Environmental policy is often implemented using market instruments. In some cases, including carbon taxing, the links between financial products and the environmental objectives, are transparent. In other cases, including water markets, the links are less transparent. In Australia’s Murray–Darling Basin (MDB), financial water products are known as ‘entitlements’, and are similar to traditional financial products, such as shares. The Australian water market includes ‘Low Security’ entitlements, which are similar to ‘sub-prime’ mortgage bonds because they are unlikely to yield an amount equal to their financial worth. Nearly half the water purchased under the Murray–Darling Basin Plan for environmental purposes is ‘Low Security’. We suggest that the current portfolio of water held by the Australian Government for environmental purposes reflects the mortgage market in the lead-up to the global financial crisis. Banks assumed that the future value of the mortgage market would reflect past trends. Similarly, it is assumed that the future value of water products will reflect past trends, without considering climate change. Historic records of allocations to ‘Low Security’ entitlements in the MDB suggest that, in the context of climate change, the Basin Plan water portfolio may fall short of the target annual average yield of 2075 GL by 511 GL. We recommend adopting finance sector methods including ‘hedging’ ‘Low Security’ entitlements by purchasing an additional 322–2755 GL of ‘Low Security’, or 160–511 GL of ‘High Security’ entitlements. Securing reliable environmental water is a global problem. Finance economics present opportunities for increasing the reliability of environmental flows.

中文翻译：

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过度分配河流流域的“次优”水、低安全权利和政策挑战：墨累-达令流域的案例

环境政策通常是使用市场工具来实施的。在某些情况下，包括碳税，金融产品和环境目标之间的联系是透明的。在其他情况下，包括水市场，链接的透明度较低。在澳大利亚的墨累-达令盆地 (MDB)，金融水产品被称为“权利”，类似于股票等传统金融产品。澳大利亚水市场包括“低安全性”权利，类似于“次级”抵押债券，因为它们不太可能产生与其财务价值相等的金额。根据墨累-达令流域计划购买的用于环境目的的近一半水是“低安全性”。我们建议澳大利亚政府目前持有的用于环境目的的水组合反映了全球金融危机前的抵押贷款市场。银行假设抵押贷款市场的未来价值将反映过去的趋势。同样，假设水产品的未来价值将反映过去的趋势，而不考虑气候变化。MDB 中“低安全性”权利分配的历史记录表明，在气候变化的背景下，流域计划水资源组合可能比 2075 GL 的目标年平均产量低 511 GL。我们建议采用金融部门的方法，包括通过购买额外的 322–2755 GL 的“低安全性”权利或 160–511 GL 的“高安全性”权利来“对冲”“低安全性”权利。确保可靠的环境用水是一个全球性问题。金融经济学为提高环境流量的可靠性提供了机会。