EclectEcon

Environment Minister David Benson-Pope and Agriculture and Forestry Minister Jim Anderton have prepared a Cabinet paper, which is expected to rule out privatisation but allow limited trading of water rights and establish an economic "price" for water.

... the Government did not want a regime which would prompt users to exploit their full water right, because that might encourage them to use more, not less, water.

One option could be a "cap and trade" system which could allow consent holders to trade a proportion of their water right, but not the full amount.

... The South Island river faces competing demand for hydro-generation, irrigation, industry and recreation, while the available flow is arguably "over-allocated" in dry years.

Existing users effectively have priority, on a first-come-first-served basis, which may not allow for new or more economic uses.

• Well-defined property rights.
• Dramatically lowered transaction costs