Hunter River Salinity Trading Scheme
The NSW Government's Hunter River Salinity Trading Scheme uses market-based economic instruments for the effective protection of waterways.
It is responsible for restoring the waters of the Hunter, ensuring safe and more stable levels of salinity and is a great win for the entire Hunter River community. Agriculture benefits from fresh irrigation waters while miners and electricity generators can make controlled discharges of excess waters.
The scheme involves a finite system of salt credits that industries can buy and trade to discharge their salty water into the Hunter River. Discharges are only permitted when the river contains adequate fresh water to dilute the salt and maintain water quality. The scheme therefore balances the amount of salt that industry can directly discharge with the background level of salt in the river.
The scheme protects the region's most precious natural resource from excess salinity, protects the ecological community from irreparable damage, provides for diverse interests to work together, and allows continued economic development, ensuring a secure future for the region.
This is achieved by:
- extensive and continuous real-time monitoring of environmental conditions and discharges
- scheduling saline industrial discharges at times of high river flows and low background salinity levels so that salinity targets are not exceeded because of the discharges
- sharing the total allowable discharge according to the tradeable salinity credits held by dischargers
- issuing initial credits with different life spans (200 credits expire every 2 years) and then using a public auction to fairly distribute 200 new credits every 2 years, starting in 2004.
Statutory review of the scheme
The Hunter River Salinity Trading Scheme is implemented under the Protection of the Environment Operations (Hunter River Salinity Trading Scheme) Regulation 2002. Every 10 years a statutory review of the scheme is conducted, with the last being conducted between 2013 and 2016. The next review of the scheme is to be completed by 2026.
See the Review of the POEO (Hunter River Salinity Trading Scheme) Regulation 2002 webpage for more information.
Market-based instruments influence the behaviour of those who manage natural resources and environmental assets in a number of ways:
- by using cap-and-trade mechanisms, which reduce pollution
- through price signals, which discourage undesirable activities
- by improving the way current markets work
- by creating new markets for environmental services.
The Hunter scheme demonstrates the applicability of market-based instruments when regulating environmental issues for the benefit of society, economy and the environment. It provides a sound process for which other similar reforms may follow. Aspects of the scheme that extend beyond the immediate Hunter Valley community and salinity management include:
- The scheme transforms the role of the environmental regulator and the practice of environmental regulation. Rather than the regulator dealing one-on-one with each polluter, the scheme has set a community-driven environmental goal which is being transparently delivered by a market mechanism. The self-interest of each credit holder is harnessed to affect the actions of each discharger.
- Discharge privileges are explicitly based on a quantitative environmental goal, rather than available abatement technology. Because the scheme is performance-based, it encourages individual innovation and facilitates cooperation and the sharing of resources to ensure environmental goals are achieved at least cost.
- The 24-hour online credit exchange makes trading faster and easier. It enables participants in the scheme to trade emission credits at any time in response to changing river flows and discharge needs.