Water Markets as Governance Innovations: A Comparative Institutional Analysis

• In Event: Water Politics and Governance

Abstract

In snow-fed river basins across the arid western United States, variability in the timing and amount of surface water flow is increasing due to climate change. As a result, water users across sectors – from those who make a living off irrigated agriculture to those who advocate for increased environmental flows for species and habitat preservation – are experiencing uncertainty about how much water will be available for their needs and when. Because the period of major water infrastructure development to create “new” water supplies is long over in the western U.S., the predominant mechanism through which individuals can obtain additional water is through the transfer of pre-existing water rights to new users and uses via “water markets.” Although the system of rules that governs water allocation in the western U.S. (prior appropriation) has historically limited the viability of some types of water markets, water governance entities ranging from conservation and irrigation districts to federal government agencies have begun experimenting with flexible market-based mechanisms to achieve a variety of water supply goals under changing conditions. For example, water market programs have been piloted that allow agricultural water right holders to voluntary and temporarily lease their water to other users, such as environmental organizations or cities, for fair compensation with the goal of meeting multiple users’ needs in times of water shortage.

Through a comparative case study of the different types of water markets that have been implemented in two river basins in the western U.S. – the South Platte River Basin (Colorado) and the Walker River Basin (California/Nevada) – this paper explores how experimental market mechanisms for water trading and transfer have been integrated into pre-existing water governance structures, as well as how water users and managers perceive the viability and effectiveness of these water governance innovations for addressing their water supply challenges. The South Platte and Walker River basins are both agriculturally-dominated, reliant on winter snowpack for annual water supplies, and already experiencing the dire effects of climate change. However, they are governed by different institutions, are experiencing different urban development pressures, and have different histories of water marketing practices. Drawing on approximately 60 qualitative interviews with diverse water users across the basins, as well as an institutional analysis of archival and secondary literature, we analyze how these differences impact the implementation and users’ perceptions of water markets. Our findings provide insight into how water markets as environmental governance innovations work in practice, whose interests are served, and how market mechanisms may need to change in the future to meet evolving water supplies and demands.

Authors

• Elizabeth Koebele, University of Nevada, Reno

• Shelby Hockaday, University of Nevada Reno

• Abigail M. York, Arizona State University

• Loretta Singletary, University of Nevada Reno