Understanding carryover water

“Carryover” is licensed water that remains unused in accounts at the end of the water year.

In some NSW catchments, the owner of a water licence may choose to ‘carry over’ a percentage of their unused allocation for use at a later time.

The rules for how much water can be carried over, held and for how long vary between licence classifications and river systems.

Deciding whether to carry over water and how much is a complex decision which is not taken lightly. Some water may be carried over if forecast conditions are dry and rainfall is likely to be low. In very wet years, there may be widespread natural flooding and an environmental water manager may choose to carry over a proportion of available water for use in drier times.

Like water, carryover space can be bought and sold.

Licence holders can sell ‘space’ (or capacity) on their water licence to manage carryover water on behalf of another licence holder. The seller of this space provides a service to the buyer by holding their water at the end of the water year and transferring it back to them at the start of the next water year.

For managers of environmental water accounts, this market mechanism provides an opportunity to invest in environmental works such as infrastructure improvements and contribute to payment of water licence charges. It can also help minimise the volume of water for the environment traded to generate required revenue.

  • To maximise the benefit for our rivers and meet some of the costs involved in managing this resource, the department may choose to buy or sell water or carryover space. In these cases, the trade purpose is reported with a price as ‘Standard commercial’, ‘Forward contract’, or ‘Carryover parking’ category.
  • Most of the department’s water trades are operational. They are transfers between environmental water licences or to private water users who deliver water to targeted rivers, creeks and wetlands on our behalf through partnership arrangements. These are recorded as trades on the public water register as zero dollars per megalitre and the trade purpose is reported as ‘Environmental use’ or ‘Returned unused environmental water’.

If you have more carryover capacity on your General Security licence than you need to use yourself you have the option to sell it to someone else. This provides an opportunity to generate income from your water licence without selling water.

Yes. Revenue generated through the sale of carryover space is invested in environmental water projects or used for the payment of water delivery charges. We can also use carryover space to ensure water is available in future years to meet the needs of rivers, wetlands and wildlife.

Water can only be carried over when the rules allow it.

  • All decisions on water trading are undertaken within the Department of Planning, Industry and Environment (Environment, Energy and Science).
  • The department participates in the water market (both buying and selling water to other licence holders) in order to balance water availability and environmental needs across seasons and water sources.

The department trades in the same way as other water users in a ‘blind market’ through broker networks and online platforms, ensuring broad and open access for buyers and sellers without identification. This prevents discrimination against who the buyer or seller might be.

The department has arrangements for the management of sensitive water market information in order to meet the basin plan trade rules (s12.49-52) including a separation of roles and provision for establishing additional temporary arrangements to prevent someone trading with knowledge of a water announcement before it is made public.

The Department of Planning, Industry and Environment (Environment, Energy and Science) sold 9,373 megalitres of carryover space in the Murrumbidgee from March to May 2020 for an average of $35 per megalitre. This (9,373 megalitres) equates to less than 3% of water carried over in the Murrumbidgee in 2019/20.

There were 11 parcels transferred ranging from 52 megalitres to 3,000 megalitres in size.

In other years, the department has contracted (paid) irrigators to carry water over on its behalf (in the NSW Murray where we don’t have carryover space).

This is within the rules for carryover in this catchment.

Licenced water allocation managed by the department may be sold to:

  • contribute to the payment of water use fees associated with water licences (the same costs apply to all water licence holders)
  • support small infrastructure projects which enhance the delivery of water to important river or wetland sites
  • purchase water for another valley
  • enable carryover of water into future years.

You can learn more about water trade.

No. When deciding whether to sell carryover space, we weigh up the need to carry over water for environmental needs before a sale is considered.

The department manages a portfolio of water on behalf of the NSW Government to support the health of rivers and wetlands across the state.

All licenses held by the Minister for the Environment are already on a public register.

The Minister is not actively involved. All decisions on water trades are undertaken within the department under appropriate ministerial delegation.

The amount of carryover space we sell typically represents a very small portion of the total water carried over by all licence holders. For example, in 2019/20 a total of 18% of water was carried over in the Murrumbidgee and our component was less than 3% of that.

Carryover in general helps to manage the risks of water availability and reduces the price volatility between water years. The major drivers of water allocation prices are changes to water availability and irrigation demand (Department of Environment, Land, Water and Planning, 2019, Water Market Trends report).