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A Paper For The Australian Competition And Consumer Commission

Many irrigators in Murray-Darling Basin access water by holding tradeable water entitlements, which relate to a specific water resource such as a dam. In recent years governments have taken steps to reduce barriers to water entitlement trade in order to promote efficient resource use. One potential impediment to entitlement trade is the use of termination fees by irrigation authorities, which are intended to recover the fixed cost of maintaining infrastructure when irrigators leave the system and are often incurred by water users when they sell their entitlements.

Our paper investigates the importance of termination fees for landholder decision-making, including decisions to trade entitlements.DOWNLOAD FULL PUBLICATION

Mechanisms For Funding Bio-Security Measures

This report examines how cost recovery mechanisms can be developed in a manner that creates stronger incentives for private parties to manage those types of biosecurity measures they are best placed to manage.DOWNLOAD FULL PUBLICATION

A Report Prepared For The Victorian Department Of Sustainability And Environment

To assist with the development of the Northern Region Sustainable Water Strategy in Victoria, this paper assesses different options for improving supply reliability in systems regulated by large dams. Frontier Australia’s analysis suggests that giving water entitlement holders greater flexibility to individually hold water in storage for use in future years is likely to be a key in ingredient in reducing water shortfalls in very dry years as it allows them to manage their supplies across time. In contrast, ‘resizing’ entitlements (to increase their reliability) or purchasing additional entitlements are likely to be relatively ineffective in achieving the same goal.DOWNLOAD FULL PUBLICATION

The Australian Energy Market Commission (AEMC) has released the final report of its Congestion Management Review (CMR).

The CMR examined the Rules for the National Electricity Market that govern how network congestion is managed, and considered how those Rules could be improved to assist participants in managing the risks associated with transmission congestion more efficiently.

Frontier (Australia) assisted the AEMC throughout the course of the CMR, principally through the development of a modelling framework and methodology for estimating the welfare losses arising from the influence of network congestion on generators' bidding incentives in a regional electricity market.

In addition, Frontier advised the AEMC of the merits of Generator Nodal Pricing in the context of the National Electricity Market by way of a qualitative review of the theory and international application of nodal pricing in markets elsewhere.

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The Australian Government's National Water Commission has released a position statement on urban water pricing outlining future reform priorities, including greater use of scarcity pricing, ending the use of inclining block tariffs and introducing greater competition in the urban water sector through institutional and structural reforms.

To support efforts to advance urban water pricing and institutional reforms, the Commission has released an accompanying report prepared by Frontier (Australia), which highlights alternative institutional and water charging options.

Commissioner Chloe Munro announced that the Waterlines report prepared by Frontier Economics, together with the Commission's accompanying Position Statement, shows that new approaches to water pricing have the potential to deliver better outcomes for water users, reducing the reliance on costly water restrictions.

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Options For The Design Of Emissions Trading Schemes In Australia

An updated submission to the Garnaut Climate Change Review.


Today, the Australian Minister for Broadband, Communications and the Digital Economy, Senator the Hon Stephen Conroy, announced the release of a request for proposals to roll-out and operate a national broadband network.

The network represents the centrepiece of the Government's pre-election commitments in the communications sector. The Government has committed up to $4.7 billion of public funding, and will consider any regulatory changes necessary to facilitate the network roll-out. It is expected that the network will be rolled out over the course of the next 5 years, using fibre-to-the-node or fibre-to-the-premises technology. The network is expected to be 'open access', with access terms and conditions to be a key part of proposal assessment.

The Government has appointed a panel of expert advisers to assess proposals, and the panel is expected to report to the Government towards the end of 2008 as to a preferred tenderer.

A team from Frontier Australia and Frontier Europe will be advising the Department and expert panel on the economic and regulatory issues associated with the tender process.

For more information, please contact Marita O’Keeffe at or call on +61 (0)3 9620 4488.

The Government of Victoria today announced the outcome of its review of gaming licensing arrangements. The current duopoly control of the state's poker machines will end and venues will compete in a competitive bidding process for the new licences.

The announcement has been hailed as a victory for competition over vested interests.  The Australian Newspaper stated "From a competitive model perspective, Brumby [the state Premier] deserves full marks".

Frontier (Australia) has been advising the Government on alternative mechanisms by which licences could be allocated.

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On 31 January 2008, the New Zealand Commerce Commission was granted leave to appeal the earlier decision of the High Court that granted a clearance for Woolworths to proceed in its bid for The Warehouse Group. Woolworths is a large supermarket chain and The Warehouse is a general merchandise retailer that has recently placed fresh food in three of its outlets.

In mid 2007, the Commerce Commission had refused to clear the merger on the grounds that it would substantially lessen competition in the local markets in which The Warehouse sells fresh food. This decision was overturned by the High Court on appeal. In granting the Commission leave to appeal this decision, the High Court granted a stay of its clearance decision - but only until the end of February. This means that the appeal must be heard this month.

Frontier (Australia) has been retained by Bell Gully (solicitors for Woolworths) throughout all stages of this process. Frontier provided the Commission with detailed empirical work at the time of the initial application for clearance. Philip Williams of Frontier gave evidence before the High Court at the appeal - and, more recently, at the application for a stay. In the latter proceedings, counsel for Woolworths presented estimates by Frontier of the costs and benefits of granting a prolonged stay of the decision by the High Court to clear the acquisition.

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A Report Prepared For The Victorian Department Of Primary Industries

‘Virtual water’ is an estimate of the amount of water involved in the production of a particular product. The virtual water concept has been used to argue against the production and export of commodities that require ‘large’ volumes of water. Virtual water estimates have also been used as an indicator of environmental damage associated with water intensive activities.

It is understandable that people are genuinely concerned about how we use scarce resources, particularly given the unprecedented drought and climate change concerns. However, as our note demonstrates, there are a number of significant flaws in the virtual water concept that effectively render the concept meaningless. In particular, there is no link established between the measure of water use and environmental degradation. Consequently no conclusions can be drawn regarding the environmental benefits of moving from high to low water intensive production. In addition the virtual water concept makes no distinction between water that falls on rangelands or water within irrigation systems. As a consequence, the implied assumption that a shift from water intensive beef cattle production, less water intensive crops or horticulture, would lead to water savings is spurious.DOWNLOAD FULL PUBLICATION