Water allocation reform to meet environmental uses while sustaining irrigation: a case study of the Murray–Darling Basin, Australia Rosalind Bark a , Mac Kirby b , Jeffery D. Connor c and Neville D. Crossman c a Corresponding author. CSIRO Ecosystem Sciences, GPO Box 2583, Brisbane, QLD 4001, Australia E-mail: Rosalind.Bark@csiro.au b CSIRO Land and Water, GPO Box 1666, Canberra, ACT 2601, Australia c CSIRO Ecosystem Sciences, PMB 2, Glen Osmond, SA 5064, Australia Abstract Governments are developing policy to reallocate water to environmental uses in many of the world’s major river basins developed for irrigation. These policies can place considerable pressure on the irrigation sector to adjust, and may be perceived to conflict with food security and rural development goals. This paper reviews the literature examining opportunities to reduce irrigation district and third party externalities associated with rapid adjustment to water reallocation, with emphasis on recent water reform in the Murray–Darling Basin (MDB), Australia. We focus on opportunities to improve joint environmental and regional economic outcomes, by targeting and sequen- cing policy instruments operating at different scales. Keywords: Environmental water recovery; Irrigation sustainability; Murray–Darling Basin; Trade-offs 1. Introduction The sharing of water between irrigation, the environment and other uses is the subject of much debate in many river basins globally, including the Murray–Darling Basin (MDB), Australia. Faced with over-allocation of the water resource, environmental degradation and the prolonged and deep so-called ‘Millennium drought’ (2001–2009), Australian governments implemented a series of reforms (such as the MDB Plan) to address the perceived imbalance in current water sharing arrange- ments between the environment and irrigation. At the same time, this reform also sought to protect the irrigation sector. Water Policy 16 (2014) 739–754 doi: 10.2166/wp.2014.128 © CSIRO 2014