The regulation of water resources in the Murray-Darling Basin provides a useful case study of mechanisms that can be used to manage the effects of climate change. The Basin is the catchment area for the Murray and Darling Rivers and their tributaries. It supports Australia's most important agricultural region and has 16 internationally recognised wetlands.

There is evidence that the Basin's water resources are seriously over-allocated and over-used. Mismanagement of the Basin's limited resources coupled with the effects of climate change have placed the Basin in a precarious situation. Availability of water resources from the Basin is declining, ecosystems are being threatened and the livelihoods of those dependent upon the Basin are at risk. A failure to ensure the sustainable use of the Basin's resources could further jeopardise one of Australia's most precious assets.

The 2004 National Water Initiative and the 2007 National Plan for Water Security anticipate the establishment of new governance arrangements for the Basin with a view to addressing 'once and for all' water over-allocation in the Basin. The Commonwealth's Water Act 2007 gives effect to this objective. Specifically, it provides for the development of rules to facilitate water trade. It is considered that water trade will help to ensure the efficient allocation and, ultimately, sustainable use of water in the Basin.

In this Paper, we will: (a) outline the rules establishing the new governance arrangements in the Basin, including a discussion of their aims and objectives; (b) discuss the actual or likely effectiveness of the rules in striking a balance between the various interests at stake including water scarcity, environmental sustainability, and food and economic security; (c) consider the impact of the rules on the various stakeholders; and (d) discuss the lessons that can be learned from the experience in the Basin.