Governing Common Resources: Environmental Markets and Property in Water

Environmental markets, in concert with the rise of property-based instruments to regulate natural resources, have gained ascendancy in many areas once the preserve of more traditional forms of legal regulation. Prominent among the trends has been the development of cap and trade regimes that utilize property rights as specific instruments to achieve ‘efficiencies’ in the regulation of common pool resources such as water, and increasingly in emerging ‘resources’ such as greenhouse gas emissions. Adoption of property rights is regarded as instituting a system that prevents the ‘tragedy of the commons’. This chapter critically explores this view by considering the emergence of new forms of property rights in common pool resources. It then examines a case study of the emergence of water property rights and market-based mechanisms in water law. It focuses upon Australia, although some comparisons are made with other jurisdictions. Finally, the chapter analyses experience with the use of property rights and trade in water to suggest some potential opportunities and challenges that property rights and cap and trade regimes may pose for the governance of common pool resources more widely.