An integrated biophysical and economic model is used to determine the effects of using more water efficient irrigation systems and trade in water rights on the environmental performance of irrigation enterprises in the Mooki catchment within the Murray-Darling Basin, Australia. We find that improved water use efficiency increased profit in the presence of modern irrigation technologies and water trading. Salinity risk downstream is reduced due to the fall in saline discharge from the catchment, and irrigation water is traded away from ecologically significant regions. It is important that the institutional setup gives confidence in the security of water supplies. When irrigators can be assured about the security of their water entitlements in the context of water reform policies, incentives emerge for them to invest in water efficient irrigation technologies and to participate in the water market. Environmental performance can thereby be improved without the need for financial support from the government. Further, minimal government intervention is required to address salinity; given the conjunctive nature of secondary salinity and water use it can be cost-efficient to address both environmental flow and salinity mitigation with a single policy instrument. (C) 2012 Elsevier BM. All rights reserved.
