The rebound effect on water extraction from subsidising irrigation infrastructure in Australia

Over the past decade, Australia has been buying water entitlements and subsidising irrigation infrastructure to reallocate water from consumptive to environmental purposes in the Murray-Darling Basin (MDB). There is considerable evidence that irrigation infrastructure subsidies are not cost-effective, as well as questions as to whether water extractions are increasing (rebounding) as a result. We used 2481 on-farm MDB irrigation surveys and identified a ‘rebound effect’ on water extractions, with irrigators who received an irrigation infrastructure subsidy significantly increasing (21-28%) their water extraction, relative to those who did not receive any grants. Although the precise hydrological impact of this rebound effect on catchment and Basin-wide extractions remains unknown, publicly available water data suggest that reductions in extractions from the MDB – supposedly commensurate with increases in environmental flows – may have been overestimated, particularly in the Northern MDB. This overestimation may in turn be linked to issues with water measurement and extractions at the catchment and Basin-scale, which occur due to: (1) water theft and poor enforcement; (2) inaccurate or absent water metering; (3) growth in unlicensed surface and groundwater extractions and on-farm storage capacity; (4) legal and practical uncertainties in compliance tools, processes and water accounting; and (5) complexity of floodplain, evaporation and groundwater interactions. To respond to these water governance challenges, MDB water and rural policy actions must: (1) improve measurement of diversions and develop transparent and robust water accounting, independently audited and accounting for uncertainty; (2) improve compliance, fines and regulation; (3) use multiple lines of evidence for water accounting and compliance; and (4) prioritise the cost and environmental effectiveness of water recovery.