Key Ecosystem Services Provided by Murray-Darling Basin
Discuss about the Environmental Finance and Investments System.
The assignment is prepared for addressing various questions in relation to the Murray-Darling Basin Authority. This is related to ecosystem services provided by the basin along with emphasizing the reason why it is an area of concern for government. Different market based instruments have been identified for improving ecosystem service provisions and how such instruments helps in determining market price of ecosystem services. Furthermore, considerable attention has been given on the potential effects on the identified ecosystem service due to climatic change. Moreover, management of environmental risks associated with has been explained in terms of implementation of financial instruments by government as strategy of managing such risks.
The key ecosystem services that Murray Darling Basin provides is discussed based on their categorization. Ecosystem services are categorized into four aspects that comprise of provisioning, regulating, cultural and supporting.
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Supporting |
Provisioning |
Regulating |
Cultural |
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Water cycling- A large area of irrigation is supported by water resources of Murray darling basin and this is regarded as key factor in the ongoing prosperity and social fabric of region. The water management of basin is a response to environmental impacts of level of water use and recent climatic change (Criscuolo and Menon 2015.). |
Fresh water A series of water quality target is carried out by Basin plan that provides user with the assurance it is safe for agricultural, drinking, environmental and recreational purpose. The flow of water is managed by adopting several measures such as maintaining dissolved oxygen at target value (Anderson 2016). |
Water Regulation The water resources of basin are managed by Water Act, 2007 that has the objective of improving the security of water for all the basin water resources users. This leads to optimization of social, economic and environmental resources by managing and promoting the use of water resource of basin. |
Social relations The areas of social relations that are assessed in the ecosystem service benefits include description of relationship between economic and social outcome provided. Social relations have improved due to improvement made in environmental conditions of wetland and basin rivers (Ferreira 2016). |
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Soil formation- The wetland in the Murray darling basin was affected by the acid sulfate soils and it is required to manage the there is unlikely that the risk posed by acid sulfate soils will be managed. A direct connection was provided between Murray and salt store in the soil by the new course carved by river. The rainfall leaking directly through soil to the groundwater supply and increased runoff have increased dramatically with the help of land cover transformation and increased runoff. |
Food Many opportunities are provided by the history and diverse geography for tourisms that includes enjoying wine and food in visiting historic townships and fertile valleys. |
Climate regulation The climate of Murray darling basin has highly variable climate. One of the major challenges faced by water resource managers and river operators and other community is to plan for this dry and wet climate of the basin. |
Cultural diversity In the Australian cultural heritage, the basin has a crucial place. Collective identity is underpinned by many of the iconic heritage features of Basin. Cultural practices are supported by conserve ecosystem and protection of aboriginal people in their natural state. |
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Nutrient cycle The key function of ecosystem is to dilute nutrients and carbon from soil and litter on food plain. A source of nutrient and carbon is provided by the interaction between food plain and in stream habitats. The mouth of Murrays remain open for durations and at various frequencies that is sufficient for enabling the conveyance of nutrients, salt and sediment to the ocean from basin with the passing flow. In addition to this, the supply of nutrient is dominated by allochthonous inputs. |
Energy There is efficient transformation of energy by the measures employed by Murray Darling Basin. |
Water purification and waste management There is a long history of development of waterways of Basin and the future well being of Australia is dependent on its ecosystem. The water of basin is recycled for beneficial reuse that includes commercial crops for irrigation, horticultural land irrigation and recovery and aquifer storage (Ccsl.iccip.net 2018). |
Knowledge system and educational values The knowledge system of Murray Darling basin involves lessons on resources of water that include water cycle, salinity, running the rivers, drought and flood and water quality. |
One of the important functions for economy of Australia is the Basin of Murray Darling River that supports the several high valued ecosystem and large share in national agriculture. The approach of river basin is employed by governmental organization of Basin of Murray Darling River with most of the owners of policy lying on the territories and state level. The conditions of usage of water, allocation of water and several can cut findings of joint programs are determined by such policy. The management and water planning are done by the authority of Murray Darling River for the decisions should be ratified by Territories and states.
The provisions of each ecosystem services can be improved by employment of market based instruments that comprise of price based and quantity based instruments. Ecosystem services that are identified are categorized into provisional, cultural, regulating and supporting ecosystem services.
Under such instruments, standards are set for mitigation efforts and among those providing mitigation, trade are allowed and two major variants forms the part of quantity based instrument.
Environmental offset- These are the actions that are set to meet any particular standard such as reduction of environmental impacts or pollution at a site away where environmental externality occurs due to any action. The actions can be taken by the party that has caused externality or they can make the payment to make it done on their behalf.
Tradeable permits- Under such permits, rights at individual level are set to output level, input level or performance standard. For instance, as a number of emission permits, an allowable level of emission are granted to individual. If an additional permit is purchased by individual from someone who is allowable under their allowable emission, then they are permitted to exceed the standard level. Therefore, under this instrument, there is excess limit.
Ecosystem Services in the Absence of Regulation
Elimination instrument of market barriers- This particular instrument intends to increase the awareness of consumer about the attributes of environmental products that are valued by focusing on improving the outcome of environment. Perhaps, the most widely applied approach of market based instrument is the scheme of product labeling. Individual valuing the associated improvement in outcome of environment are able to express their preferences through market forces. Price based instruments:
The instruments that are price based intend to subsidize mitigation actions or charges for negative externalities for influencing environmental performance.
Incentive payments- Under this scheme, externality is mitigated by subsidizing the cost of actions. The level of incentive payment is set at fixed rates.
Environmental charges- Individual are charged under this approach in relation to level of environmental externality. Some alternative implementations involve any charge on externality input (Dey and Gibbon 2018). For instance, charging the vehicle registration based on engine displacement rate.
Tendering- This approach is used for distribution of funds by auction or tender in the form of incentive distribution. Offers are made by those seeking any incentive payment by describing payment terms of cost sharing and mitigation action. The mitigation value forms the basis of offer selection by the government.
The adoption of environmental sustainability practices becomes more financially attractive using the market based instruments and there can be favorable outcome in relation to environment in the absence of prescriptive regulation of command and control. Market based instruments involves incurring of lower cost to achieve favorable outcome and environmental performance standard (ten Brink and Russi 2016). However, there are some challenges associated with the implementation of market based instruments such as lack of capacity, lack of science, lack of information and lack of understanding the responses of producer and consumers.
It is usually pointed by pollution level or sub optimal ecosystem provision assessment that economic value of environment is reflected by absence of market. In this regard, the market based instruments are viewed as appreciated as measures of value correction as it can be addressed through regulatory mechanism.
The critical factor in determining the usage of water resources of basin is effects of climatic change. Climatic change impacts the availability of water that will be shared by environment and consumptive users through the processes of standard water allocation. Challenge that is faced due to variable Australian climate is management of environmental water. Ecosystem service of Murray Darling Basin such as fresh water provisions that makes the availability of fresh water is directly and indirectly impacted by change in climatic condition. It is projected that the basin has experience reduced availability of water since 1980 due to climatic change. In addition to reduced availability of water, there is increased temperature and occurrence of extreme that are more frequent (Ando and Shah 2016). Furthermore, there is occurrence of severe droughts comes as climatic change risk that has the likelihood of increasing the period between wetland watering that is beyond the verge that is withhold by species.
Quantity Based Instruments
Some of the financial instruments that help in managing the environmental risks are as follows:
Debt swap- The foreign currency dominated debt is sold by creditor of nation to an investor buying debt at price enabling profit margin. This particular debt can be swapped by investor in local currency with debtor nation. For environmental swap, debt swap cover the swap that has typical focus on green projects and conservation. Financing of debt cost is done at no extra fiscal cost because there is re routing of projects to domestic project coffers (Bos et al. 2015).
The advantage offered by debt swap is that government is not incurred with additional fiscal cost. In addition to this, the development of pipeline of long-term projects would be kick started with the help of environmental swaps debt.
On other hand, the disadvantage of debt environmental swap is that the contingency of debt swap viability is dependent upon appropriate debt swap availability. Furthermore, it is required by government to employ the process of centralized decision making depending upon the expenditure program nature.
Guarantees- This instrument ensures the project feasibility by placing the condition that prevents the development of project using debt on terms to attract the capital. Risks attributable to such project are mitigated by guarantees that reducing the risk of renewable resources. The valuable factor for efficiency of financial energy investments is determined by credit guarantees and performance through performance contracts of energy Service Company (Howard 2015). A risk of purchaser of fuel going out of business or contracted power off taker is covered under credit guarantees.
Advantage of guarantees it helps in promoting the development of project in sectors that are risky and are considered critical for goals of climatic change. The contingent liabilities can be ameliorated by government due to increased access to international resources (Wang and Zhi 2016).
Guarantees leads to occurrence of increased contingent liabilities due to which fiscal deficit might get impacted. It is certainly possible that requirement of technical capacity and highly specialized information about new market.
The decision about employment of appropriate financial instrument or mechanism should be initiated by having a clear standing of climatic change magnitude and nature that is faced by country. The success of implementation of such financial depends upon the legal and conducive environment (Froger et al. 2015). In order to understand the priorities of exact climatic change, it is required by government to undertake further studies on comprehensive technical, economic, political and environmental.
Price Based Instruments
Conclusion:
The Murray Darling Basin River needs to be managed appropriately in light of changing climatic conditions. In light of changing climatic condition, the associated problems are maintenance of freshwater ecosystem and insufficient allocation of water. A river basin approach is implemented by government organization of Murray darling Basin with most of policy power lying on the level of territories and state. The introduction of sustainable diversion limits has replaced the plan of Basin in recent years. There is a long term implementation that is incorporated in the plan of Basin because the users have lower total access to water. Furthermore, new trading rules are incorporated in the Basin Plan that helps in ensuring there is no restriction on water trade apart from environmental reasons that makes the availability of sufficient market information.
Reference lists:
Anderson, J., 2016. Environmental Finance. In Handbook of Environmental and Sustainable Finance (pp. 307-333).
Ando, A.W. and Shah, P., 2016. The economics of conservation and finance: a review of the literature. International Review of Environmental and Resource Economics, 8(3–4), pp.321-357.
Bos, M., Pressey, R.L. and Stoeckl, N., 2015. Marine conservation finance: The need for and scope of an emerging field. Ocean & Coastal Management, 114, pp.116-128.
Ccsl.iccip.net. (2018). [online] Available at: https://ccsl.iccip.net/risk-management.pdf [Accessed 6 Jun. 2018].
Criscuolo, C. and Menon, C., 2015. Environmental policies and risk finance in the green sector: Cross-country evidence. Energy Policy, 83, pp.38-56.
Curley, M., 2014. Management Principles of Environmental Finance. Finance Policy for Renewable Energy and a Sustainable Environment, 37(41), p.5.
Dey, C. and Gibbon, J., 2018. New development: Private finance over public good? Questioning the impact of social and environmental impact bonds (Forthcoming). Public Money and Management.
Farley, J., Schmitt Filho, A., Burke, M. and Farr, M., 2015. Extending market allocation to ecosystem services: Moral and practical implications on a full and unequal planet. Ecological Economics, 117, pp.244-252.
Ferreira, M.A.M., 2016. Environmental Finance and Investments A Book Review. International Journal of Latest Trends in Finance and Economic Sciences, 6(2), pp.1148-1149.
Froger, G., Boisvert, V., Méral, P., Coq, J.F.L., Caron, A. and Aznar, O., 2015. Market-based instruments for ecosystem services between discourse and reality: An economic and narrative analysis. Sustainability, 7(9), pp.11595-11611.
Howard, K., 2015. Market-based instruments for ecosystem service provision in southern Alberta: An exploration of landowners’ perspectives (Doctoral dissertation, University of Lethbridge (Canada)).
Mdba.gov.au. (2018). Murray-Darling Basin Authority |. [online] Available at: https://www.mdba.gov.au/ [Accessed 6 Jun. 2018].
Page, G. and Bellotti, B., 2015. Farmers value on-farm ecosystem services as important, but what are the impediments to participation in PES schemes?. Science of the Total Environment, 515, pp.12-19.
Pirard, R. and Lapeyre, R., 2014. Classifying market-based instruments for ecosystem services: A guide to the literature jungle. Ecosystem Services, 9, pp.106-114.
ten Brink, P. and Russi, D., 2016. Economic Instruments to Respond to the Multiple Values of Wetlands. The Wetland Book: I: Structure and Function, Management and Methods, pp.1-8.
Wang, Y. and Zhi, Q., 2016. The role of green finance in environmental protection: Two aspects of market mechanism and policies. Energy Procedia, 104, pp.311-316.
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