SALINITY TRADING AND OFFSETS

Salinity is a particular problem in Australia because irrigation and the clearing of native trees with deep roots have caused the groundwater level (watertable) to rise in many regions.

In 2000 it was estimated that 5 per cent of all cultivated land in Australia was affected by dryland salinity and that this was likely to rise to 22 per cent in the next few decades if nothing was done about it. Dryland salinity makes land unproductive, at a cost of some $46 million per year in the Murray-Darling Basin alone. It has also reduced the number of bird species in agricultural areas by half (COAG 2000: 5; Quiggan 2001: 84). Brian Fisher (2001), Executive Director of the Australian Bureau of Agricultural and Resource Economics (ABARE), warns:

Within 20 years, Adelaide's drinking water, which comes from the Murray, will fail World Health Organization salinity standards on two days out of five. The biological integrity of 7000 wetlands is threatened by salinity, and the Australian Bureau of Agricultural and Resource Economics (ABARE) estimates that the cost to farming associated with falling water quality will be hundreds of millions of dollars.

Offset credits

In 1992 an interstate market in salt emission permits was established for the Murray-Darling Basin: 'States earn credits by funding the construc­tion of salt interception schemes or other methods of reducing river salinity and use credits by constructing drainage or allowing other actions which increase salinity' (Brennan amp; Scoccimarro 1999: 75).

A salinity offset scheme is also being trialled by the NSW EPA in three different regions where point source polluters are being required 'to offset their emissions by investing in works that reduce salinity from diffuse sources'. Salinity offset trading is being trialled in Queensland, and salinity credit trading is being applied to dryland salinity in Victoria (NMBIPP 2005).

In one pilot programme in New South Wales, salinity 'credits can be earned for investments that limit the entry of salt into the river system. The tradable credits are used to offset debits for drainage into the system' (NCEE 2004: 30). Landowners in the upper Macquarie Valley are earning extra income from tree plantations on their land planted by Forests NSW. The plantations earn 'salinity control credits' that are sold to Macquarie River Food and Fibre, which operates downstream and suffers the salinity impacts of upstream clearing. Forests NSW retains title to the timber and carbon (Sundstrom 2000; Wahlquist 2000).

Cap and trade

A system of tradeable salinity credits was introduced into the NSW Hunter River Valley in 2002. Saline discharges into the river are not allowed during times of low river flow but salinity permits can be traded and used during times of high river flow. One thousand permits or credits are issued at any time, which allow the holder to discharge 0.1 per cent of total allowable discharge, which is determined by the NSW Environmental Protection Authority (EPA). Permits are auctioned off every two years and last for 10 years. During times of flood there are no restrictions on discharge and permits are not necessary. Holders include coal-mining facilities and power stations (Ecosystem Marketplace 2005; Hawn 2005c).

Various pilot projects for cap and trade schemes to control salinity are being trialled in New South Wales and on the lower Murray River in South Australia (NMBIPP 2005).