Innovative governance and smart regulation: institutional and regulatory regimes for a water-constrained world

"There is enough water for everyone. The problem we face today is largely one of governance: equitably sharing this water while ensuring the sustainability of natural ecosystems. At this point in time, we have not yet achieved this balance." (UNESCO).

One of New Zealand's greatest challenges is to manage its natural resources sustainably, and water resources in particular are under threat. Canterbury is already a water-short region. With a projected sharp upward demand for water, the situation will become critical.

• How can ecological services and functions be maintained while also meeting the needs of industry, agriculture and domestic users? How can water quantity and quality issues be balanced?
• How can water managers maintain legitimacy, credibility and trust when confronted by demands from different stakeholders with a diversity of interests, beliefs and values?
• How should resource managers act when the science is unclear and the future demands for water and the capacities of water resources to meet them are uncertain?

These are "wicked questions" for which there are at best "clumsy solutions" and no definitive answers.

This paper will explore the challenges ahead, and options to address them. Drawing from the international experience, it will suggest that neither hierarchy (command and control regulation), nor markets (water trading and incentives) offer anything like complete solutions and that serious attention must be given to a third approach: collaborative environmental governance, which involves a diversity of private, public and non-government stakeholders who, acting together towards commonly agreed goals, hope to achieve far more collectively than individually.

It also argues that in designing policy instruments we need "smart regulation" and approach which seeks to use a range of tools in complementary combinations and to harness a broader range of stakeholders as surrogate regulators.