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What is water trading?
Water trading is the process of buying, selling or exchanging rights to water. The VEWH is permitted under the Victorian Water Act to buy, sell or exchange water to meet environmental needs.
What type of water trading does the VEWH do, and why?
Water trade can be a permanent transfer of ownership of a water entitlement (an ongoing right to water), or trade of allocation water (the physical water available each year).
The VEWH can trade its water entitlements with the approval of the Minister for Water, assessed on a case-by-case basis. The VEWH has not to date traded its water entitlements.
The two categories of allocation water trades the VEWH commonly undertakes are:
Administrative trade
Environmental water supply and demand across systems varies due to climatic and ecological conditions. Administrative allocation water trades ensure water is available when and where it is most needed. Administrative trades have no financial consideration aside from administration fees that may be charged by a water corporation. Examples include:
- trades of environmental water within and between water systems to ensure water is available when and where it is most needed
- trades between the VEWH and other environmental water holders to facilitate environmental water delivery in Victoria
- donations of privately owned water to the VEWH.
While the VEWH can accept donations of privately owned allocation it cannot make donations to other users. Under the Water Act 1989, the VEWH must manage the Water Holdings to improve environmental outcomes.
Commercial trade
The VEWH can sell or buy allocation to optimise environmental outcomes in Victorian waterways. Commercial trade decisions always include an assessment of environmental water demand and supply.
Allocation has been primarily sold when foreseeable priority water demands were able to be met, but decisions may also be made to forgo watering actions and sell allocation water to fund investment in strategic activities, knowledge, research, complementary works and measures or other priorities to improve management of the holdings and performance of Victoria's environmental watering program. This includes the sale of allocation water where the environmental outcomes of investing the proceeds is considered greater than environmental outcomes of delivering or carrying over an equivalent volume of water. The VEWH has a Trade revenue investment framework to guide trade revenue investment decisions.
Allocation has primarily been bought when a demand and supply assessment shows there is insufficient supply available to achieve high priority watering demands. To date, volumes purchases have been relatively small in comparison to allocation sales.
How does the VEWH trade?
In Victoria’s declared water systems (Broken, Bullarook, Campaspe, Goulburn, Loddon, Murray, Ovens, Thomson/Macalister and Werribee) the VEWH can apply to trade allocation water through a water corporation and is subject to the same state and Commonwealth trading rules as other water market participants, such as irrigators or water corporations.
Trade is possible in other systems but trade mechanisms are not as well established.
The VEWH manages its administrative trades internally. Commercial trade can be carried out through established water markets, or by agreement between entitlement holders. Water markets in the irrigation supply systems in northern Victoria (and the broader Murray-Darling Basin) are well established. The VEWH typically engages water brokers to facilitate commercial trade of water in those established water markets.
How does the VEWH communicate water trade?
The VEWH’s annual allocation water trading strategy provides information about how and why environmental water might be traded each year. The allocation water trading strategy is published in July each year and provides a high-level overview of the potential administrative and commercial trades the VEWH may undertake in the water year.
Commercial trade decisions are normally announced on the VEWH’s website and by media release. An initial announcement will include an ‘up to’ volume of allocation that may be available for commercial sale in the coming water year, and the systems from where allocation may possibly be sold.
Subsequent announcements regarding individual sales tranches may be made progressively during the year when information regarding the VEWH’s water portfolio position is more certain. The announcements will include the system in which the trade will take place, the volume and timing of the allocation trade.
There may be circumstances when a trade decision would not be announced. This could be if the action was urgently required (e.g. purchase of a small volume to ensure a watering action could continue) or if there is no established market that can be affected by trade activities.
New regulations regarding announcement of water market decisions are expected to begin on 1 July 2026. The VEWH will review its approach to communicating allocation trade to ensure alignment with new regulations.
Avoiding trading impacts on other market participants
As a public sector organisation, the VEWH seeks to ensure it is operating in the public interest and is not causing impacts to market participants. When considering administrative trade, the VEWH gives regard to the effect its trading may have on trading opportunities also available to other market participants. When considering commercial sales and purchases, the VEWH assesses the potential market impacts and takes steps to minimise those impacts.
VEWH activity in the water market, including its choice of market intermediaries and mechanisms, is guided by these considerations:
- ensuring adequate information is provided to the marketplace
- ensuring no positive or negative discrimination against potential buyers and sellers or intermediaries
- minimising any real or perceived impacts on the market from trading activity
- ensuring efficient transaction costs and management fees
- ensuring systems and contractual arrangements are in place to guarantee transactions are executed in a timely, accountable and efficient manner.
The Victorian Government has also set Ministerial rules around how the VEWH can make decisions, including about water trade. In setting these rules, the government has ensured that the VEWH is trading only in the public interest, to protect environmental values without adverse community impacts.
Allocation trade review
In 2019, a review of the VEWH’s allocation trade by independent auditors Marsden Jacobs found the VEWH had not impacted water market prices, transparently signalled its trading intentions to market participants, and effectively avoided market distortion and adverse impacts on other parties.
Page last updated: 09/09/25