Water Markets

In the early 1980s, PERC was a pioneer in promoting the use of markets to encourage water conservation and to reallocate water to higher valued uses. The idea caught on. Governments have begun to remove obstacles to water trading, and water markets have fostered conservation and cooperation in Australia, Brazil, Colorado, Mexico, and Spain.

By removing barriers to trade in California and elsewhere, robust water markets can emerge to allow water banking and water conservation. Water crises need not occur if individuals are allowed to respond to scarcity through market processes.

Tapping Water Markets in California: Six Policy ReformsTapping Water Markets in California: Six Policy Reforms
These policy proposals will not magically increase water supplies in the Golden State, but they do offer a reasonable starting point for tapping water markets to make the most of California's scarce water resources.
Scott River Water Trust, harnessing water markets to provide habitat for coho salmon Scott River Water Trust: Improving Stream Flows the Easy Way
Water markets are a win-win. The Scott River Water Trust in Siskiyou County pays farmers to leave water instream for salmon and steelhead. This case study looks at how low-volume, low-cost water leases support agricultural communities and municipal development while also enhancing environmental flows.
Water from the Desert, Entrepreneurs Tap into Unlikely Source 

Water from the Desert: Entrepreneurs Tap Into Unlikely Source
With less than a foot of rainfall each year, the Mojave Desert is not an obvious place to look for water. An innovative proposal to pump groundwater from the Mojave to nearby Southern California municipalities could change that perception. This case study looks at how the proposed Cadiz Valley Water Conservation, Recovery, and Storage Project plans to use water markets to develop a new source of water in an unexpected place.

Pulse Flow on the Colorado River, Morelo Dam. Photo by Andrew AyresPulse Flow on the Colorado
After brokering conservation deals upstream, buying unused water rights from Mexican farmers downstream, and even helping renegotiate an international water treaty to temporarily allow for more flexible water trading, this “pulse flow” revived the Colorado and reconnected the river to the Pacific Ocean.
Tapping Water Markets by Terry Anderson, Brandon Scarborough, and Reed Watson Tapping Water Markets
How can we effectively tap water markets? This book is about the past, present, and future of water markets. It compares water markets with political water allocation, documents the growth of water markets, and explores the ways in which water markets can be improved and implemented further.
Warming up to Water Markets
Climate change will likely exacerbate pressures on water resources worldwide, increasing the urgency with which managers and policymakers must address water supply concerns. PERC Senior Fellow Jonathan Adler offers several steps government agencies can take to facilitate the development of water markets.
 Solutions to California's DroughtThe Solution to California's Drought: A Free Market in Water
In this video from ReasonTV, Reed Watson explains how government created an artificial shortage of our most essential resource.
Zack Donohew discusses water markets as a solution to California's drought Market Magic: Water Woes
Nature causes drought but water shortages are manmade. In this video, John Stossel interviews water economist and PERC alum Zack Donohew.
 California droughtCalifornia in Crisis: Busting Water Myths
Whiskey is for drinking; water is for cooperation? Ownership of water sources and in-stream flows evolved to allow the voluntary exchange of water rights.
 Folsom Lake Drought. USGS image by David Pratt.What California Can Learn About Drought from the Land Down Under
Like California, Australia recently experienced a prolonged period of drought. In response, Australia implemented several reforms to promote water markets that allowed water trading to occur across competing uses. Q&A with Jeff Bennett on Australia’s water market reforms.
 Brandon Scarborough on Tapping Water MarketsTapping Water Markets Video
Authors Reed Watson and Brandon Scarborough briefly describe and give examples of how water markets can not only provide water where it is needed most, but avoid the acrimony of past water disputes. 
The Hamilton Project  •  Brookings      1 Peter W. Culp, Robert Glennon, and Gary Libecap Shopping for Water:  How the Market Can Mitigate Water Shortages in the American West by Peter Culp, Robert Glennon, and Gary Libecap 

Shopping for Water: How the Market Can Mitigate Water Shortages in the American West
In this discussion paper from The Hamilton Project, PERC Senior Fellow Gary Libecap, PERC alum Robert Glennon, and Peter Culp offer five proposals to encourage the broader establishment and use of market institutions to encourage reallocation of water resources and to provide new tools for risk mitigation.