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More people, less water: CSIRO examines future options

CSIRO : 02 October, 2006  (Technical Article)
New research by CSIRO and Monash University has examined a series of scenarios for how Australian cities could cope with the likely rise in demand for water. Australia now has a new capacity to understand the macroeconomic implications of Australia
Australia is expected to have an extra five million people living mostly in major cities by 2032 which, coupled with a possible reduction in water supply, would place growing pressure on demand.

If governments had not acted to expand water trading and access “new” sources of water by building desalination plants, establishing large sewage recycling schemes and making use of storm water the study suggests that in our worst affected city, Perth, the price of water would need to increase by about 10 times to manage demand.

The report, Without Water: The economics of supplying water to 5 million more Australians, was produced to help governments and other water managers plan to cope with these challenges.

One of the authors of the report, Mike Young from CSIRO Land and Water said the good news was that “governments are acting. Dramatic price increases can be avoided”.

The report, which was released today, examines water price implications for each of Australia’s main cities and regions in 25 years’ time.

The research team analysed four alternative future paths, based on Australian Bureau of Statistics projections that by 2032 Australia’s population will have risen to 25 million. They coupled this with Access Economics predictions for the Australian economy and a reduction of the stock of water available for use by 15 per cent.

“Today’s planners are faced with some important policy choices,” Mr Young said.

“If Australia stops improving water infrastructure and policy, it’s clear that the real price of water will become a major issue over the next quarter century, but by how much, and where, depends on decisions we have to make today.

“Water policy has the potential to affect where people choose to live, and where they can earn a living.

“Our report aims to inform people and industries of the costs they are likely to pay and ways in which these costs can be significantly reduced. It is critically important that all Australians understand the future water supply implications of both climate change and enhancing environmental flows.”

The report assumes that by 2032, people living in a city and their business can each get by with 22 per cent less water and farmers can increase their water use efficiency by 34 per cent.

The four scenarios include a range of increasingly sophisticated options for dealing with declining water and increasing population.

Scenario One allows only for more efficient water use, and changes in the supply price of water. It assumes already approved investments in desalination and water recycling (plus policy reforms like water trading) are abandoned.

Scenario Two allows unimpeded water trading between rural and urban Australia. Additional infrastructure is necessary but it is already in place in South Australia and Western Australia.

Scenario Three introduces the proposition that a new source of water can be found. While the construction of desalination plants is used as an example, the same result could be achieved by constructing a sewage recycling plant or storm water capture system that provides access to water at the same or lesser cost than a desalination plant.

If Australia stops improving water infrastructure and policy, it’s clear that the real price of water will become a major issue over the next quarter century.Scenario Four includes these elements, plus inter-regional migration, mainly driven by wage and employment factors, to favour population growth and the development of smaller cities.

“The four scenarios are fairly simple and there are infinite possible variations,” Mr Young said.

“But it is important to highlight the economic effects of water policy decisions that are going to have to be made in the very near future.”
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