Blockchain technology could help make the trading of water, including in the Murray-Darling Basin, more transparent, according to these industry professionals.
There is no doubt water is the most precious resource we have as humans. With the acceleration of climate change, there is an increasing need to support the preservation of our finite natural resources.
Australia pioneered water rights trading in the early 1900s, becoming a world leader in water sharing between valleys. The initiative extended throughout the states of Australia and across the Murray-Darling Basin (MDB).
However, recent findings from the water markets inquiry of the MDB, completed by the Australian Consumer and Competition Commission (ACCC) and the Department of Climate Change, Environment, Energy and Water (DCCEEW), highlighted many challenges within the system.
These challenges included aging trading architecture, complex and inefficient trading of water leading to limited transparency, eroded trust and missed opportunities.
A single trading platform for water
A report from Arup and IBM, Enabling Trust In Water Trading, explains how harnessing blockchain technology could maintain Australia as a global leader in this space and improve the way this limited resource is managed.
Blockchain, or distributed ledger technology, dissolves silos by giving actors access to the same trade updates at once. Trade participants can see exactly where their trade is sitting in an approval flow, and validators can quickly and securely approve trades digitally.
The report outlines a vision for a distributed, collaborative platform governed by a blockchain architecture that leverages decentralised data providers.
This could ensure water markets have integrity safeguards and participants have access to information to make informed trading decisions.
There are clear merits in developing a single platform for the MDB’s water trading markets. This would have the power to provide interoperable, transparent and streamlined processes by transforming the ecosystem’s operating model and blocking silos.
As called out by both the ACCC and the DCCEEW’s reports, current processes are convoluted and involve a mix of automated and manual processes, many of which cannot communicate with each other. Traders themselves called for simplification during the ACCC investigation, which was highlighted in the DCCEEW’s roadmap by the recommendation for a ‘backbone platform’.
Arup has been researching alternate forms of governance for the water trading markets since 2018. It ran a collaborative research project with the Department of Planning and Environment (DPE) which collated stakeholder input from the Murray-Darling Basin Authority and Water NSW, and anecdotal research from irrigators.
IBM has implemented several projects that leverage emerging technologies, particularly blockchain. These projects have included plastic waste reduction, food supply chain safety and renewable energy grid management.
Increasing market integrity
It would be an overreach to suggest a technology platform on its own will solve all the systemic and political issues outlined by the ACCC. Other technologies could also play a role.
However, ideating and convening a team to discuss a potential business platform can help to catalyse the governance changes and people process restructures that need to take place.
In this way, blockchain’s multiplayer requirements provide the perfect opportunity to house adjacent discussions about governance and market integrity.
We believe that the Lower Darling, Wimmera/Mallee and South Australian Murray catchments will provide the most robust test for a blockchain pilot as it is cross-jurisdictional. Furthermore, it provides the best way to demonstrate how the different trading rules work in a common water trading platform environment.
Our hope is to stimulate informed and insightful discussion about a blockchain platform approach and encourage key stakeholders to harness this new technology during project development, to produce better water system outcomes for the MDB.
We believe it is possible to achieve change, and for new technologies and approaches to make the planet’s inhabitants safer and more actively engaged in the changes that will benefit future generations.
Bill Robinson is Australasia Digital Water Leader at Arup; Josh Millen is Associate Partner, Digital Transformation at IBM Consulting Australia; and Laurent Lambert is Blockchain Practice Lead at IBM Consulting.
