Water management reform - What role does the market have to play?

This paper examines current water management issues facing New Zealand, the existing legal framework and problems and challenges to that system. It focuses on water markets; the barriers to an effective trading regime, and the reasons that widespread water permit transfers have not occurred to date. It also looks at lessons that can be learnt from water law reform in Australia and the development of water allocation and trading systems in New South Wales in particular.

In order to facilitate an enhanced market, it is suggested that there is a need for reform of our existing resource management framework. In undertaking this task, an appropriate balance must be struck between private property interests and the flexibility required for adaptive management that is appropriate for a natural and fluctuating resource such as fresh water. Particular proposals examined include decoupling ‘take’ and ‘use’ consents, whether we should follow the NSW approach of removing finite terms of water-taking permits and other reforms to create an enhanced market.

In combination with regulatory initiatives to improve our allocation framework, it is considered that markets have a significant part to play in improving efficiency of allocation and use. Regional Plan processes will remain essential to identifying environmental bottom lines, but these need to be complemented by a system that encourages water available for abstraction to be allocated to its highest and best uses. This is where an effective water trading market can play a valuable role.