Climate refugees ruse in water debate

lin-crase Dr Lin Crase

Recently, the Age reported that officials from the Department of Sustainability and Environment had claimed that the economic malaise of irrigation in Northern Victoria was the first symptom of an impending exodus of climate change refugees.  Perhaps not surprisingly, the Premier, Mr Brumby, has moved rapidly to invoke the 'climate change refugee' as the rationale for his government's approach to water policy and the state's constraint on water trade away from irrigation.

Regrettably, there are several problems and inconsistencies with this approach that should be of concern to Victorians.

First, the current economic plight of irrigation communities is not of itself a result of long-term climate trends.  The decline in the terms of trade for agriculture commenced long before climate change appeared on the policy horizon. Consequently, rural communities have been shrinking for decades. Indeed, irrigators now in big financial trouble in Northern Victoria could be more accurately described as 'wine glut refugees'.

The high costs of providing irrigation water in a country like Australia were well known and clearly articulated in the 1960s.  Put simply, governments have known for a long time that the economic rationale for irrigated agriculture in Australia is seriously flawed and communities built on this foundation were always going to struggle once subjected to serious competition for resources.  Nevertheless, this has not stopped our elected representatives using public money to shore up private irrigators, primarily on the grounds that this is somehow synonymous with 'nation building'.  Historically, that public support has taken different forms, including generous allocation of water that has now been shown to be greater than sustainable limits.  However, the most recent profligate version of public support, 'Foodbowl Modernisation', carries even greater long-term risks in the context of climate change.

Furthermore, the claims of water savings for the expensive foodbowl scheme do not stand up to close scrutiny.

This brings us to the second fundamental problem with the 'climate refugee' argument. The modelling outputs from CSIRO suggest that one of the main impacts of climate change in Northern Victoria will be reduced average streamflow and increased variability - there is to be less water, longer droughts and more episodic rainfall.  In this environment, an agricultural activity that can be 'switched on an off' will carry greater economic advantage than one that is premised on reliable streamflows and high technology irrigation infrastructure.

Unfortunately (for the taxpayer) the policy approach of the Australian and Victorian governments is biased in favour of engineering fixes that will subvert this requirement. Politicians in Victoria regularly refer to perennial farming as 'high value' agriculture and all manner of engineering devices are subsidised by the taxpayer to support producers who chose to install them.  To an economist this is akin to a politician deciding that the best TV shows will always be those viewed on black and white TV.  Thus, the government should subsidise technological innovations that make it easier for manufacturers of black and white TVs to stay in business. Most taxpayers would see the folly in this and undoubtedly prefer that taxes be spent assisting the transition of displaced workers from an industry in decline - not clinging to false hopes and indefensible investments that make it more difficult for communities to adjust to inevitable change.    

The third flaw in the 'refugee argument' is the supposition that somehow limiting the trade of water to others will benefit irrigation communities.  Let's be clear what this means in a practical sense.  If you are a farmer at the front of a queue of willing sellers of water you have your water purchased under a competitive bid, since anybody can buy this water (including governments trying to meet their obligations under the Living Murray Initiative).  
However, if you are at the back of the queue and have to sell your water then you can only sell to those in your own irrigation district.  Not only do these arrangements run the risk of violating the Constitution (as the SA government has argued) they also randomly reward some and severely punish others.  To contend that this is for the benefit of all in the irrigation community misses the point entirely.  Some are winning, particularly successful irrigators able to buy up water cheaply from their struggling neighbours.  Others are clearly losing, namely those who sell into a less competitive market.  Moreover, the community at large also loses out as it is less able to adapt to less water-intensive industries.   

Water markets were introduced in the 1990s to encourage water to move to preferred uses.  There have been problems with these markets, not least the difficulty of defining rights in a way that is consistent with the notion of capping extractions.  Many of these problems were on the way to being resolved and staff from the Department of Sustainability and Environment made valuable contributions on this front.  It is a pity that capable officials have now been drawn into a political argument premised on flawed logic.