Commonwealth environmental water Trading Framework

Executive Summary

The Commonwealth Environmental Water Holder (CEWH) has legislated responsibility for decisions relating to Commonwealth environmental water. The purpose of Commonwealth environmental water is protecting or restoring the environmental assets of the Murray-Darling Basin. To maximise the benefits of environmental water, the Commonwealth environmental water portfolio is actively managed which means the water may be:

• delivered to meet environmental outcomes;
• carried over to the following year to meet future environmental outcomes; or
• traded.

The purpose of this paper is to provide interested parties with the framework within which the CEWH and Commonwealth Environmental Water Office (CEWO) staff are required to behave when involved in commercial trading. The implementation of the Commonwealth environmental water trading framework (the Trading Framework) will ensure that CEWH’s trading activities:

• support enhanced environmental outcomes;
• have regard to social and economic outcomes;
• consider impacts on the market, including any third-party impacts;
• are undertaken in a manner which meets legislative requirements;
• are financially responsible, fair, equitable, transparent and accountable; and that
• the CEWH and CEWO staff act with integrity and high ethical standards.

The development of the Trading Framework takes into account stakeholder responses to the Commonwealth Environmental Water – Trading Arrangements discussion paper released in November 2011, and addresses many of the concerns raised. The Trading Framework consists of:

1. Legislative requirements that must be met by the CEWH as a statutory office holder and CEWO staff as Commonwealth government employees.
2. Operating rules, which are internal governance arrangements covering the CEWH and CEWO staff in relation to the different stages involved in trade.
3. Procedures and Protocols, which are the processes that support legislative requirements and the operating rules, and must be complied with by the CEWH and CEWO staff.

The focus of this paper is on the CEWH and CEWO’s legislative requirements and the operating rules. The operating rules provide clear guidelines on how the CEWH will behave through the trading process including:

• identifying trading opportunities that will enhance capacity to support environmental objectives;
• making a trade decision;
• approaching the market, including announcements;
• evaluation of offers;
• trade approvals; and
• announcement of results.

Over the next two years, the Trading Framework will be refined if necessary as the CEWH’s involvement in the water market matures. Three years after the CEWH’s first trade there will be an independent review of the Trading Framework to establish its appropriateness and effectiveness. The review will also assess the CEWO’s compliance with the Trading Framework.