Distributional consequences of upstream tree plantations on downstream water users in a Public-Private Benefit Framework

The policy as confirmed by our PPBF, indicates “flexible negative incentives” to reduce the expansion of new private plantations by compensating downstream public losses through sale of water entitlements from the latter to the former. Assuming that environmental flows are protected and purchase of downstream water entitlements is required from irrigators and stock and domestic users for new tree plantations, net private benefits of $192M to new plantations are added to $138M in downstream public benefits, improving the net change in catchment benefits to $330M. The policy would improve total net catchment benefit from $251M to $330M, achieving an economically efficient, socially equitable and environmentally sustainable solution, which adjusts automatically over time through the market.