Early in 2017, a 212-kg bluefin tuna sold in Tokyo’s Tsukiji fish market for more than AUD$850,000 –  a stark reminder that commercial fishing has reduced stocks to less than three per cent of natural levels.

A few months later, the South Australian Government announced a Royal Commission into water theft upstream in the Murray-Darling Basin, highlighting just how valuable and sought-after water has become in many parts of Australia.

How to avoid the disastrous economic consequences of poor environmental management is what resource economist Professor John Tisdell from the Tasmanian School of Business and Economics has spent decades trying to figure out.

He’s been developing a set of practical market-based instruments (MBIs), and testing them in experiments and models in an effort to come up with a more fair and sustainable way of allocating potentially scarce resources like water and fish.

And his work is particularly important in the era of climate change.

“There’s talk of access to water as being the next big cause of major wars,” he said

Water is going to become scarce, and how we deal with climate change will tie into that.

Direct government regulation of environmental activity can be difficult and expensive, because everything is interconnected, and with many competing interests.

For example, policy-makers need to figure out how much of the water flowing down a river is needed for farming, industry, and the public, and what happens to the waste water afterwards? How much can we take before we start killing off vegetation or encouraging algal growth, and how do we allocate fairly between those located upstream and downstream?

The basic idea of MBIs is to encourage good behaviour by using the market to help with those decisions. If you can put a price on a valuable resource such as water, and devise a sensible set of rules for trading it, it can then be distributed to where it’s most needed.

Changing historic habits

When Europeans first arrived in Australia and established farms, they took ownership of local water sources, and used them in unregulated and unmonitored ways for more than a century.

The recent shift towards trading water like a commodity akin to wheat or wool has been tough for some farmers and irrigators to adjust to, but Professor Tisdell says MBIs are about making the best deal possible for everyone – they’re not about restricting resources arbitrarily.

“What market-based instruments do is ensure the resource is used efficiently. Water is becoming scarce, and the future depend on us using it efficiently,” he said.  

Find out about studying Business and Economics at the University of Tasmania here.

About Professor John Tisdell

Professor Tisdell's research aligns with the University's research theme of Environment, Resources and Sustainability. He explores economic and social interactions in water and fishery management. He is studying how groups coordinate to avoid common pool resource problems and how game theory and optimisation models can be used to inform policy. In ecological economics he is interested in how steady state economies, proposed over twenty years ago, may play a role in modelling socially and environmental sustainable economic systems into the future.

View Professor John Tisdell's full researcher profile