater is still important to Murray-Darling Basin markets, particularly as a source when there is low surface water availability(footnote 16) . Water rights represent an economic instrument that governments have used to manage water use and to give incentives for increasing water use efficiency. The nature of water rights varies within and between jurisdictions in their duration, security, flexibility, divisibility and transferability. In Australia water rights are traded as water entitlements or water allocations. Water entitlements refer to a perpetual or ongoing entitlement to exclusive access to a share of water from a specified consumptive pool, while water allocation is the specific volume of water allocated to water access entitlements in a given year. Water allocation can vary from year to year, mainly dependent on rainfall, but does not exceed the maximum amount specified in the associated entitlement. This terminology is consistent with the Australian Water Markets Report published by the National Water Commission. Figure 6.7 shows the water entitlements in the Murray-Darling Basin for 2009-10 and 2010-11. The most reliable data available is for tradeable entitlements of surface water within the Murray-Darling Basin and this data forms the basis of Figure 6.7. Surface water represents around 80-90% of total water (the other major category is ground water). From 2008, the Australian government under the 'Restoring the Balance' program has commenced a series of water "buybacks", in order to return over-allocated or overused water systems to environmentally sustainable levels of extraction(footnote 17) .
Water allocation is the amount made available each year to the water entitlement holder. Depending on rainfall and amount of water in storage, a new allocation is announced each year. At present no data is available to construct a full stock and flow account with opening and closing balances of water allocations. However, as all unused allocations automatically expire at the end of the year, it is expected that the closing stock is always netted to nil. The allocations have been treated as a flow account for the purpose of this paper. Accounting for the trade of allocations, the buyers and sellers of the allocations and how the water traded is being used, would provide another level of detail for the water accounts.Water intensity of households The water intensity of households is a measure of the water consumed annually per head of population. Figure 6.8 gives the household water intensity in the Murray-Darling Basin for 2009-10 and 2008-09. Water used by Murray-Darling Basin households decreased from 2008-09 to 2009-10 by 7 GL, however the expenditure increased from $320m to $343m. Thus the water intensity decreased during this period. This could be an indication that people used water more efficiently.
Water productivity in industries Water productivity can be defined as economic output (e.g. Gross Domestic Product - GDP or Industry Gross Value Added - IGVA) generated per one unit of water consumed. However, as economic aggregates such as industry value added are not available at regional level this is not currently possible. Some data on the gross value of irrigated agricultural production and some productivity measures are presented below (Figure 6.11). AGRICULTURE One of the Murray-Darling Basin Plan objectives is "sustainable industries demonstrating leadership in water-use efficiency, cutting-edge technologies, new crops and innovative land and water management suited to the Australian environment". The agriculture industry is the dominant industry in the Murray-Darling Basin, and this section explores the agriculture industry in the region.Land use and land management Figure 6.9 presents land use and management by agricultural businesses in the Murray-Darling Basin for 2007-08 and 2009-10. The area of agricultural holdings decreased slightly (-0.4%) in this period and the number of agricultural businesses decreased by 5%. The area of land used for crops decreased by 3% while the area of land used for grazing increased by 2%. The ABS Population Census showed that between 2001 and 2006, employment in crop growing decreased while employment in cattle and other livestock farming increased(footnote 18) .
Figure 6.10 illustrates the volume of irrigated water used in agriculture production from 2005-06 to 2009-10. The irrigated agriculture land area decreased by 42% from 2005-06 to 2007-08 but was fairly steady between 2007-08 to 2009-10. The volume of irrigated water used decreased by 57% from 2005-06 to 2007-08 and increased by 13% from 2007-08 to 2009-10. Gross value of irrigated agriculture production (GVIAP) can be used to construct a water productivity measure for irrigated agriculture. GVIAP is the measure of economic output and the water productivity indicator is expressed as $ GVIAP/GL. $ GVIAP should be expressed in chain volume terms (changes in commodity prices are removed) where the objective is to draw conclusions about changes in economic efficiency over time. Chain volume measures for GVIAP are not available at this time. Figure 6.11 illustrates the $ GVIAP/GL from 2005-06 to 2009-10 where GVIAP is measured in the prices at current at the time. As the results will reflect commodity price changes over the period, it should be interpreted as income receipts per GL rather than as an indicator of water efficiency. GVIAP can be calculated for different agricultural commodities and these are reported in Appendix. It is important that the economic aggregate, GVIAP in this case, being used is measured in constant prices (e.g. the price with the effect of inflation removed) in order to compare the changes over time. No constant prices measures are available for the GVIAP at this time. It is useful to investigate the drivers behind the changes in water productivity. The volume of irrigated water applied depends on both the water availability from suppliers, seasonal rainfall and water saving measures used. Water availability has declined since 2000-01 in the Murray-Darling Basin(footnote 19) . However, the impact upon agricultural production (in volume and fiscal terms) is not proportional with reduced water availability. Switching agricultural products grown and changes in irrigation practices have sustained the value of irrigated agricultural production during this period of reduced water availability. Over half of agricultural businesses have changed their irrigation practices in order to better manage water use(footnote 20) .Other accounts for understanding agriculture in the Murray-Darling Basin Several other accounts could aid the understanding of the environmental and economic aspects of the agriculture industry in the Murray-Darling Basin. In addition to the land and water accounts the following accounts could be added:
Including this additional information in an expanded set of environmental-economic accounts for the Murray-Darling Basin would be useful for monitoring and evaluating the progress of the agricultural water use efficiency and innovative land and water management practices. 1 MBDA 2010, Guide to the Proposed Basin Plan – Overview, Murray–Darling Basin Authority, Publication no. 60/10, vol. 1, Murray–Darling Basin Authority, Commonwealth of Australia. <back 2 Gross Value of Irrigated Agricultural Production, 2000–01 to 2009–10, (ABS cat. no. 4610.0.55.008), Australian Bureau of Statistics, Canberra. <back 3 SEEA 2012, The System of Environmental – Economic Accounting. United Nations, OECD, Eurostat, World Bank and IMF, viewed January 2012. <back 4 http://www.environment.gov.au/erin/nvis/about.html. <back 5 MDBC, 2012, viewed February 2012. <back 6 Vardon, M., Martinez–Lagunes, R. Gan, H. and Nagy, M. 2012. The System of Environmental–Economic Accounting for Water: Development, Implementation and Use. Pp. 32–57 in Water Accounting: International Approaches to Policy and Decision–making. Ed by J. Godfrey and K. Chalmers. Edward Elgar. <back 7 Apples D, Douglas R and Dwyer G. 2004, Responsiveness of demand for irrigation water: A focus on the Southern Murray–Darling Basin, Productivity Commission working paper, . <back 8 Foran, B., Lenzen, M., Dey, C., 2005. Balancing Act – A Triple Bottom Analysis of the Australian Economy. CSIRO, Canberra. <back 9 Productivity Commission 2012, Australia's Urban Water Sector. <back 10 Water Accounts Australia, 2009–10 (ABS cat. no. 4610.0). <back 11 Water Accounts Australia, 2008–09 (ABS cat. no. 4610.0). <back 12 Vardon, M., Martinez–Lagunes, R. Gan, H. and Nagy, M. 2012. The System of Environmental–Economic Accounting for Water: Development, Implementation and Use. Pp. 32–57 in Water Accounting: International Approaches to Policy and Decision–making. Ed by J. Godfrey and K. Chalmers. Edward Elgar. <back 13 Comisari P, Feng L and Freeman B, Valuation of water stock resources and water infrastructure assets, paper presented at the UN's 17th London Group meeting, 14 September 2011, Stockholm, Sweden. <back 14 MBDA 2010, Guide to the Proposed Basin Plan – Overview, Murray–Darling Basin Authority, Publication no. 60/10, vol. 1, Murray–Darling Basin Authority, Commonwealth of Australia. <back 15 NWC 2011(a), Australian Water Markets: Trends and drivers 2007–08 to 2009–10, National Water Commission, Commonwealth of Australia, 2011, viewed February 2012. <back 16 NWC 2009, National Water Commission Australian Water Markets Reports, 2008–2009, National Water Commission, Commonwealth of Australia, 2009. <back 17 NWC 2011(b), National Water Commission Australian Water Markets Reports, 2010–11, National Water Commission, Commonwealth of Australia, 2011. <back 18 ABS 2008, Water and the Murray–Darling Basin: A Statistical Profile, (cat. no. 4610.0.55.007), Australian Bureau of Statistics, Canberra. <back 19 NWC 2011(a), Australian Water Markets: Trends and drivers 2007–08 to 2009–10, National Water Commission, Commonwealth of Australia, 2011, viewed February 2012. <back 20 ABS 2010, Energy, water and environmental management 2008–09, (cat. no. 4660.0), Australian Bureau of Statistics, Canberra. <back Document Selection These documents will be presented in a new window.
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