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Abstract
The Australian Capital Territory (ACT) became a full participant in the Murray Darling Basin (MDB)
Initiative in 1998. This opened the opportunity for the ACT to establish water trading arrangements
with the other MDB member States. Provisions to facilitate this trade are currently being developed. In
addition, the ACT is required to negotiate an initial “Cap” level with the other MDB members before
water trading can begin. The Cap defines the amount of water resources for which each State has
extractive rights, and is based on 1993/94 levels of water utilising development. This paper
investigates alternative trading strategies that could be used to “build” Cap over time, and explores the
implications for negotiation of the initial ACT Cap endowment.