INTHEBLACK November 2023 - Magazine - Page 29
“We continue to focus on the cost of action, when the cost of inaction is far greater. We have to
overcome this bias, because as we continue to experience the effects of climate change and water
insecurity, ‘down the track’ seems increasingly close.”
WILL FARGHER, AITHER
and hedge funds have taken a firm footing
in Australia’s “blue economy”, which has
an estimated market value of A$68 billion,
according to CSIRO.
The market is backed by federal and state
governments. They argue that the water
market allows farmers the flexibility to
decide what crops to grow and provides risk
management against climate change.
This means state water authorities can take
water hundreds of kilometres away, to be
extracted by the purchaser at the point where,
in theory, it is needed most.
Water markets are controversial, however.
Many are questioning whether a critical
resource like water should be bought and sold
like any other agricultural commodity.
Maryanne Slattery, director with water
consultancy Slattery & Johnson and former
director of the Murray-Darling Basin
Authority, questions the very principle
underlying the water market.
“Water does not move to its highest value
use for the community, the economy or even
the country,” she says. “It moves to whomever
is prepared to pay the most.
“If a dairy farmer or rice grower, for
example, cannot make the same dollars per
megalitre as an almond or cotton grower,
they are condemned as less efficient, of less
value. ‘Highest value use’ is therefore better
described as ‘greatest ability to pay’,” says
Moving water around is like “robbing Peter
to pay Paul” – someone, somewhere is always
going to lose out, says Patrick Viljoen CPA,
senior manager – ESG with CPA Australia.
“If water is concentrated in a particular
jurisdiction or country, it becomes an asset for
them. But it also lends itself to price gouging,
hoarding or, at the most extreme, water wars,
where countries could go to war because of
famine,” Viljoen says.
WATER SHORTAGE IMPACTS
Water scarcity poses challenges not just for
global stability, but also for agriculture and
industry, particularly where water is critical to
the production process.
The potential for water shortages must be
factored into the accounting assumptions used
by organisations, says Viljoen.
“A lot of money has been invested in
establishing their infrastructure. They can’t
simply shut up a factory and move elsewhere.
In a drought, it can mean trucking or
pumping water in, raising the overall cost
of production, which is usually passed
Water shortages can also affect where a
business sources its workforce. “If you have
operations in areas exposed to drought, the
livelihoods of people in those regions are
impacted. You can reach a situation where
certain places become depopulated because
there is no available water,” says Viljoen.
Businesses in large metropolitan areas,
accustomed to having water available around
the clock, are often under-prepared for water
insecurity, says Quentin Grafton, professor
of economics and director of the Centre for
Water Economics, Environment and Policy at
the Australian National University.
“As water insecurity gets worse, what are the
implications for food prices, immigration and
national security? As a business, you might say,
‘These aren’t my problems’, but they are. The
farmers get it – they are seeing the impact in
diminished revenues – but in the big cities,
businesses don’t think about it much.”