Analysis of constraints to water marketing and an evaluation of select techniques to facilitate market-based reallocations
Water shortages are a frequent occurrence in some river basins in the American West. With growing water demand in many of these basins, competition over water resources is intensifying. Water marketing is one method of easing the strain over water; those with water rights can lease or sell their water to parties with the highest willingness to pay. This solution involves only willing parties, and allows water to move to its highest economic use.
Despite the merits of an economics-driven, voluntary water transfer system, markets have thus far been limited in moving water across uses. Several reasons exist for this stagnation. In order to effectively reallocate water, markets need a "helping" hand. This study identifies methods which may have the effect of allowing transfers of water at low cost, while still adequately protecting third-party impacts. While water transfers may never be seamless transactions, it may be possible to make them efficient enough to allow markets to move water to higher economic uses during times of shortage.
This research uses SWOT analysis to explore the strengths, weaknesses, opportunities, and threats of selected facilitating techniques. This is done to gain a better understanding of the options available to policy makers to create water transaction environments that protect the public interest, but allow willing parties to transfer water at low cost.
The results from the expert survey conducted suggest that some of the facilitating environments identified in this research may have the potential of lower transaction costs and increase the amount of water traded. However, for this to occur, some compromises may have to be reached; each of these techniques also posses drawbacks that could prevent their implementation. Ultimately, policy makers will have to weigh the political and social resistance to moving water away from low-value historical water uses verses the need to reallocate water to increase the available water supply for new uses.
