We’ve been fortunate to collaborate with some outstanding partners over the last couple of years designing and implementing innovative, outcome-based, market-based instruments (MBI) to address water quality, flow and environmental issues in Victoria.

Our work has included establishing model MBI approaches at the precinct and household level to achieve urban stormwater quality and flow objectives, developing frameworks for identifying when MBIs should be used to support the achievement of environmental regulation and policy targets, and developing an industry backed offset framework to achieve cost-effective and flexible environmental compliance for point source discharges.

We’ve demonstrated that well-designed and implemented market-based approaches (things like offsets, tenders and auctions) can be developed and delivered cost effectively to achieve multiple objectives, and that well-designed and implemented MBIs can act as best-practice toolkits for low cost implementation to address water and environmental management issues in other catchments and settings.

There are ongoing policy discussions about whether market-based instruments for the environment ‘work’, whether investors and the public get value for money when they are used, and when, where and why market-based instruments should be applied. Our view is that a lot of this discussion could be re-focused. Our work shows:

  • there are some core, simple and readily transferable design and implementation elements that should be part of all MBIs, irrespective of the number of potential market participants, whether the issue is diffuse or point-source, and the environmental outcomes they are targeting
  • that MBIs can achieve environmental outcome targets more cost effectively and with greater flexibility than regulation. It’s clear that clear, outcome based regulation provides the basis of successful MBIs – but MBIs can be used to deliver regulatory outcome objectives more cost effectively and flexibly than another layer of regulation that stipulates how regulatory outcomes must be met. Also, we’ve found the process of developing MBI with stakeholders can help to sharpen the focus of regulation and identify ways to reduce regulatory burden
  • MBIs can among other things:
    • enable innovative water and environmental management solutions on private land and via private public partnerships
    • develop community understanding and active ongoing support for integrated water management and environmental solutions
    • provide much-needed income for Councils and other delivery partners to fund operations and management of infrastructure. This can in turn build whole of environmental management and delivery capacity within these organisations. It can also build broad-based support for environmental management and outcomes within Councils and other organisations.

At the River Basin Management Society awards last Friday, one of our recent projects – the Victorian Water Industry Water Quality Offsets Framework – was recognised for excellence as one of three finalists in the Progression of Public Policy for Waterway Management category.

We’re really proud to have been part of the team who developed this industry framework and the case study that went along with it. The idea for the framework was initiated by Western Water and developed, submitted and championed by Western Water as part of the Smart Water Fund. Our project team was led by Alluvium. We partnered to develop and deliver the framework along with Barry Hart, Adrian Volders, Barry Tiller and others, and in close consultation with EPA Victoria and DELWP.

You can read more about the Victorian Water Industry Water Quality Offsets Framework below, and on the RBMS website.   

About the Victorian Water Industry Water Quality Offsets Framework

The Victorian Water Industry Water Quality Offsets Framework is an industry backed framework for offsetting water quality impacts of wastewater discharges into Victorian waterways.  In July 2015, VicWater –the peak industry association for water businesses in Victoria –took on the role of housing and overseeing industry uptake of the framework.

The offset framework supports the Victorian water industry to protect and enhance Victoria’s waterways while providing dischargers with the flexibility needed to achieve the best community outcomes in a prudent and efficient manner. The offsets framework gives Victorian regulators, policy makers, the water industry and the community clarity around how wastewater discharges can be offset in Victoria, and steps for assessing and implementing options for offsetting the water quality impacts of wastewater discharges into waterways.

Water quality offsets might be considered in instances where Victorian water corporations face a significant challenge in meeting existing or projected EPA discharge licence conditions or recognise a genuine opportunity to deliver a net environmental benefit at a lower community cost. In most instances the use of an offset arrangement will be driven by the potential to defer capital expenditure on infrastructure upgrades that might otherwise help meet the license conditions, or a specific policy driver.

The Victorian Water Industry Water Quality Offsets Framework delivers an agreed approach for the EPA and the Victorian water industry. The Framework builds on Victorian waterway and wastewater discharge legislation and policy in a positive way. The Victorian Water Industry Water Quality Offsets Framework:

  • uses the EPA’s proposed offset principles (EPA 2008), risk assessment guidelines (EPA 2009) and principles for environmental protection (Environment Protection Act 1970) as its basis. Clause 19AA of the Environment Protection Act 1970 (Govt. Vic 2007) permits offsetting as a means of “achieving cost effective environmental protection or regulation”
  • aligns with the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) – which defines ‘environmental offsets’ as measures that compensate for the residual adverse impacts of an action on the environment, that is, impacts that remain after avoidance and mitigation measures. The Framework clearly identifies what avoidance and mitigation measures are expected before offsets will be considered
  • develops the offset measures so that they are consistent with offsetting principles identified in State Environment Protection Policy (Waters of Victoria) clause 26 (Govt. Vic 2003) and emerging themes in the State Environment Protection Policy (Waters) Review
  • will support the EPA and Victorian water industry to deliver equivalent or better water quality outcomes for Victoria by offsetting, after avoidance and mitigation measures have been undertaken. The framework provides clarity around how EPA will assess and approve offset measures for a discharge, where the offsets offer either equivalent or greater protection of beneficial uses and does not result in unacceptable local impacts. The Framework delivers the EPA’s 2008 offsetting principles that require that offsets must:
    • deliver net environmental benefit compared to actions that would otherwise be required.
    • be cost-effective and in proportion to the significance of the adverse environmental impact being addressed.
    • not facilitate or reward poor environmental management practices that pose significant risk or create inappropriate market distortions.

Contact Jeremy Cheesman in our Melbourne office to discuss our market-based instrument work further.

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