Technical, Economic and Institutional Assessment of Environmental Offsets to Reduce Saline Water Discharge

Pollution from industry, mining and agriculture is being emitted into the natural environment in ever-increasing quantities and is causing large-scale and potentially irreversible degradation. Government regulation using command-and-control measures is often the least cost-effective way of addressing these problems because it ignores the fact that different industries have different marginal costs of abatement and so imposing the same environmental standard on all industries results in an uneven distribution of the abatement costs. The NSW government recognizes this and is considering the use of market-based instruments as a means of achieving positive environmental outcomes (or avoiding environmental degradation) at least cost. Examples of market-based instruments include: taxes, subsidies, user fees, tradable emission permits and offsets. This report focuses on the issue of developing effective and equitable market structures that will ensure the environmentally and economically sustainable disposal of saline waste water and the role that environmental offsets might play in this. The report introduces the issues that are impeding the development of an offset market which lead to, and can be measured as, high transaction costs. It is through reducing transaction costs that the salinity offset market can be changed from a theoretical concept to a practical, effective reality.