When freshwater resources become scarce there is a trade-off between human resource demands and environmental sustainability. The cost of conserving freshwater ecosystems can potentially be reduced by implementing institutional reforms that endow environmental water managers with a permanent water entitlement and the capacity to store, trade and release water. Australia's Murray Darling Basin Plan (MDBP) includes one of the world's most ambitious programs to recover water for the environment, supported by institutional reforms that allow environmental water managers to operate in water markets. One of the anticipated benefits of the Plan is to improve the health of flood-dependent forests, which are among the most endangered ecosystems globally because of river regulation and land clearance. However, periodic flooding to conserve floodplain ecosystems in the MDB creates losses to riparian landowners such as damage to fencing and temporary loss of access to flooded land. To reduce these losses reservoir operators restrict daily water release volumes. Using a model of optimal water management in Australia's southern MDB we estimate that current reservoir operating restrictions will substantially reduce the ecological benefits of investments made to recover water for the environment. The reduction in benefits is largest if floodplain forests decline rapidly without periodic inundation. In the latter circumstances, ecological losses cannot significantly be reduced by allowing environmental water managers to operate in water markets. Our findings demonstrate that the recovery of large volumes of water for environmental purposes and water market reforms are insufficient for conserving flood-dependent ecosystems without coordination and cooperation among multiple stakeholders responsible for water and land management.
Keywords: Climate change; Environmental water holder; River red gum; Storage releases; Water entitlements; Water trading.
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