Government purchase of water for environmental outcomes

Governments will need to consider a range of issues when purchasing water for environmental flows. For instance, they need to consider whether it is more cost effective to purchase water directly from irrigators or to subsidise investments in more efficient water use technology, and retain some of the savings for the environment. They will also need to consider the location of environmental assets, as this may constrain the sourcing of environmental flows to regions that can directly or indirectly provide flows upstream of an environmental asset. It may also be possible to increase the value of environmental flows by sourcing water from regions where consumptive use imposes external costs on downstream users. For example, sourcing water from irrigation areas with hypersaline groundwater could deliver additional downstream benefits. The advantages and disadvantages of each of these options are examined in this report.