Has Australia dropped the ball on water reform?

In our December 2015 editorial, ‘Let’s not drop the ball on water’ (Baldwin et al. 2015), we reflected on the substantial progress made on water reform under the guidance of Australia’s National Water Commission (NWC). We queried whether, given the NWC’s demise, there would be a continued nationwide commitment to a sustainable water agenda. Recent revelations by the ABC’s Four Corners¹ about irrigators circumventing the Murray–Darling Basin (MDB) Plan and associated licence conditions, which was allegedly condoned by the NSW government demonstrate fundamental governance problems affecting water allocations in Australia.

The allocation of water in a country as dry as Australia has always been controversial due to fundamental tensions between the productive use of water by irrigators and other industries, and use of water for social, cultural and environmental purposes. Millions of dollars have been invested in the MDB Plan and indeed water reforms across Australia. But state water plans are enforced by state governments leaving them vulnerable to regulatory capture. Politicians are easily persuaded by the short term economic benefits of productive use, particularly when lobbied by powerful industry groups. In contrast, politicians can afford to ignore other beneficial uses, because doing so shifts the burden to less powerful groups and to future generations. It appears, for example, certain industries are privileged over other interests, such as the environment and the Aboriginal desire for cultural flows.

The NWC’s final 2014 assessment drew attention to unfinished business for improving the water planning, management and regulatory framework and recommended that ‘governments should not “mark their own scorecards” on water reform’ (2014, p. 4). This is why the public benefits of social, cultural and environmental uses need the protection of independent and transparent review. While the Productivity Commission has been given responsibility for providing oversight of progress in water reform in achieving economic, social and environmental outcomes since 2014, its current review of water reforms will show how well it is suited to the task given its previous focus on micro-economic reform, and whether the three year reporting cycle is sufficiently regular.

Articles in this issue

Economics can seldom be separated from the environment. This issue contains a number of articles that contribute valuation methods to assist in environmental decision-making.

Jayanthi Kumarasiri explores the relationships between stakeholder pressure, companies’ climate change risk management strategies, and their management accounting practices. The study of 18 large listed Australian companies engaged in high and low carbon intensive industries found that stakeholder pressure had a major influence on the actions of companies on emissions management. The companies used different strategies for each stakeholder group, according to the potential for cooperation or the competitive threat posed. Meanwhile high carbon intensive companies mainly use management accounting techniques in managing financial and regulatory risks, while the low carbon intensive companies use them to manage reputational and financial risks with respect to their climate change strategies. Some of the latter used accounting practices symbolically for the sake of portraying a proactive image. Kumarasiri suggests that such exploitation could be reduced by empowering stakeholders to influence better corporate governance.

Thanh Phan, Kevin Baird and Sophia Su studied the use of environmental management accounting and its relationship with a company’s environmental management system (EMS), top management support and size, in 208 Australian organisations. They also examined its influence on environmental performance. Their survey results showed moderate use of physical environmental management accounting (physical information on the use, flows and destinies of energy, water and materials including waste), but a low use of monetary environmental management accounting (information on environment-related costs, earnings, and savings). The comprehensiveness of the EMS and top management support influenced the use of environmental management accounting, and those organisations using it had higher levels of environmental performance.

In the continual improvement of methods for measuring environmental values, Robert Gillespie, Drew Collins and Jeff Bennett use a case study of recreation benefits in the Hawkesbury–Nepean River, NSW. They adapt the travel cost method to overcome its present limitation to the current condition of sites, by combining it with a contingent behaviour technique to estimate the influences of changes in site condition. They found that environmental flow releases of water, which are under consideration to improve river health, would bring increases in recreation values at six main recreation sites along the river. The marginal benefits of introducing the environmental flows were estimated to be within a range of $1.7 m to $6.6 m per annum.

In New Zealand, Martin Neale, Richard Storey and David Rowe assess the performance of a revised approach to the Stream Ecological Valuation method. The method provides managers with a standardised measure of the hydrological, biogeochemical, habitat and biological functions of streams. They find that the variations introduced after a 2010 review make the method simpler, clearer, and less subjective in application. Their field test at 19 sites showed the revised method produced a similar mean result, but a greater range of scores than the original version. For practitioners, this means little or no information loss but improved ability to discriminate between pristine and degraded streams. The method is the only standardised approach available for assessing environmental compensation in New Zealand, and is consistent with methods used internationally.

Christopher Ambrey, Christopher Fleming and Matthew Manning explain another method used in New Zealand for valuing water, the ‘experienced preference method’, also referred to as ‘life satisfaction approach’. This measures the contribution of an environmental good (e.g. water) to satisfaction with an experience (‘experienced utility’), where other methods focus on the desirability of an outcome (‘decision utility’). The method overcomes a number of difficulties with conventional non-market valuation methods such as the travel cost method, contingent valuation and choice experiments, in that it does not ask individuals to do cognitively demanding tasks. It has the added advantage of relying on regularly collected national survey data, so does not require custom data collection. In their application, the authors found that each unit of increase in satisfaction with the state of water bodies visited by an individual is associated with a 1.6 per cent greater likelihood to report being very satisfied with their life. This finding is valuable to environmental managers who are keen for evidence to support (or negate) the assumption that water quality contributes to quality of life.

Jeremy Webb, Clevo Wilson and Max Briggs studied the phenomenon of ‘peak car’ in Australia and the US, where automobile use, assessed on a per capita basis, plateaus or reduces. They introduce an analytical framework to explain the timing of peak car. A set of socio-economic forces locked in the use of automobiles as a dominant mode of transport in urban areas, but is counteracted by externalities such as congestion, urban infilling, social and environmental costs of the automobile, and also generational preferences. The authors assess that the mutually reinforcing nature of these factors will reduce further the rate of growth in car use and ownership.

Jean-Francois Rochecouste, Paul Dargusch and Christine King explore the implications of the Australian Government's former Carbon Farming Initiative (since combined with the Emissions Reduction Fund) for the dryland grains industry. Farmers and industry professionals argued that the project approval processes and associated transaction costs made producing carbon offsets financially unattractive, and that legal constraints requiring long-term maintenance of the carbon might affect farm viability and the earning potential of future generations. The authors suggest the government pursue programs that encourage tree plantings and farm practices that deliver carbon sequestration and biodiversity without locking farmers into long-term obligations.

Annual award for best publication in AJEM

This year, the Eric Anderson Award for the best article published in this journal was presented to Piers Larcombe and Angus Morrison-Saunders for their article ‘Managing marine environments and decision-making requires better application of the physical sedimentary sciences’ (Larcombe & Morrison-Saunders 2017). Since publication on-line, this article has received 68 views (by 1 November 2017).

We also congratulate authors of the short listed articles: Adriana Chacon, Natalie Stoeckl, Diane Jarvis and Robert Pressey (2016) and Phil Gorey, Mark McHenry, Angus Morrison-Saunders, Hudson Mtegha and David Doepel (2016).

The prize is sponsored by Taylor & Francis, the journal publishers. We thank the judging panel, Prof Geoff Syme, Prof Paul Eagles, Prof Claire Freeman, and Dr Bec McIntyre.

Editorial advisory board

Professor Michael Lockwood, of the University of Tasmania, has announced his retirement. We thank Michael for his 11 years of service on this board.

AJEM reviewers in 2016–2017

The editors thank the following people who reviewed articles in late 2016 and 2017:

Mohammad Alauddin

Benjamin Allen

Justine Bell

Suzanne Benn

Jeff Bennett

Jeff Birchall

Roger Burritt

Michael Calver

Simone Carr-Cornish

Pavel Castka

Jim Cavaye

Rebecca Colvin

Bethany Cooper

David Copplestone

Steven Cork

Allan Curtis

Allan Dale

Paul Dargusch

Maria de Lourdes Melo Zurita

Ivan Diaz-Rainey

Phillip Eberbach

Vic Galea

Lei Gao

Phil Goodwin

Claire Gronow

Kathy Herbohn

Jarra Hicks

Vincent Hoang

Janet Hunt

Muhammad Islam

Frith Jarrad

Thames Kularatne

Hugh Lavery

Emma Lee

Brenda Lin

Michael Lockwood

Sumit Lodhia

Bill Malcolm

Thilak Mallawaarachchi

James McIntosh

Alistair Melzer

Kelly Miller

Katie Moon

Athula Naranpanawa

David Pannell

Samantha Paredes

Ataur Rahman

Benjamin Richardson

Jonathan Richmond

Cathy Robinson

John Rolfe

Helen Scarborough

Jacki Schirmer

Jeff Smith

Marko Strok

Craig Styan

Geoff Syme

Tomohiro Tabata

Rebecca Tan

Sorada Tapsuwan

Terry Tudo

Andrea Walton

Adrian Ward

Dona Whiley

Bradd Witt

Notes

1. Besser L, ‘Pumped: Who’s benefitting from the billions spent on the Murray-Darling?’ ABC Four Corners, 24 July 2017.