55th

Annual AARES National Conference

Melbourne, Victoria

February 2011

Authors: Peggy Schrobback, Thilak Mallawaarachchi, John Quiggin

Title: The complexities in environmental decision-making for the Murray-Darling Basin

Key words: Environmental decision-making, uncertainty, risk, trade-off, collective choices,

resilience, Murray-Darling Basin

Topics: Environmental Economics & Policy, Political Economy, Public Economics, Resource /

Energy Economics & Policy Risk

Abstract:

People are part of a complex natural system and have the ability to actively interfere with their

environment. Collective decisions made by governments represent social rules that limit the extent of

people‟s interference with the environment that support them. Environmental decisions made by

governments usually carry an ethical bias and are limited by the perception of the risks and

uncertainties that may affect society‟s well-being in the medium to long run.

The recently published Guide to the proposed Basin Plan represents a draft for a legislative instrument

that aims to reclaim some of the water back onto the environment to safeguard declining natural

ecosystems in the Murray-Darling Basin. By limiting diversions into agricultural uses, irrigators in

particular are encouraged to adapt water use to produce more with less; it may also affect some

ecosystems that have become part of the modified landscape in the Basin. While humans may

discriminate between endemic and modified components of the landscape, the rest of the biome is

already adapting, with varying levels of success, to what they experience in their own setting.

The policymakers' task is compounded as the changes in the social systems may be enforced through

other institutional adjustments brought about by climate change, globalisation and as a response to the

GFC. It seems plausible that uncertainty will rule the day and adaptation to allow efficient decision-

making under information asymmetry may provide opportunities to compete better.

This study assesses the complexities in collective decision-making for improving the environmental

assets in the Basin and what could help minimise the impacts on the agricultural systems and improve

the resilience of rural communities in the long run.

1

The complexities in environmental decision-making in the

Murray-Darling Basin

Peggy Schrobback*, Thilak Mallawaarachchi

* and John Quiggin

*

1. Introduction

The recently published Guide to the proposed Basin Plan represents a draft for a legislative instrument

that aims to reclaim some of the water back onto the environment to safeguard declining natural

ecosystems in the Murray-Darling Basin from further degradation. By limiting diversions into

agricultural uses, irrigators, in particular, will be expected to adapt to produce more with less water.

Because changes in water flow patterns have induced ecological changes affecting many species over

several decades, these adaptations may also affect some ecosystems that have become part of the

modified landscape in these regions.

Changes to water access are being proposed because improving knowledge systems indicate risks to

social stability in the status quo. While humans may discriminate between endemic and modified

components of the landscape, the rest of the biome in a given locality is continually adapting - with

varying levels of success, to what they experience in their own setting. The issue, however, is that

because of the ability of humans to rapidly modify landscapes and induce irreversible change,

unmitigated human action has the potential to destabilise the environment to a point that it is artificial

and self destructive. As the variety, complexity, and the abundance of anthropogenic features

increases in specific scales, it becomes imperative to develop means to bridge the gap between

naturally-derived and artificially-induced features of the environment. The Basin Plan can be seen as

an attempt to avoid such fragility in the Basin environment.

The challenge in designing and implementing the Basin Plan is to avoid creating prolonged instability

in one component of the broader ecosystem in attempting to safeguard another. The concept of

resilience, which encompasses the notion of preserving attributes of a system that delivers its essential

functions in the presence of periodic disturbances, may provide a useful framework in seeking the

optimality in resource use in the Basin over the long term.

The Guide to the Basin Plan, which calls for 3,000-4,000 gigalitres of water to be diverted from

irrigation to the environment, was met with outrage from irrigators when it was released in October

2010. The government responded with a call for a wider impact assessment and a need to optimise

economic, environmental and social objectives, rather than giving environment the priority in

determining diversion limits as foreshadowed in the Guide.

The immediate crise has subsided with unprecedented rainfall across the Basin contributing to

recharging storages, groundwater reserves and water deprived aquatic ecosystems. However,

decisions on the appropriate volumes and patterns of withdrawals to be agreed for the Plan now rest

with the ability to reconcile differing priorities in values for production, environmental and broader

social aspirations during the review period.

To this point, scientific analysis, in the main led by natural sciences, has played a major role in the

direction of the Basin Plan. This follows a historical precedent. Historically, the scientific method

played a crucial role in enabling the industrial society, facilitation of trade and in promoting market

liberalism nurtured by rational self interest. Equally, in the post modern era, science-led public

knowledge has led to a plethora of social controls in countering the risks to society in the pursuit of

* Risk and Sustainable Management Group, School of Economics, The University of Queensland, Brisbane

QLD 4072; Email: p.schrobback@uq.edu.au

2

individual self interest. In the modern 'risk society', where risks are perceived (narrowly) as

probabilities of physical harm due to technological or other processes, technical experts are often

entrusted in defining boundaries of freedom for individuals to exercise rational self interest (Beck

1992).

Scientific knowledge, underpinned by observations and abstract modelling, played a significant role

in the lead up to the decision to develop a Basin Plan as well as in the preparation of the Guide. While

the scientific advice has been taken at its face value, and the level of scrutiny of the underpinning

science remains relatively modest, during the review phase leading up to the Plan proper and its

subsequent scrutiny by the Australian Parliament, the focus will likely to extend to social and

institutional aspects. In these deliberations, scientific uncertainty, spatial and temporal distribution of

risks and potential pathways to mitigate risks will be key attributes of disagreement that would

characterise the complexity of the social dialogue on the Basin Plan.

The aim for this paper is to assess the complexities of collective decision-making for improving

environmental assets in the Basin and find out what could help minimise the impacts on agricultural

systems and improve the resilience of rural communities in the long run.

The paper is structured into five sections. In Section 2 we describe complexities of environmental

decision-making by reviewing the relationship between the environment, society and economy.

Section 3 provides an overview on the history of water policy preceding the Basin Plan. A brief

overview of the environmental status of the Basin and its implications for the Australian society is

provided in this section. Section 4 discusses key components for collective decision-making processes

and their implications for effective water policy in the Basin. Section 6 concludes the paper.

2. Complexities in environmental decision-making

The complexity of decision-making for water policy in the Basin is closely associated with the (trade-

off) relationship between environmental needs and income from extractive use (Tisdell 2001). The

social origins of the environmental problems, such as those affecting rural Australia, are amenable to

social solutions (Stern and Dietz 1994, Lawrence et al. 1992). For example, Beck (1992) wrote:

“Environmental problems are not problems of our surroundings, but – in their origin and

through their consequences – are thoroughly social problems, problems of the people, their

history, and their living conditions, their relation to the world and reality, their social,

cultural and political situations.”

Finding solutions for the environmental issues in the Basin requires the society to make decisions

about concurrent alternative pathways with differing consequences for the environment and the well-

being of the society. Collective decision-making requires the consideration of such things as

motivations for public choice, identification of decision makers and initiators, information about

shared rules, cohesion, values and preferences among the members of a society, and temporal aspect

of choices (Petit and Bon 2010).

The existence of scarce water resources in the Basin predicates choices about the water‟s most

„beneficial‟ allocation for society. The water markets, being developed to help allocate the resource to

its most efficient consumptive use, are unlikely to assign water entitlements to environmental assets

that define the health of the ecological systems that support production.

Met with the pressing need to increase environmental flows in the Basin to ensure health of the

aquatic ecosystems, policy makers seek to choose allocation strategies which ideally fulfil

environmental and socio-economic objectives. The difficult task, though, is to consider the manyfold

elements of the ecosystem and relationships among stakeholders, institutions and natural systems.

This difficulty mirrors the complexity of environmental decision-making which we will here discuss

in brief.

3

In understanding the complexity of decision-making about optimal water use in the Basin, it is

customary to consider the interactions between society, economy and the natural environment. In this

section, the discussion is aided by a brief review of literature, undertaken to establish the key

relationships between the society (economy) and the natural environment and highlight some sources

of conflict arising from often mistreatment of these interactions.

2.1 The concept: Natural environment-society-economy

The human society is a collection of individuals which is contained within, and hence constrained by

the natural environment. The economic activities of society are derived from individual preferences

and as such constituted within the environmental and social domains.

Figure 1: Concept of natural environment, society and economy

Anthropocentrism and the rise in environmental awareness

The inextricable relationship between society and its natural environment dates back to the beginning

of mankind as the natural environment provided the ecological basis of society. However, the

dynamic nature of its influence, and its anthropocentric character has changed significantly with the

development of the human race as a dominant source of ecological modification. As a result, the

interaction between the society and the environment is a complex web of positive and negative

feedback loops (Cordero et al. 2005).

At the time of hunters and gatherers, mankind was closely intergraded with wildlife. The settlement of

humans started with the cultivation of plants and domestication of animals as the abundance of

wildlife diminished (Mebratu 1998). Effort in raising crops and animals became advantageous to

chasing in the wild as the environmental feed-backs were not limiting. However, growing consensus

among environmental archaeologists reveals that numerous ancient societies, including the

Babylonian Empire, may have collapsed because of the cumulative impacts of environmental

degradation (Mebratu 1998).

The intricacy of the natural environment and the curiosity of human mind to explain human being in

nature have been major driving forces behind science and technology development. The Renaissance

used the law of nature to describe reasoning. For example, formulation of the heliocentric cosmology

by Nicholas Copernicus in 1543 and Isaac Newton's description of universal gravitation in 1687

formed the groundwork for classical mechanics.

Environment

Society

Economy

4

The Industrial Revolution, starting in Britain in the mid-eighteenth century, led the exploitation of

natural resources and initiated environmental degradation through mining, mass manufacturing,

transportation, and intensive agriculture (Harding et al. 2009). It also marked the beginning of

economic expansion in the western world, following the capitalist economic model of production for

private profit, along with the demise of feudalism.

Population growth, urbanization, technological and scientific advances in the 18th and the 19th

century, led to increasing pressure on the environment, while also paving way for monitoring

technologies thus allowing the generation of knowledge to mitigate risks. The impact of unregulated

anthropogenic activities became evident in the 1940s and 1950s with increasing water, air and waste

pollution (Harding et al. 2009), such as the Great Smog of 1952 in the UK. Consequently, legislations

to reduce mainly air pollution were introduced in major industrial countries, e.g. Air Pollution

Controls (1955) in the US, Clean Air Act (1956) in the UK.

In the 1960s, people began to consciously realise the extent of impact of their socio-economic

behaviour on the wider environment. Then, the awareness of risks of man-made environmental

degradation to society increased (Carson 1962, Hardin 1968) and the need to „tame the treadmill‟

(Schneiberg 1980) became apparent. Economists conceptualised environmental problems and the

attended resource misallocations as (capitalist) market failure in the provision of collective goods

(Mol 2010).

The 1970s signalled a period of social uprise against polluters and the need for policies to combat

ensuing risks (Mol 2010). Limits to growth were perceived (e.g. oil crises in 1973/1974) and were

linked to population growth and resource use pressures on the environment (Meadows et al. 1972,

Ehrlich 1968, Ehrlich and Ehrlich 2009).

In the 1980s and early 1990s, dealing with environmental issues became increasingly important to

governments, and in response, agencies to deal with social impacts of private economic activities

were established. Equally, environmental laws, environmental impact assessment systems and green

political parties emerged during this period (Mol 2010). However, pollution and natural resource

exploitation continued to significantly impact on the environment and human health.

By 1985 human impact on the environment reached a global scale with the detection of the ozone

hole. The ozone depletion was understood to be caused by extensive emissions of man-made

chloroflourobcarbons. The thinning of the upper atmospheric ozone layer, the 'ozone hole' allowed

larger quantities of harmful ultraviolet rays to reach the earth. Scientific evidence of an acute risk to

human civilization led to a prompt international treaty, known as the Montreal Protocol, which phased

out the production chloroflourobcarbons, numerous substances believed to be responsible for the

expanding ozone hole. Because the scientific knowledge was uncontested and the danger was

imminent, the economic cost of phasing out ozone depleting substances was considered to outweigh

the benefits.

The environment became a mainstream concern by the mid-1990s with growing public awareness

(Papadakis 1996) and increased expenditure on environmental management (Harding et al. 2009). The

ongoing scientific advances, fuelled by wealth generated through industry enabled close monitoring of

economic processes of production and consumption to help raise public awareness of potential risks.

Moreover, increasing threats of litigation coupled with corporate social responsibility led to profound

institutional change in the economic domain of production and consumption in the 1990s leading to

measures such as eco-labelling, environmental taxes and recycling of waste (Mol 2010).

Globalization, coupled with fast knowledge assimilation aided by the digital revolution leading to

rapidly expanding connectivity and information flow, thus acted as a strong accelerator of the global

environmental monitoring system. These advances have since assisted in recent years to share

information and forming people‟s preferences and influencing attitudes towards the natural

environment, pollution mitigation and adaptation. The Inconvenient Truth about issues of potential

5

anthropogenic climate change and an increase in the frequency of harmful natural events, such as

droughts and floods, are affecting the human life on earth. This is leading to an ongoing focus on

environmental management in the modern society at all levels of the economy.

Globally, the connected economies, international knowledge flows and a greater appreciation of the

global natural wealth, in comparison to that of material wealth generated through industry, have also

led to greater scrutiny of activities by individual nations with a view to protect global commons.

Although risks of human behaviour in regard to the environment are now recognised, modern

societies appear to remain unable to actively eliminate or effectively deal with these enduring risks.

The interplay between environmental protection and economic growth

The exchange of goods and services were initially developed to relieve the local scarcity of

environmental resources that affected the unconnected early societies. Subsequently, the economy

(representing the sum of all exchanges of good and services) developed as a subset of the society in

response to environmental constraints. The development of the economy can thus be interpreted as a a

social mechanism that allowed the continued existence of a growing society within the prevailing

environmental constraints.

Environmental regulation

The environmental resource, based upon which all economic activity depends, includes ecological

systems that produce a wide variety of goods and services to sustain human life (Arrow et al. 1995).

Modern society has realised that this environmental resource base is finite and that there are limits to

the carrying capacity of the ecosystem (Arrow et al. 1995).

The relationship between economic growth and environmental quality has been a source of much

controversy (Shafik 1994, Arrow et al. 1995). At one extreme is the view that economic activity

inevitably leads to environmental degradation and ultimately to possible economic and ecological

collapse. At the other extreme is the view that those environmental problems worth solving will be

addressed more or less automatically as a consequence of economic growth (Shafik 1994).

Attempts to disprove the trade-off relationship between economic growth and environmental

protection included the theory of the Environmental Kuznets Curve (Grossman and Krueger 1991,

Shafik and Bandyopadhyay 1992, Shafik 1994). This theory argues that at higher levels of

development, structural change towards information-intensive industries and services, coupled with

increased environmental awareness, enforcement of environmental regulations, better technology and

higher environmental expenditure, would lead to levelling off and gradual decline of environmental

degradation (Panayotou 1993, Stern 2003). However, others such as Arrow et al. (1995) argues that

while the relation between per capita income and environmental quality may follow an „inverted-U‟

shape relationship, it only applies to a selected set of pollutants.

Critiques of the Environmental Kuznets Curve argue that there is little evidence that the relationship

holds true for all pollutants, for natural resource use or for biodiversity conservation (Stern 2003).

Arrow et al. (1995) argue that the u-shaped relationship may only hold true for a selected set of

pollutants only. Moreover they assert that:

"... because it is consistent with the notion that people spend proportionately more on

environmental quality as their income rises, economists have conjectured that the curve applies

to environmental quality generally. But it is important to be clear about the conclusions that

can be drawn from these empirical findings. While they do indicate that economic growth may

be associated with improvements in some environmental indicators, they imply neither that

economic growth is sufficient to induce environmental improvement in general, nor that the

environmental effects of growth may be ignored, nor, indeed, that the Earth's resource base is

capable of supporting indefinite economic growth. In fact, if this base were to be irreversibly

degraded, economic activity itself could be at risk." (Arrow et al. 1995, pp.520)

6

Arrow et al. (1995) argues further that the solution to environmental degradation lies in such

institutional reforms that compel private users of environmental resources to take account of the social

costs of their action. To achieve this, signals that effectively reflect increasing scarcity of the resource

base are required to be generated within the economic system (Arrow et al. 1995), to be able to reflect

the true cost of production of goods and services.

Consistent with the above notion, contemporary environmental policies aim to provide with clear and

enforceable rules as signals to private users of environmental resources such as land, water, air, the

atmosphere, and specific habitats under a common property regime. Moreover, private economic

activities are increasingly regulated by different instruments like Pigouvian taxes, markets for

pollution rights, binding quota restrictions and property rights that reflect the scarcity of resources.

However, these instruments do not receive universal social approval and are often claimed to be

hampering economic growth and undermining international competitiveness, destroying jobs, or

forcing business to relocate in emerging markets with lower environmental standards. The basis of

such claims and counterclaims are the subject of growing scrutiny.

In the meantime, increasing public awareness, changing social values and the continuing debate about

economic growth and environmental quality have led to changing business practices (van Marrewijk

2003, Carroll 1999).

The demand for more ethical and responsible economic behaviour within the corporate sector (Carroll

1979) and governments have resulted in the development of concepts such as the triple bottom line,

sustainable development, corporate citizenship, sustainable entrepreneurship, business ethics and

corporate social responsibility as means of social mediation in environmental governance. The

concepts of these activities assume that economic, social and environmental efforts should reflect the

performance of an institution to its shareholders (Schilizzi 2002). For example, the triple bottom line

concept (Elkington 1998, Freeman 1984) calls for the economy, society and the environment to

operate together in a balanced way, reconciling conflicts (O‟Riordan and Rayner 1991, Giddings

2002) in order to achieve stakeholder satisfaction (see Figure 2). Yet making the concept operational

into practice has been difficult.

Figure 2: The triple bottom line concept (Source: Giddings 2002)

The corporate responsibility concept can be interpreted as a business strategy for self-regulation borne

out of the triple bottom line concept. By making social and environmental issues explicit in business

strategies, firms have signalled the willingness to show concern for the three dimensions of business

performance as opposed to a single-minded focus on profits (Schilizzi 2002). Consequently, decision-

making under the corporate responsibility framework attempts to answer the questions: What is the

socially acceptable degree of change within the society towards reduction of society‟s impact on the

Economy

EnvironmentSociety

7

natural environment? From an economic perspective that translates into the question: What are the

marginal costs associated with increasing resource constraints?

Corporate social responsibility has become common parlance in the last decade. Equally, business

investments in addressing social and environmental concerns are representing an increasing cost to

business. This has led to a push-and-pull process for strict profit maximisation versus those pushing

for better social and environmental performance (Lantos 2001).

The adoption of the triple bottom line concept within economic sector may have led to the increased

public recognition that natural resources do constrain economic growth. However, the economy

continues to transform its activities by seeking more efficient natural resource use and develop more

sustainable paths of resource extraction. This forms the basis of ongoing debate about the relationship

between economic growth and environmental protection.

Critiques of the triple bottom line, including Schilizzi 2002, Norman and MacDonald 2004, Coelho et

al. 2002, Friedman 1962, Lantos 2001, Carr 1969 and van Marrewijk 2003, argued that the corporate

social responsibility, as a business approach, is vague, ambiguous, and has a debatable legitimacy

both in practice and theory. Friedman notes that

“...there is one and only one social responsibility of business – to use its resources and engage

in activities designed to increase its profits so long as it stays within the rules of the game,

which is to say, engages in open and free competition, without deception or fraud” (Friedman

1962).

Carr (1969) phrased the concept as a business bluffing ethical. He argued that the sole purpose of

business is to turn a product at a profit and that those businesses who do not play by the „rules of the

game‟ will not be very successful (Carr 1969). Coelho et al. (2002) argued that the approach benefits

businesses by window dressing as it is an extremely effective marketing tool by selling an image a

social and green company (Coelho et al. 2002). Coelho et al. (2002) pointed out further that the

rationale behind the stakeholder and social corporate responsibility movements is the improvement of

capitalism my modifying it. Maslennikova and Foley (2000) showed that the concept can contribute to

the aim of business, which is the creation of long-term values to the owners of the business.

The debate in the literature about the relationship between economic growth and resource protection

remains unresolved. Although responsible business strategies are increasingly expected in the

corporate world, and policy instruments like environmental taxes play a role, the exploitation of

natural resources and pollution of environment continues at a suboptimal level. The main reason is

that our society remains driven by the pursuit of well-being and happiness which we interpret as

closely linked to an increase in material wealth, economic growth and satisfaction of precarious wants

that places the economy in a dominant position in social negotiations. This was clearly evident in the

recent negotiations in Australia for a Carbon Pollution Reduction Scheme and the Murray-Darling

Basin Plan.

2.2 System complexity

A system is a set of elements connected in a way that provides the set an overall identity and

behaviour (Manson 2009). Complexity examines the relationship of elements within a system

(Manson 2009). The two factors that emerge as important determinants of complex systems are the

number of elements defining the system, and the degree and nature of the interactions between them

(Simon 1964, 1969). The importance of the number of elements is obvious: the larger the number of

parts whose state or condition must be considered when attempting to investigate or control the

behaviour of the system, the more involved this process will be (Mackinnon and Wearing 1980).

Mackinnon and Wearing (1980) added the degree to which uncertainties affect the behaviour of the

system as a further determinant of complexity.

8

Uncertainty refers to the lack of confidence about knowledge. Uncertainties arise primarily due to the

inability to reliably predict the states of nature. Understanding uncertainty and devising ways of

managing it is therefore an important pathway to dealing with complexity. Because the states of

nature define the environment and the environment is a primary driver of economic activities; the

interaction between the environment and the economy are essential building blocks of society.

The concept of risk extends the notion of uncertainty to decision-making where the potential for an

undesired outcome or a loss is known but the precise nature of the loss, whether it will occur, or how

probable it is unclear (Brown and Damery 2009). Essentially, risk always has a negative connotation,

since it refers to the chance of avoiding an unwanted outcome (Giddens 1999). The idea of perceived

risk is bound up with the aspiration to controlling the future (Giddens 1999) which is a motive for

societies to make decisions about actions in order to prevent risks from occuring.

While the number of elements in a system can be defined variously from different points of view, for

the purpose of public policy determinations, the major elements that define the complexity of

environmental decision-making in the Basin are: its natural environment, its social make-up and its

economy. Importantly, these elements are hierarchically independent and none can be considered

superior in isolation. For the purposes of public discourse, they are functionally interdependent as the

sub-elements that constitute them are inextricably linked. In fact, our inability to properly articulate

these linkages is the primary source of confusion that has driven the social conflict and polarisation of

views relating to the socially optimal allocation of water resources in the Basin.

Environment

The natural environment encompasses all living and non-living things occurring naturally on Earth.

The natural environment provides the basis for human life and as such foundation for the existence of

human society and economy. The complexity of environmental systems is determined by the human

perception and understanding of natural processes. Human understanding of natural processes is

generally incomplete but has developed with the increasingly available information about the benefits

of natural resources to human life and rising knowledge about potential risks of human behaviour

towards the environment (Brown and Damery 2009).

Natural events such as lightning, flooding, earthquakes and bushfires are striking regularly, but are

unpredictable and thus beyond human control. These natural events cause risks to society as they lead

to bodily harm and property loss.

These risks are to be differentiated from anthropogenic risks. Beck (1992) claimed the end of the

antitheses between nature and society which implies that nature can no longer be understood outside

of society, or society outside of nature. Beck (1992) argued that the effects of socialisation of nature

are the socialisation of the destruction and threats to nature, their transformation into economic, social

and political contradiction and conflicts. This very transformation of threats to nature from culture

into threats to the social, economic and political order is the central challenge of the present and the

future which justifies the concept of risk society (Beck 1992).

Similarly, Giddens (1999) called the increasingly influence of science and technology on the society

as the end of nature and the end of tradition. Giddens (1999) argued the end of nature happened when

a transition came about from the sort of anxieties people used to have about nature to a new set of

worries. The scientific and technical advances, their impact on nature and society bear additional risks

to the society.

The dependence on knowledge in the process of decision-making and the remaining lack of

information about natural and anthropogenic processes (e.g. causality, connectivity, and dynamics)

bears uncertainties about the risks such as the resilience of the environment.

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Society

Society is a group of individuals (Giddens 1993) embedded within the natural environment and thus is

constrained by it. Society is a system of interrelationships which connects individuals together

(Giddens 1993). A society is defined by its culture which consists of values that members of a given

group hold; of norms they follow; and the material goods they create (Giddens 1993). Modern

societies are reflexive, that is a society that examines itself, and it in turn changes itself in the process

(Beck 1992). However, human‟s ability to observe itself is determined by the structure of the brain,

experience and personality (Brown and Damery 2009). Anxiety about chance drives human life. This

anxiety is fuelled by the uncertainty about the time, scale, location and consequences of change. The

perception of risk to society involves individual‟s beliefs, attitudes, judgements and feelings as well as

the wider social and cultural values. These attributes defines the disposition that people adopt towards

hazards and their benefits (Royal Society 1992). Individuals perceive risks differently and differ in

their willingness accept particular risks (Harding et al. 2009). Thus society represent a heterogeneous

entity with a differing capacity to adapt and display varying degree of resilience to external and

internal sources of change.

Beck (1992) argued that in advanced modernity the social production of wealth is systematically

accompanied by the social production of risk. He defines risk as a systematic way of dealing with

hazards and insecurities induced and introduced by modernisation itself (Beck 1992). Giddens (1999)

considers the risk society as a society increasingly preoccupied with the future (and also with safety)

which generates a notion of risk. The notion of introduced anthropogenic risks implies that choices

about actions have an influence on the outcome of decisions. Other than for natural risks,

manufactured or anthropogenic risks (Giddens 1999) can be prevented in their occurrence and greatly

influenced in their consequences by coordinated human action and decision.

The modern society has adopted the precautionary principle to deal with uncertainties related to

potential environmental degradation (risks) associated with modernisation. In essence, the principle

states that rather than await for certainty, regulators should act in anticipation of environmental harm

to ensure the harm or risk does not eventuate (Bodansky 1991). Stern and Dietz (1994) argued that the

impacts of human action on the natural environment require attention and cannot be ignored because

they have an effect on things of value. Although the precautionary principle provides an approach to

deal with environmental issues, it is too vague to serve as a regulatory standard because it does not

specify what type of precautionary actions and the degree of caution that need to be taken, and when

to apply it (Bodansky 1991). Bodansky (1991) argued that the precautionary principle seems to

suggest that choice is between risk and caution, but in reality some choices tend to be between one

risk and another. The management of risks therefore requires the society to choose between

alternative actions and their anticipated outcomes.

In a democratic society, judgements about alternative allocations of resources and their implications

for the environment, society and economy requires the making of collective choices or social

determinations.

In theory, collective choices are based on the aggregation of individual preferences as an indicator for

well-being (Samuelson 1938, 1948) as a set of collective preferences (Sen 1973). The central problem

in this approach is related to the retrieval of information about individual preferences and

interpersonal comparison of preferences. A range of authors argue that individual preference

satisfaction does not mirror well-being because people demonstrate altruistic (Quiggin 1997) and

malevolent (Hausman and McPherson 2009) behaviours, make mistakes in their beliefs (Hausman and

McPherson 1994, 2009), or be induced by social codes of behaviour to act as if they have different

preferences from what they really have (Sen 1973, Sagoff 2003). Thus people may demonstrate

incomplete consideration of consequences before making a choice (Sen 1973) and preferences could

sometimes result from coercion or manipulation (Hausman and McPherson 2009).

10

This suggests that mapping individual preferences involves dealing with the unpredictability of

human behaviour and the environmental drivers underpinning such behaviours. Furthermore, the

aggregation of individual preferences into collective preferences involves difficult judgments.

Arrow‟s Impossibility Theorem (1950, 1951) suggests that no perceivable preference ranking measure

could satisfy a certain set of desirable criteria (unrestricted domain, non-dictatorship, Pareto-

efficiency and independence of irrelevant alternatives) simultaneously. This can be interpreted as

individuals have no reason to expect that even the best rules for making decisions will lead to the kind

of reliability attributed to individual choice.

Another issue that affect collective choices are the political will for making and enforcing informed

decisions. The motivation for making decisions can be driven be self-interest, personal attitudes to

risk, or pressure from peer groups or rent-seeking behaviour of other interests. This may lead to

political leaders making concessions for support groups (pork-barrelling) and result in inefficient

allocation of resources and losses in social welfare. Giddens (1999) argued if anyone - government

official, scientific expert or lay person - takes any given risk seriously, he or she must proclaim it.

Giddens (1999) claims that risks must be widely publicised because people must be persuaded that the

risk is real - a fuss must be made about it. Assessment of risks to society thus presents a major

political dilemma in the modern society. Judgement concerning risk implies a valuation of the level of

risk to society and an appraisal of the acceptability or otherwise of a given risk. Decision-making thus

bears a notion of responsibility to act ethically and be accountable in the interested of society

(Giddens 1999), rather than to be driven by personal motivations.

Economy

Modern societies not only aim for an efficient allocation of resources; they also aim for achieving

social justice concerning the effects of resource allocation on the distribution of benefits among

members of society. The social justice concept has been developed as a way of protecting members of

society against risks, where collective rather than private insurance is warranted (Giddens 1999). An

efficient and socially fair allocation of resources (Pareto-efficiency) is assumed to be achieved in a

situation where it is impossible to improve the well-being of one individual without harming at least

one other (Sen 1974). The Kaldor-Hicks criterion laid the foundation for a welfare principle, the

Pareto-improvement test. This principle advocates that a in considering a change in individual‟s

welfare resulting from collective decisions, gainers would need to compensate losers and would need

to be still better off compared to the status quo (Kaldor 1939). In practice though the task of

identifying potential winners and losers in alternative states in comparison to the status quo under

imperfect information presents numerous difficulties. Short of complete equality, decision-makers are

often forced to determine how much inequality within a society is desirable (Kaldor 1939).

Dealing with Risk and Uncertainties

Uncertainty, which may be of both scientific and socio-economic origin, is an inherent feature of

environmental management (Harding et al. 2009). The society interacts in a system that we don‟t fully

understand and the number of interacting elements and the relationships among them are

unobservable. The improving knowledge due to technical and scientific advances does not necessarily

lead to greater certainty but reveals new complexities that were previously unrecognised (Harding et

al. 2009).

However, modern society is able to work within the constraint of not knowing what state will occur.

Although it is impossible to predict the probabilities for alternative states of nature, and their spatial

and temporal distributions, society is able to map possible future state spaces as intervals or ranges

based on past experience (Chambers and Quiggin 2000). The identification of risks within these state

spaces allows society to make provisional decisions, and thereby anticipate a distribution of state-

contingent risk-return tradeoffs. This approach thus enables risk to be treated in a positive light, in

terms of taking remedial or precautionary initiatives in the face of a problematic future (Giddens

11

1999). Thus risks and uncertainties depend on the level of society‟s awareness or recognition of a

problem, its perceived importance and ability to resolve it (Brown and Damery 2009).

In this section we have outlined the the concept of natural environment, society and economy as a

complex interacting system, where existence of uncertainty, risk, resource constrains, trade-offs and

the need for choices is paramount. This acknowledgement of the compound relationships among these

interacting elements is essential for effective environmental decision-making. Rather than trying to

represent any or each of these subsystems as superior in conferring social well-being, the task of

decision-making is to understand how different interests conceal each other and employ that

understanding to seek a balance between different risks presented to society in their varying

interactions. In analytical parlance, this may be presented as optimising economic-environmental

trade-offs in social determinations.

3. Water policy in the Murray-Darling Basin

3.1 History of water policy

Water is a natural, renewable resource accessible as a common property in general. Society employs

water policy as an instrument to achieve a specific behaviour of its members towards the use of water.

Thus, water policy reflects the scarcity of water as a resource and its value to a society.

The history of water policy in Australia dates back almost as far as European settlement on the

continent. The need to control the use of scarce water resources for the consumptive use in the Basin

became first evident to the stakeholders along the River Murray in the late nineteenth century (McKay

2008). Musgrave (2008) describes the history of Australian water policy in the Basin in three phases:

Development of irrigated agriculture (time of European settlement to beginning of 20th century). The

main achievements during this period included: the reduction of riparian rights of individuals in the

interest of the state, water resources were increasingly controlled by state governments, expansion of

state-controlled irrigation development and focus on enhancement of agricultural output. The Murray

River was perceived as a liquid lifeline for agriculture in the semi-arid and arid inland. With limited

knowledge of the variable natural flow of inland rivers and weather patterns, early settler framers

suffered valuable crop and stock losses. The aim of water policy was to create a drought proof

agricultural sector.

Conscious exploitation and expansion of irrigated agriculture (beginning of 20th century up to mid-

1980s). This period was characterised by the spread of irrigation in the Basin with virtually

unquestioning support of the whole community. Public irrigation schemes dominated the development

with major engineering and administrative achievement. In the 1960s the enthusiasm of irrigation

development waned due to shifting political priorities and the abandonment of closer settlement, fiscal

stringency and mounting questioning of the economic desirability of such endeavours.

Water reforms to limit extractions and degradation of landscapes (mid-1980s to present). The

externalities of the abundance of the ecology along the Murray and Darling Rivers were not

considered in the first two phases of Australian water policy development. The alarming degradation

of land and water resources due extensive regulation of the rivers and water extraction from the

systems became apparent in the 1980s (Musgrave 2008). The central issues to water management in

the entire Basin remained the institutional arrangements in place and the weak management approach

in achieving cost-recovery for infrastructure investments. In particular, the separation of jurisdictions

for water management and competition among states about scarce water resources were hindering any

effective water reform.

In the 1990s policies and engineering effort to maintain river flow and water quality became the focus

of water resource management in the Basin. These included the establishment of the Council of

12

Australian Governments (CoAG) in 1994, the introduction of a water market in 1994, the introduction

of the Cap on water diversions in 1997, and a reformation of urban water markets in the 1990s.

In 2004 CoAG launched the National Water Initiative which was named “Australia‟s enduring

blueprint of water reform” (Australian Government 2010.b). The National Water Initiative is a

cooperative program of Australian Governments to increase the efficiency of Australia's water use,

leading to greater certainty for investment and productivity, for rural and urban communities, and for

the environment (Australian Government 2010.b).

These reforms and initiatives focused on seeking solutions for the dire state of the Basin. However,

the policy attempts to improve the doom circumstances were mainly focused on ensuing quantity and

quality for consumptive water of its various users rather than emphasizing on the conservation of

environmental assets located along the river system.

The Living Murray Initiative was established in 2004 by the Murray-Darling Basin Ministerial

Council, which included state and federal Government, to improve the health of six selected icon sites

that are located along the River Murray. The aim of this first environmental focused policy was to

recover an annual average of up to 500 gigalitres of water for the environment (Australian

Government 2010.a).

The prolonged drought that affected the Basin between 2001 and 2007 put additional stress on the

Basin, especially on the ecosystems in the lower riverine regions. Public concern about the

environmental stress which also affected agricultural production and the water management increased

significantly.

The concern about health coupled with the severe sign of stress of environmental assets such as the

Coorong at the mouth of the Basin, wetlands and floodplains along the rivers systems caused policy

makers to act. In 2008, the Australian Government established the Water for the Future campaign, an

initiative to secure Australian‟s water supply (Australian Government 2010.c). The already existing

National Water Initiative and the Water Act 2007 (Australian Government 2007) were claimed as

fundamental elements of the campaign.

The Water Act 2007 (Australian Government 2007) implemented key reforms to water management

in Australia (Australian Government 2010.a):

The Act establishes the Murray-Darling Basin Authority (MDBA) with the functions and

powers, including enforcement powers, needed to ensure that Basin water resources are

managed in an integrated and sustainable way.

The Act requires the MDBA to prepare the Basin Plan - a strategic plan for the integrated and

sustainable management of water resources in the Murray-Darling Basin.

The Act establishes a Commonwealth Environmental Water Holder to manage the

Commonwealth's environmental water to protect and restore the environmental assets of the

Murray-Darling Basin, and outside the Basin where the Commonwealth owns water.

The Act provides the Australian Competition and Consumer Commission (ACCC) with a key

role in developing and enforcing water charge and water market rules along the lines agreed

in the National Water Initiative.

The Act gives the Bureau of Meteorology water information functions that are in addition to

its existing functions under the Meteorology Act 1955.

Furthermore, the Act demands that resources should be used in a way that optimises economic, social

and environmental outcomes (Australian Government 2007). The Water Act 2007 outlines the

following environmental objectives (Australian Government 2007):

Ensure the return to environmental sustainable levels of extraction for water resources that are

overlocated or overused, and

13

Protect, restore and provide for the ecological values and ecosystem services of the Murray-

Darling Basin (taking into account, in particular, the impact that the taking of water has on the

watercourses, lakes, wetlands, ground water and water-dependent ecosystems that are part of

the Basin.

As part of the Water for the Future campaign, the Australian Government committed in April 2008

$12.9 billion over 10 years to purchase water in the Basin (Australian Government 2010.a). It

includes $3.1 billion to purchase water entitlements and $5.8 billion to improve water efficiency in the

Basin. The goal of the water entitlement buyback program is to acquire water entitlements from

willing seller at the water market and to use the water allocated to them for the environment

(Australian Government 2010.a). The water resorted is expected to improve the healthy the Basin‟s

river, wetland and floodplains. The success of this program is currently limited due to the seller‟s

willing to give up water entitlements rights. A number of mechanisms were recommended by the

Wentworth Group (2008) that the Australian Government could pursue in order to accelerate the

buyback of water. These include (Wentworth Group 2008):

buy water offered for sale by entitlement holders, such as with the recent Commonwealth

purchases;

an off-market buy-back, as often takes place in private sector companies;

negotiating bulk purchases with water supply companies; or

negotiating a conditional access arrangement, such as the River Reach proposal.

The proposed Basin Plan, being developed under the Water Act 2007 (Part 2, Division 1) (Australian

Government 2007), seeks to balance between agricultural, industrial, human and environmental water

needs (Murray-Darling Basin Authority 2010.a). In particular, the Basin Plan aims to restore water

flows to key environmental assets in the Basin (Murray-Darling Basin Authority 2010.a). To achieve

that, the Basin Plan is developing a long-term average sustainable diversion limit, a quantity of

surface and ground water that may be taken from the Basin water resources without impacting on the

environmental integrity of the Basin. Furthermore, Basin-wide environmental objectives for water-

dependent ecosystems of the Basin, water quality and salinity objectives are to be determined; and

strategies for the establishment of effective water trading regimes across the Basin are to be agreed in

the Plan (Murray-Darling Basin Authority 2010.a, Australian Government 2007).

The average volume of water considered as being used for consumptive uses is 10,940 gigaliters per

annum (Murray-Darling Basin Authority 2010). The proposed Basin Plan suggests overall cuts of

between 23 to 37 per cent from this long-term average use to allow a sufficient water allocation for

water-dependent environmental sites in the Basin (Murray-Darling Basin Authority 2010.a). The

Murray-Darling Basin Authority (2010.a) expects that reductions in water extractions would return an

extra on 3,000 to 4,000 gigaliters of water to the environments through its implementation from mid-

2012 to 2019. The proposed document outlines that this will be achieved through buy-backs of water

entitlements on the water market by the environmental water holder.

Water Policy: Environmental restoration vs. social risks

The public release of the (Guide to the) Basin Plan and its proposed limits or „cuts‟ in water

diversions caused emotional public protests; especially in rural communities where livelihoods

depend on water extractions from the Basin. Mass confusion and frustration among residents along

the Basins were reported in the days after the (Guide to the) Basin Plan was circulated (ABC News

2010).

The insufficient endorsement of the proposed water reform by the Australian Government and the

media has resulted in a situation where the entire reform was at stake. The central issue was the

articulation of the plan in terms of „cuts‟ to water entitlements and allocations. The lack of clear

statements about the proposed reform had undermined the public trust. Following that communication

lapse the Government was left to reengage with rural stakeholder arguing that is had already

14

committed itself to ensure that water would be acquired only through voluntary participation in

purchases or water-saving investments.

The emotional response to the proposed reform demonstrates the fear of losses in irrigated agricultural

production due to a policy that allocates more water to the environment and away from agricultural

uses increased. Corresponding with that angst about unemployment, social decline, and loss in life

style was amplified within rural communities.

However, rural communities are largely aware of the degradation process of water and land resources

and understand that a reform is required. A recent survey showed that about 75% of people in the

Basin agree that water allocations should change so enough water is available for the natural

environment (Basin Pulse 2010).

Yet, dealing with large scale and rapid change as proposed in the Basin Plan threatens the security of

communities and leads to rejection if not dealt with appropriately by decision makers. Community

stakeholders demand participation in shaping the changes that will affect them (Basin Pulse 2010).

The Australian society demands the long-term resilience of rural community as they represent the

backbone of food production in Australia. The challenge is for policy makers is to deliver such

integrative decision-making processes which eventually lead to adaptive, step-wise and participatory

management of water resources for the environment and human consumption.

The public debate about the risks of environmental policy to society leads the back to the interplay

between environment, society and economy which were reviewed in Section 2.1.

3.2 Environmental impacts of water resource use

The need for improved environmental decision-making for the Basin was triggered by the heightened

awareness of the degradation of its environment which led to widespread social concerns (Quiggin

2001). Threats to the health of the Murray and Darling River systems and associated environmental

assets have been reviewed by a number of authors (Overton et al. 2009, Kingsford 2000, Bunn and

Arthington 2002, O‟Connor et al. 2006). The causes of the imperilment of river ecosystems and their

biota are diverse and range from habitat alternations, invasive species, pollution, overexploitation to

climate variability. The purpose of this section is to provide a brief overview on the impacts of water

recourse use on Basin‟s environmental assets, as a basis for policy intervention and improved

environmental decision-making.

A healthy Murray-Darling River system can provide the Australian society with a range of benefits as

a source of: potable water for urban and rural communities, irrigation, transportation and hydropower,

recreation and spiritual fulfilment. Healthy rivers also provide the foundation for important

ecosystems functions. Aquatic ecosystem functions include the recycling of nutrients, purifying water,

attenuate floods, recharge ground water and provide habitat for biodiversity (Allan and Castillo 2007).

As such, ecosystem functions indirectly affect society‟s well-being. Furthermore, healthy river

systems can be associated with minimal „costs‟ but offer numerous ecosystem services and contribute

to ecological resilience. Arrow et al. (1995) argues that the loss of ecosystem resilience is potentially

important for at least three reasons:

The discontinuous change in ecosystem functions as the systems flips from one equilibrium to

another could be associated with a sudden loss of biological productivity, and a reduced

capacity to support human life;

It may imply an irreversible change in the set of options open both to present and future

generations, e.g. soil erosion, depletion of ground water or loss in biodiversity; and

Discontinuous and irreversible change from familiar to unfamiliar states increase the

uncertainties associated with the environmental effects of economic activities.

The Murray-Darling Basin Authority lists a number of environmental assets that signify the important

ecosystem functions in the Basin (Murray-Darling Basin Authority 2010.a). They include:

15

Around 440,000 km of rivers, of which 60,000 are major;

78 groundwater systems;

Some 30,000 wetlands – mostly on private land – some of them listed internationally for their

importance to migratory birds from the Basin, other parts of Australia and overseas;

57 fresh water fish species of which 12 are non-native (Lintermans 2007) and 7 marine or

estuarine fish species;

Around 124 families of macroinvertebrates such as shrimps, snails and insects;

98 species of water birds; and

Floodplains with support 150-300 plant species.

Since European settlement, in south-east Australia the Basin‟s natural environment has experienced

significant change. Major transformations compared to its pristine environmental state include:

Regulation and modification of flow regimes due to the construction of dams (Dartmouth

Reservoir, Hume Reservoir, Lake Victoria, Menindee Lakes, Burrinjuck Reservoir,

Blowering Reservoir, Eildon Reservoir, and uncounted private on farm storages), wires,

channels, barrages;

Land-use practices that include irrigation and dryland agriculture, fertilizer application,

clearing of trees & native vegetation replaced by annual vegetation;

Exploitation of water resources from the system for urban, industrial and agricultural use; and

Introduction of Invasive species such as the carp (cyprinus carpio) and the redfin perch

(perca fluviatilis) (Lintermans 2007).

Appendix Table 1 summarises ecological threats to streams and rivers. Figure 2 below illustrates the

scale of river system regulation through dams, irrigation areas, modification of wetlands and other

water bodies.

Figure 1: River system regulation in the Basin

Under current arrangements, total water available for the environment is 19,000 gigalitres per year,

which is comprised of 14,000 gigalitres per year environmental water and 5,100 gigalitres per year

outflows through the Murray Mouth. Current diversion limits are shown in Figure 2.

16

Figure 2: Current water allocations in the Basin

Source: MDBA 2010.a

Wentworth Group of Concerned Scientists (2008) argued that the Basin is in a state of crises and

ecological stress due to past and current human activities. Lintermans (2007) and Overton et al.

(2009) claimed that many of the species, unique to the Basin, are listed as rare and threatened. For

example, 26 of the 57 fish species are threatened or endangered, e.g. Murray cod (Maccullochella

peelii peelii), Murray hardyheadm (Craterocephalus fluviatilis) and southern pygmy perch

(Nannoperca australis) (Lintermans 2007). Some species that are widely considered to be keystone

species and/or environmental engineers such as floodplain trees such as River Red Gum (Eucalyptus

camaldulensis Dehnh) and Black Box (Eucalyptus largiflorens F.Muell) have been greatly reduced as

a result of river regulation (Overton et al. 2009). This has resulted in ecological changes in the forest

(Overton et al. 2009).

The Coorong and Lower Lakes at the mouth of the River Murray are examples for flow dependent

aquatic sub-systems of the Basin that are in a dire state (Wentworth Group 2008). The Coorong and

Lower Lakes are wetlands that provide habitat to a diverse range of flora and fauna. However, the

stream flow at the Murray River mouth currently accumulated to 5,100 gigalites per year (Murray-

Darling Basin Authority 2010.a, Guide to the proposed Basin Plan) which is estimated to be about 40

per cent compared to without-development conditions (Murray-Darling Basin Authority 2010). The

most significant impact from reduced inflows is the exposure of sediments high in sulfates which have

the potential to oxidize and produce sulphuric acid upon rewetting (Wentworth Group 2008). Salinity

levels have risen to levels of 180-200ppt TDS (total dissolved solids) during summer which exceeds

the maximum levels that key fauna can tolerate (Wentworth Group 2008). Around 3,000 hectares of

the Coorong lake bed is affected by sulfidic sediments and the problem is spreading up the Murray

River Valley (Pittock 2008). The lack of freshwater inflows to the Murray Mouth and Coorong region

are believed to have negative implications fish species such as Black Bream (Acanthopagrus

butcheri), Greenback Flounder (Rhombosolea tapirina), Mulloway (Argyrosomus hololepidotus) and

Congolli (Pseudaphrites urvillii) (Brookes et al. 2009). Furthermore, a change in the migratory

behavior of key water bird spices (e.g. Little Black Cormorant - Phalacrocorax sulcirostris and

Curlew Sandpiper - Calidris ferruginea) was recorded due to the abundance of food resources and

breeding grounds in the area (Brookes et al. 2009).

The effects of extensive irrigation and water flow management have influenced salinisation of streams

and land patches (Thomas and Jakeman 1985). As a non-point source pollution, the management of

salinity on land is difficult due to limited information about pollution generation (natural rate of

degradation and human intervention), a lack of information about the measurement of runoff level and

loadings from irrigation, and the time lags, and its trans-boundary discharge behaviour. Engineering

efforts to manage in-stream salinity along the River Murray started in the late 1980s (Murray-Darling

Basin Authority 2009). Today, the operation of several salinity mitigation schemes prevents about

8%

33%

43%

16%

Interceptions (2,740 GL/p.a.)

Watercource diversions (10,940 GL/p.a.)

Environmental water (14,000 GL/p.a.)

Outflows through the Murray Mouth (5,100 GL/p.a.)

17

450,000 tonnes of salt from entering the Murray River annually (Murray-Darling Basin Authority

2009). The benefit varied from 831 EC in late October 2008 to about 295 EC at the end of June 2009

(Murray-Darling Basin Authority 2010.b). Without salinity management, salinity at Morgan would

have been in the range 1,200 to 1,430 EC from September to November 2008, levels that would have

been destructive to most irrigated plantings in that part of the river and in urban areas, affecting the

livelihoods and quality of life of the significant population that sources water from the River

downstream of Morgan (Murray-Darling Basin Authority 2010.b). The costs to the society of

construction and management of salinity mitigation schemes are around $12.8 million in 2008-09

(Murray-Darling Basin Authority 2009).

Flow regime, in particular the flow volume, temperatures, sunlight exposure and nutrient levels, is an

important determinant of algae development as water velocity can affect colonization, production and

loss (Dewson et al. 2007). Outbreaks of blue-green algae bloom have always been present in the river

system as blooms are a natural phenomenon (Murray-Darling Basin Authority 2010.c). However, with

gradually decreasing flows in the river systems blooms are prone to occur as more intense and

frequent events, impacting on the human uses of the river systems and causing stress or death to other

aquatic organisms (Murray-Darling Basin Authority 2010.c).

The consequences of past and current human intervention into the natural ecosystems of the Basin

have become a risk to the Australian society. There is little doubt that altered flow regimes within the

Basin have a profound influence on the biodiversity and ecosystem functions of rivers, streams and

their profound floodplain wetlands. However, there are significant gaps in scientific knowledge and

data about potential responses of the complex natural systems remaining that provide uncertainties to

society and influence the commitment to a change in water use behaviour. It is believed that without

an immediate and comprehensive change in behaviour towards the use of scare water resources in the

Basin risks and costs to reduce these will further increase (Wentworth Group 2008).

4. Key components of water policy development

The complexities of environmental decision-making for the Murray-Darling Basin represent a

classical example for collective decision-making over public goods in the field of public policy and

political economy. The central components that determine an effective and socially acceptable water

reform include the identification, assessment and management of risks; which incorporates the

retrieval and dealing of scientific and socio-economic information and knowledge, the aggregation of

individual values and the management of the trade-off relationship between environment and

economy.

The attempt to allocate water resources away from consumptive use towards safeguarding

environmental assets indicates that the Australian society recognises the risks associated with

anthropogenic degeneration of the Murray and Darling River systems.

The actual and potential loss or harm to the environmental quality in the Basin is outlined in Section

2. Our current knowledge about the state of degradation of the environment only comprises what we

presently perceive as risks to our society. The precise nature of potential damage, whether it will

occur and how probable it is, remains largely unclear. Other threats that might exist may not yet be

recognised. The level of awareness about potential loss and harm affecting the Basin environmental

varies within the society and thus the management of the risks appears challenging for environmental

decision-making.

The assessment of risks to environmental quality attempts to quantify, minimise and control

uncertainty (Brown and Damery 2009). In acquiring and using information about the relationship of

the complex system (environment – society – economy) we endeavour to quantify the probabilities of

occurrence of possible events (outcomes or states of nature).

18

Ideally, in assessing potential loss and harm we aim to determine the ability of the elements in the

complex system to adapt to changing risks and outcomes. This is notion is called resilience which has

its roots in ecology and measures the perturbations that can be absorbed before a system flips to

another state (Gunderson and Holling 2002, Folke 2006). The resilience of a system relates to the

functioning of the systems as a whole, rather than the stability of its components or the ability to

maintain a steady state (Adger and Brown 2009).

A broad range of skills is required to assess the risk of environmental degradation in the Basin.

Therefore, interdisciplinary cooperation in scientific research is necessary to minimise the cognitive

limitations of individuals, scientific ignorance and to eliminate errors.

Furthermore, the assessment of environmental risks in the Basin requires information that is already

available to be used efficiently. For example, mapping the possible states of nature based in historical

data allows us to make provisional and thereby anticipate a distribution of state-contingent risk-return

trade-offs.

While scientific studies can provide valuable insight into harmful events, whether risks are tolerable

or requires particular action will ultimately depend on individual and social judgements (Brown and

Damery 2009). A growing array of decision tools (e.g. cost benefit analysis and multi-criteria) are

offered to retrieve information about individual values associated with resources at risk in order to

guide collective choice. The central issues of all tools deal with the cognitive inability of individuals

to precisely articulate the value of the environment and the aggregation of individual value. Wegner

and Pascual (2011) summarised these challenges in public ecosystem valuation as they: i) affect

intangible dimensions of human well-being, ii) are intrinsically and collectively vales iii) are

characterised by thresholds, complexity and uncertainty, iv) differently affect poor and wealthy

groups of the society, and are endogenous values. Given these challenges, Wegner and Pascual (2011)

claim that the retrieval of a public value for the environment may be better guaranteed by public

deliberative processes.

Once a collective judgement about the need for action in the presence of a risk is made strategies are

necessary that outline that aims, types and sequence of action to be undertaken in order to avoid the

risks to occur. These action strategies are depended on the type and scale of the risk, as well as and

environmental and socio-economic settings. The recently observed precipitation pattern in the Basin

varied from drought (2007/08) to flood (2010/11) states within only three years (which equals an

election period in Australia). This indicates that a water policy for the Basin requires some degree of

inbuilt flexibility in order to deal adequately with changes in water availability. A feedback

mechanism between occurring precipitation patterns and policy modification would be required to

allocate water dependent on the state of nature. Thus, this implies flexible adaptive behaviour of

affected water users.

The definition of specific aims or targets for action to decrease environmental degradation is a

challenging task, especially for risks that affect large spatial areas, such as the Murray-Darling Basin.

The difficulty links back to the lack in our knowledge about natural and social processes. However, in

the absence of complete information we should opt to apply precaution in our actions and work within

our capacity. The use of selected proxies that act as indicators for the state of a larger socio-ecological

system can assist us in dealing with the prevailing uncertainties. For the Basin this can be done by

continuous motioning of the physical condition of selected indicator sites such as wetlands, river

sections or affected species as recommended in the proposed Basin Plan.

Communication of (potential) collective decisions that affects particular members more than other

parts of the society is important in order to shape individual attitudes, build trust, gain public approval

and openness to change. Beck (1992) claimed that consciousness (knowledge) determines being.

Therefore, the provision of (known) information about the complex system is essential for members

of a society to form their attitudes which determine behaviour. Dealing with change is as learning

process for individuals and decision-makers of a society. However, in order to adapt to required

19

changes some provisions of social assistance may need to be provided for members that are facing a

loss in welfare during the process. Yet, any welfare assistance should avoid rent-seeking behaviour,

encourage innovation and promote self-reliance in dealing with adjustment processes and thus, build

on the human adaptive capacity. Furthermore, our societies need to have to accept that in a risk

society, individuals have to be able to psychologically and materially to adjust to deal with risks and

required change in a reasonable way.

The Australian society is currently in the process of deliberating about an action plan to manage the

identified risks to the Basin. The ability to deal with the risks depends now on the will to manage

these, on the decisions for actions and the implementation of actions to resolve the problems.

5. Conclusion

The complexities of environmental decision-making for the Murray-Darling Basin encompass dealing

with uncertainties, risks, scarce resources, trade-off relationships and collective choices. The

environmental issues in the Basin are socially constituted as a result of current and past actions that

affected the health of the River systems. Dealing with large-scale man made risks with uncertain

consequences fits into Beck‟s (1992) classification of modernisation risks. Managing these

modernisation risks require social solutions.

This paper has reviewed the interplay between environment, society and economy. We highlighted

that decision-making about water policy in the Basin is primarily dealing with the trade-off

relationship between environmental need and income from extractive use in the presence of scare

resources.

We provided some thoughts on the currently proposed Basin Plan which indicated that the Australian

society started worrying about what has been done to nature in the Basin. Given the insufficient

promotion and emotional response by farmers and rural communities to the proposed reform we

suggested the improvement of communication between stakeholders. Social adaptation to change is

only possible if affected individual and groups are aware of risks and accept the need for and

implication of changes in behaviour.

Decision-makers of water policy in the Basin are now confronted with an appraisal of how much risk

our society is willing to bear; what action is to be taken that ensures the simultaneous resilience of

environment, society and economy. Folke (2006) claims that aiming for system resilience requires a

shift in mental models toward human-in-the environment perspectives; the acceptance of the

limitation of policies based on steady-state thinking and the design of incentives that stimulate the

emergence of adaptive governance for social-ecological resilience of landscapes.

Disturbance in form of currently perceived risk to the system has the potential to create opportunity

for doing new things, for innovation and development (Folke 2006). The need for decisions to avoid

what Beck (1992) calls the „boomerang effect‟ is recognised within our society. The Australian

society‟s ability to reconcile differing priorities in values for production, environmental needs and

broader social aspirations will be tested during the review period of the Basin Plan.

20

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Table 1: The primary threat to streams and rivers (Allen and Castillo 2007)

Threat Proximate cause Abiotic effects Biotic effects

Habitat alternations Damming, water abstractions and

diversions

Loss of natural flow variability, altered habitat,

serving of upstream-downstream linkages

Reduced dispersal and migration, changes to

quality and assemblage composition

Channalization Reduced habitat and substrate complexity, low

base flow

Reduction in biological diversity favoring high

tolerance species

Land-use changes including

deforestation, intensive agriculture,

urban development

Altered energy inputs, increased delivery d

sediments and contaminants, flashy flows

Changes in assemblage composition, altered

trophic dynamics, can facilitate invasions

Invasive species Aquaculture, sports fishing, pet trade,

ornamental plants

Some invasive species modify habitat,

otherwise minor

Declines in native biota, biotic homogenization,

can result in strong ecosystem-level effects

Contaminants Nutrient enrichment from agriculture

municipal wastes, atmospheric

deposition,

Increased N and P, altered nutrient ratios Increased productivity, algal blooms, altered

assemblage composition

Acidification from fossil fuels (SO2,

NOx), mines

Reduced pH, increased Al+, metals Physiological and food chain effects

Toxic metals form mining, industrial

gaseous emissions, waste disposal,

organic toxins

Increased trace metal concentrations (e.g. Hg,

Cu, Zn, Pb, Cd), increased levels of PCb,

endocrine disruptors, some pesticides

Physiological and toxic effects

Overexploitation Commercial harvest for food, pet

trade, recreational fisheries

Usually none Changes in assemblage composition, altered

trophic dynamics, can facilitate invasions

Climate change Temperature change Milder winter, altered evapotranspiration

patterns and flow regimes

Range shifts in accord with physical tolerances

increased productivity

Precipitation changes Altered flow regimes, greater flashiness Greater role for disturbance