This paper by Gavan Dwyer, Robert Douglas, Deb Peterson, Jo Chong and Kate Maddern was released on 14 March 2006. The paper discusses the nature and causes of environmental change related to rural water use, and provides a taxonomy of the many diverse types. It also examines the issues surrounding possible charges on water use for water related externalities. This paper may be of relevance to people interested in the commissioned study, Rural Water Use and the Environment: The Role of Market Mechanisms.

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Contents

Preliminaries
Cover, Acknowledgments, Abbreviations and Explanations, Key Points, Overview

1   Introduction
1.1   Irrigation water use in Australia
1.2   Water reform in Australia
1.3   What are economic externalities?
1.4   Outline of the report

2   Environmental change and externalities from irrigation water supply and use
2.1   Identifying environmental change and externalities
2.2   Framework for analysing the characteristics of externalities
2.3   Applying the framework to irrigation water supply externalities
2.4   Applying the framework to irrigation water use externalities
2.5   Summary

3   Externalities and potential responses
3.1   The economic effects of externalities
3.2   The likelihood of private action
3.3   Is there a case for government intervention?
3.4   Policy design and assessment
3.5 Efficiency and choice of instrument
3.6   Externality charges and Pigouvian taxes
3.7   Summary

4   Implementing an externality charge for irrigation water
4.1   Effects of a tax on irrigator water use
4.2   Issues in designing a tax
4.3   Summary

A   Irrigated agriculture
A.1   Economic costs and water charges
A.2   Trade in irrigation water

References