The Barr government has extended consultation on Territory Plan Draft Variation 354, which revises the code on how the impact of urban development on waterways is mitigated.

The idea of water-saving urban design is to reduce demand for potable water by making appliances more efficient, increasing the use of rainwater, minimising wastewater generation and improving the quality of stormwater.

When the changes were first released, Land Strategy and Environment deputy director-general Dr Erin Brady said the draft variation would encourage more green spaces and porous areas, set targets for mains water reduction and the quality of stormwater, as well as encourage new developments to be more environmentally friendly by including wetlands, ponds and rain gardens.

However the Conservation Council ACT has raised the alarm about another element of the variation, which would allow developers to purchase offsets in order to meet these targets.

Dr Brady said this would give developers "flexibility", but the council's director Larry O'Loughlin said he was concerned the draft variation included "too many ways for developers, and the government, to avoid doing good design".

"Water-saving urban design is an essential part of Canberra’s growth, and minimises drinking water use for irrigation with benefits in cooler environments, and less need to potentially pump water from the river," Mr O'Loughlin said.

"We can expect from climate predictions that Canberra will have more severe droughts, as well as greater floods, and we need to more carefully manage water as an increasingly scarce resource.

"Given that we are an urban society with steadily predicted population increase we need to be prepared for progressive water scarcity, and policies are needed to conserve and effectively use the water available."

In its submission, the council said offsets of any type were notoriously difficult to set up and to achieve actual results.

A land offset scheme in NSW allows developers to pay a fee to government instead and the ACT proposal appeared to be similar, the council said.

"Unless the utmost rigour is employed to implement a water-saving urban design offset, the outcome is likely to be overall negative," the submission said.

It also warned the ACT's "inform and educate" approach to regulation, coupled with the offsets, would mean less adherence to the rules than there was now.

An audit in February found the territory had to foot a $750,000 bill to fix erosion and sediment run-off at Coombs Ponds last year, due to a lack of ACT government enforcement of erosion and sediment rules.

"The application of a substantial fine would be far more effective," the council said.

Mr O'Loughlin suggested the government consider water infrastructure that better encourages water retention, water recycling and water efficiency.

"These might include more constructed wetlands, stormwater ponds and grassed swales especially along existing major stormwater channels," Mr O'Loughlin said.

"[It might also include] permeable root protection and water catchment for urban trees, along with enhanced urban tree planting to reduce heat loads and water run-off.

"All new developments should have reduced stormwater runoff to retain more moisture in the local environment and water tables. More rain gardens should be established in new and existing suburbs to mitigate stormwater runoff and the community should be able to be involved in care and maintenance of the rain gardens. Greywater should be reused including for gardens and regulated using a risk management approach."

The revision to the code come after a 2014 review concluded the code and water-saving requirements in development codes in the territory plan may stifle innovation by limiting the options available to meet the rules.

Consultation on the draft variation has been extended to December 21.