Refreshing Water and Valuing the Priceless

New Zealand’s freshwater allocation system has run its course


  • Eric Crampton



cap-and-trade, smart markets, environmental economics, just transition, Pigovean taxation, agricultural economics


The most promising way of reducing water use and nutrient load in overburdened catchments builds on the same kind of policy New Zealand is developing to reduce greenhouse gas emissions: cap-andtrade systems that operate at the water catchment level. Because cap-and-trade approaches are more cost-effective than other regulatory approaches, they allow us to do more good at less cost than other alternatives. Developments in smart-market technology and geospatial mapping allow for smart-market solutions that overcome barriers to success in existing trading arrangements. And, if initial rights allocations respect both the existing use rights of current users and incipient iwi water claims, they build a powerful constituency in favour of environmental management institutions that can withstand changes in government.


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