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Water holding licence b

Notes: a) Under current arrangement, sales water is not a formal entitlement. It is attached to water right or diversion licence and cannot be traded separately. As the Victorian Government White Paper (2004) has proposed to unbundle sales water into a separate, legally recognised and independently tradable entitlement, in this study, sales water is identified as a separate category of water entitlement. b) A highly reliable entitlement that allows holder to access water in prescribed sources indefinitely but the water cannot be used until it is transferred to a water taking licence.

Notes: a) Under current arrangement, sales water is not a formal entitlement. It is attached to water right or diversion licence and cannot be traded separately. As the Victorian Government White Paper (2004) has proposed to unbundle sales water into a separate, legally recognised and independently tradable entitlement, in this study, sales water is identified as a separate category of water entitlement. b) A highly reliable entitlement that allows holder to access water in prescribed sources indefinitely but the water cannot be used until it is transferred to a water taking licence.

Water access entitlements provide ongoing rights to a share of the resource. The access entitlement itself - the share of available resource - does not need to change at all. They are firm entitlements held by and traded between individuals and other interests, even though the volume of water associated with them may vary each year. Quiggin (1988) argues that tradable water entitlements establish a basis for the operation of common property subsystems within large water resource systems. They are designed to be more perpetual and stable than the kinds of access granted under the command-and-control model. There are a number of advantages associated with a tradable water entitlements scheme:

• Provided that the market for entitlements is competitive (i.e., perfect information, single good, sufficient number of trades so that each is unable to individually influence the market outcome), tradable entitlements minimize the costs of restricting use of the resource;

• Resource users can enter the industry without increasing the overall level of water diversion/use;

• Non-consumptive resource users, such as government, environmental or community groups, can purchase entitlements on the market;

• A tradable entitlements scheme is flexible enough to allow production processes of resource users to adapt over time in response to changes in economic and technological conditions; and

• Trade may take place on a large scale, such as at a basin or national level, or within a local region.

Table 3: A summary of state approaches to irrigation water allocation

State

Entitlement

Allocation policy

Supply reliability a

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