This dissertation has suggested that allocation of water rights,
in New Zealand and around the world, can exemplify the “tragedy of the
commons.” The lack of economic value ascribed to water was
identified at the Second International Water Conference held in March 2000,
and is a matter of concern world-wide.
The Kakanui River catchment faces a depleting groundwater resource, and a surface water resource that has been over-allocated. Irrigators currently have little incentive to offer all or part of their water right to other potentially high value users and in-stream users are finding less water is available to them. The conflicts arising from this situation are costly to all sides when debated at resource consent hearings and subsequent appeals. Political manipulation of the allocation system is possible, with the current system better serving those who are able to operate within it than those who might make better use of the water.
This dissertation has asserted that the primary cause of these problems is lack of secure, defined, tradeable, private property rights. The framework for this dissertation is that private property rights are morally defensible and economically desirable. Rand (1964a and 1967a), Reisman (1998) and Peikoff (1991) justify private property rights as a necessary tool for life. They have argued that because physical resources are required for survival, the ability to own the results of one’s effort is imperative. The worries of farmers in the Kakanui catchment about expiring water rights, and their diminishing value due to reactivation of dormant rights, reveals that private property protection is a matter of substantial concern to irrigators.
A system of Tradeable Water Permits, as proposed by Begg (1995) and Hide (1987), reflects a burgeoning interest in an economic rationale for greater efficiency and development. The finding that innovative farmers in the field area are more supportive of a free-market system of water allocation backs this up. Innovators are very likely to grow their operations and to be concerned with water allocation in the future. If water allocation is to meet the demands of users, then a free-market approach is likely to gain wider approval as innovators become the dominant force in irrigation farming.
Most interviewees calmly accepted the facts, recognised problems in
the current system, and were prepared to consider alternatives.
The willingness for change was evident, although the direction of such
change was a matter of contention.
A system of perpetual Tradeable Water Permits, with prioritised
access governed by Common Law and based on Locke’s principles for land
privatisation, is recommended.
Tradeable Water Permits allows opportunities for an exchange in values. If in-stream users and irrigators are able to trade water then an objective standard value (set by market supply and demand) will give anyone who can offer something of value to a water right holder the opportunity to acquire the water they need. Such a system will remove political interference from the process and show the real cost of environmental demands. It is unlikely that many in-stream users will be able to afford to buy water rights, but the system of initial allocation should consider that in-stream users have historical rights of ownership.
Water in the Kakanui was originally over-allocated. Following Lockean principles, access should first be granted to those who claim water through use. Subsequent claims should not reduce what original holders are entitled to and a prioritised access scheme, based on historical right, should be employed. Those users who initially claimed the water would then have first right to water in low flows, and later claimants would be the first to face restrictions. Such a system would encourage those with low priority water rights to store water in times of abundance, thus encouraging efficiency of usage. The decision by the Otago Regional Council to allow supplementary water rights is laudable because it does not reduce the value of existing water rights, but it does allow more water to be accessed.
If Lockean principles of water allocation were adhered to, then in-stream users would be able to claim a right over the water they need and use, but only if they were the first to access it. Issuance of water rights up to the current minimum flow to in-stream users would put control of the water into the hands of users. Such users could be the Department of Conservation, the Fish and Game Council, and the Kakanui Ratepayers Association. In-stream users would then be able to buy or sell water rights and charge user fees for in-stream water access, thereby creating a supply and demand market for conservation.
With a system of Tradeable Water Permits, those who hold priority water rights would have something of great value. An irrigator could sell the primary water right for a substantial gain, then buy a supplementary water right, albeit with a lower guarantee of supply, if the risk seemed justified.
To implement this new system of water allocation in the Kakanui Catchment will be difficult because it would involve the effective confiscation of some current water permits. Users have built up a significant infrastructure and should not have use of it arbitrarily removed. That is unfair and would wreck havoc on the market. The current policy of non-renewal of unused water rights by the Otago Regional Council may be the fairest and morally defensible way to reduce the problems of over-allocation. Such a policy has further merit of being in line with Lockean principles as users can only claim a right for the water they actively use.
Tradeable Water Permits would do away with the need for management by
a regulatory body. Common Law is recommended as its replacement
because it has worked well in upholding property rights and permits a market
approach to pollution control. Liability for polluting another’s
water supply lies with the polluter, under Common Law, and the polluter
either has to pay damages or negotiate a deal favourable to all affected
parties. The ability to trade the right to pollute may be an
outcome of negotiations between users and owners and result in the cost
of pollution, as well as the cost of not polluting, becoming evident to
all. Such a system would allow for environmental decisions
within the limits of what people are prepared to pay. This
writer further recommends that the Resource Management Act (1991) be abolished,
along with other prescriptive environmental legislation, because they do
not permit free trade of valued resources.
The proposal of a Fully Privatised Catchment met with little support
amongst farmers and in-stream users in the Kakanui catchment, and the effective
confiscation that would be required to set it up is manifestly unfair.
The main advantage of the Fully Privatised Catchment is that a resource
is well defined because it has one owner. However, this hurdle
can be overcome through individual ownership of Tradeable Water Permits
backed by a legal system that protects individual property rights.
A study with similar aims could usefully draw on information from
a wider selection of interviewees to achieve clearer results.
The use of detailed scenarios for interviewees, as in this study’s recommended
system, would reveal the degree of acceptance of change. The
philosophical framework of this study, represented by the Tradeable Water
Permits scenario, could also be applied to other natural resources.
Access to the radio spectrum, determination of fishing quotas, and definition
of ownership and responsibility for pests such as rabbits, could all benefit
from privatisation following the guidelines set out in the recommended
system for water allocation.
The application of defined, secure, tradeable, private property
rights allows that people are rational beings who are capable of making
their own decisions through a voluntary exchange of values.
This contrasts with the current system of the commons where confrontational
resource hearings and insecure rights lead to antagonism, exemplified in
the contempt evident between some in-stream users and irrigators.
The idea of pollution being treated as a commodity, rather than something to be abolished, needs more exposure. The real cost of not polluting is impossible to calculate under the current process because a polluter either gains or is refused permission to release effluents. There is no opportunity for negotiation between affected parties because the resource consent process is manifestly confrontational. If a polluter is granted a right to pollute under the current process, a reduction in pollution levels is unlikely because there is no economic incentive to do so if there is not a pollution fee. There is also virtually no recourse for those affected by the pollution. The current system of regulation and prescriptive environmental laws is a barrier to the free exchange of values, and it circumvents property rights by dictating resource usage.
Innovative forward thinking farmers see merit in Tradeable Water Permits, and they are precisely the people expected to respond to new export opportunities. Encouraging the innovative farmer through Tradeable Water Permits would help the farming community to grow economically within the levels of affordable conservation.