ADMINISTRATIVE,INSTITUTIONAL, AND STRUCTURAL CHARACTERISTICS OF AN ACTIVE WATER MARKET1

ABSTRACT: Voluntary water transfers through markets have been advocated by many diverse groups as a means to reallocate scarce water supplies in the semi-arid western U.S. Although transfers of water rights have occurred almost since the creation of prior appropriation laws over a century ago, functioning water markets have been very slow to develop and are few in number. The structure, composition, administration and transactions of one of the most well established water markets, shares in the Bureau of Reclamation, Colorado-Big Thompson project, are examined to better understand the institutional and transfer conditions that sustain an active water market. Results from a detailed study of C-BT project records reveal that between 1970 and 1993 there were 2,698 transactions through which over one-third of the project water changed ownership or type of use. Further analysis shows that the transactions involved many individual sellers and categories of buyers with different uses, including agricultural buyers. The transfer activity and efficiency of the C-BT market has lead some to suggest that it be used as a model for other markets. However, because this market has fewer institutional restrictions, a well developed infrastructure and unique market conditions, it will be difficult to transfer this model to other areas without accompanying modifications in water right administration and institutions.     

Evidence Supporting Cap and Trade as a Groundwater Policy Option for Reducing Irrigation Consumptive Use1

Thompson, Christopher L., Raymond J. Supalla, Derrel L. Martin, and Brian P. McMullen, 2009. Evidence Supporting Cap and Trade as a Groundwater Policy Option for Reducing Irrigation Consumptive Use. Journal of the American Water Resources Association (JAWRA) 45(6):1508‐1518. Abstract: In the American West water is becoming an increasingly scarce resource. Obligations to bordering states, endangered species protection, and long‐term resource sustainability objectives have created a need for most western states to reduce the consumption of irrigation water. In Nebraska specifically, the Nebraska Department of Natural Resources (NDNR) and local Natural Resource Districts (NRDs) are meeting a large part of this need by using a regulatory approach, commonly called groundwater allocation. The cost of allocation, which occurs in the form of reduced economic returns to irrigation, could be greatly reduced by using an integrated cap and trade approach. Much like environmental cap and trade programs which are used to reduce the cost of limiting environmental pollution, the trading of capped groundwater allocations can reduce the cost of limiting water use. In an analysis of a typical case in the Nebraska Republican Basin, we found that the impact of a water market to trade groundwater allocations depended on the size of the allocation and on the characteristics of the land and irrigation systems involved in the trade. Potential economic benefits from trade ranged from US$0 to US$120 per 1,000 cubic meters traded, from US$25 to US$250 per 1,000 cubic meters of reduction in consumptive use, and from US$16 to US$50 per hectare of irrigated land in the region. The highest benefits occurred at relatively high allocations, which capped withdrawals at 65‐75% of the expected unrestricted pumping level. These gains from trade would be split between buyers and sellers based on the negotiated selling price.     

Rural market imperfections and the role of institutions in collective action to improve markets for the poor

Many countries in sub‐Saharan Africa have liberalized markets to improve efficiency and enhance market linkages for smallholder farmers. The expected positive response by the private sector in areas with limited market infrastructure has however been very limited. The functioning of markets is constrained by high transaction costs and coordination problems along the production‐to‐consumption value chain. New kinds of institutional arrangements are needed to reduce these costs and fill the vacuum left when governments withdrew from markets in the era of structural adjustments. One of these institutional innovations has been the strengthening of producer organizations and formation of collective marketing groups as instruments to remedy pervasive market failures in rural economies. The analysis presented here with a case study from eastern Kenya has shown that marketing groups pay 20–25% higher prices than other buyers to farmers while participation was also positively correlated with adoption of improved dryland legume varieties, crops not targeted by the formal extension system. However the effectiveness of marketing groups is undermined by external shocks and structural constraints that limit the volume of trade and access to capital and information, and require investments in complementary institutions and coordination mechanisms to exploit scale economies. Successful groups have shown high levels of collective action in the form of increased participatory decision making, member contributions and initial start‐up capital. Failure to pay on delivery, resulting from lack of capital credit, is a major constraint that stifles competitiveness of marketing groups relative to other buyers. These findings call for interventions that improve governance and participation; mechanisms for improving access to operating capital; and effective strategies for risk management and enhancing the business skills of farmer marketing groups.     

EFFICIENCY IN THE USE OF WATER FOR IRRIGATION: THE ROLE OF PRICES AND REGULATIONS

Efficiency in the use of water for irrigation is normally defined in a physical sense - engineering and agronomic; and it is often assumed that higher efficiency is desirable. However, in an economic sense, there is an optimum range in the level of physical efficiency. Normally it can be said that as water prices increase, it becomes more rational to increase physical efficiency by selecting and adopting improved methods of controlling, measuring and applying water, and to design systems of pricing and regulations that will promote optimal allocation and efficient use. However, the value of water is often extremely low, in which case there may be little economic incentive to improve physical efficiency unless forced by physical factors that affect production and productivity such as soil characteristics, waterlogging or nutrient leaching.
The combination of regulations and prices that are used to allocate irrigation water reflect the conflicting goals of redistribution of income in favor of agriculture and needs to encourage efficient use of water. Regulations and pricing systems also depend on the value of water, the dependability of supplies, systems of delivery and the extent to which flows can be regulated.
Using examples and case studies, this paper discusses physical and economic efficiencies and their interrelationships. It emphasizes the role of pricing and regulations and provides general guidelines.     

Exploring Nontraditional Participation as an Approach to Make Water Quality Trading Markets More Effective

Water quality trading (WQT) has the potential to be a low‐cost means for achieving water quality goals. WQT allows regulated wastewater treatment plants (WWTPs) facing discharge limits the flexibility to either reduce their own discharge or purchase pollution control from other WWTPs or nonpoint sources (NPSs) such as agricultural producers. Under this limited scope, programs with NPSs have been largely unsuccessful at meeting water quality goals. The decision to participate in trading depends on many factors including the pollution control costs, uncertainty in pollution control, and discharge limits. Current research that focuses on making WQT work tends to identify how to increase participation by traditional traders such as WWTPs and agricultural producers. As an alternative, but complementary approach, we consider whether augmenting WQT markets with nontraditional participants would help increase the number of trades. Determining the economic incentives for these potential participants requires the development of novel benefit functions requiring not only economic considerations but also accounting for ecological and engineering processes. Existing literature on nontraditional participants in environmental markets tends to center on air quality and only increasing citizen participation as buyers. Here, we consider the issues for broadening participation (both buyers and sellers) in WQT and outline a multidisciplinary approach to begin evaluating feasibility.     

From open access to access by all: restating challenges in designing groundwater management in Andhra Pradesh, India

In a village-based watershed in Andhra Pradesh, India, it is increasingly difficult for users to access and extract groundwater for irrigation: a 'pumping race' is taking place. A move from groundwater development towards groundwater management is required, with a new perspective on options for change. Through a study of borewell technology and groundwater use, and considering new local developments in electricity supply and participatory resource management, the article argues that groundwater is a resource with 'instructions for use'. The technological dimensions of groundwater irrigation urge its study as a socio-technical process in order to design sustainable and equitable groundwater management.     

Developing adaptive capacity within groundwater abstraction management systems

Groundwater is a key resource for global agricultural production but is vulnerable to a changing climate. Given significant uncertainty about future impacts, bottom-up approaches for developing adaptive capacity are a more appropriate paradigm than seeking optimal adaptation strategies that assume a high ability to predict future risks or outcomes. This paper analyses the groundwater management practices adopted at multiple scales in East Anglia, UK, to identify wider lessons for developing adaptive capacity within groundwater management. Key elements are (1) horizontal and vertical integration within resource management; (2) making better use of water resources, at all scales, which vary in space and time; (3) embedding adaptation at multiple scales (from farm to national) within an adaptive management framework which allows strategies and management decisions to be updated in the light of changing understanding or conditions; (4) facilitating the ongoing formation through collective action of local Water Abstractor Groups; (5) promoting efficient use of scarce water resources by these groups, so as to increase their power to negotiate over possible short-term license restrictions; (6) controlling abstractions within a sustainable resource management framework, whether at national (regulatory) or at local (Abstractor Group) scales, that takes account of environmental water needs; and (7) reducing non-climate pressures which have the potential to further reduce the availability of usable groundwater.     

Water farms and transfer conflicts in Arizona,USA: A proposed resolution process

Water is a relatively scarce resource in Arizona, especially since the recent urban growth booms of Phoenix and Tucson. Arizona's 1980 Groundwater Management Act was the precursor to current water-transfer conflicts between urban buyers, rural farmers, and third parties. Water farms are bought with the intention to transfer their appurtenant groundwater to the two major metropolitan areas. As water markets have emerged, differing values and public interest issues have become apparent, while the state legislature attempts to resolve inequities. Site-specific transfer disputes, as well as policy-making conflicts, offer suitable situations for a mediation process. Equity- and efficiency-based criteria are suggested as the basis for resolving water-transfer conflicts, and a mediation process is proposed. However, third parties must develop an agenda, and a balance of power should be attained before mediation can effectively forge an agreement on water-transfer policies. The attainment of statewide policies generated through a mediated process has the potential to expand long-range regional water planning and management.     

Inputs of nutrients and fecal bacteria to freshwaters from irrigated agriculture: case studies in Australia and New Zealand

Increasing demand for global food production is leading to greater use of irrigation to supplement rainfall and enable more intensive use of land. Minimizing adverse impacts of this intensification on surface water and groundwater resources is of critical importance for the achievement of sustainable land use. In this paper we examine the linkages between irrigation runoff and resulting changes in quality of receiving surface waters and groundwaters in Australia and New Zealand. Case studies are used to illustrate impacts under different irrigation techniques (notably flood and sprinkler systems) and land uses, particularly where irrigation has led to intensification of land use. For flood irrigation, changes in surface water contaminant concentrations are directly influenced by the amount of runoff, and the intensity and kind of land use. Mitigation for flood irrigation is best achieved by optimizing irrigation efficiency. For sprinkler irrigation, leaching to groundwater is the main transport path for contaminants, notably nitrate. Mitigation measures for sprinkler irrigation should take into account irrigation efficiency and the proximity of intensive land uses to sensitive waters. Relating contaminant concentrations in receiving groundwaters to their dominant causes is often complicated by uncertainty about the subsurface flow paths and the possible pollutant sources, viz. drainage from irrigated land. This highlights the need for identification of the patterns and dynamics of surface and subsurface waters to identify such sources of contaminants and minimize their impacts on the receiving environments.     

Water and the potential for social instability: Livelihoods, migration and the building of society

In much of the Third World, access to secure water for irrigation, particularly groundwater, reduces vulnerability, stabilizes livelihoods,alleviates poverty and 'entitles' populations to education and other forms of capital accumulation. Water resource development can, as a result, be used as a key tool for addressing the social roots of instability. The reverse is also true — problems such as groundwater overdraft contribute to poverty and are often at the root of forced migration and the creation of underemployed and unstable displaced populations. Water is fundamental to regional as well as local security.
The benefits of water resource development and the risks associated with unsustainable use patterns are particularly critical in arid regions. Patterns of water use that are unsustainable can play a positive role in the transition of populations from nomadic or migratory to stable communities, where people have access to education and asset accumulation. The exit is, however, as important as the entry. In many regions, the majority of the population now need to make the transition from agriculture to non–agricultural livelihoods. Many people, particularly the wealthy, may already be doing this. Understanding and enabling transition represents one of the most important policy challenges for coming decades.
Using examples from India, Yemen, Saudi Arabia and other countries, this article documents some of the connections between water and security and clarifies the importance of effective solutions to water problems and to social transition in arid regions.     

INSTITUTIONAL BARRIERS TO WATER MARKETING IN THE WEST1

ABSTRACT: Water marketing has been proposed as one means of reallocating water supplies in the western United States. While markets for western water currently exist and may be expected to expand, the institutional constraints within which the markets must operate will limit the ultimate size and efficiency of those markets. Lack of articulation of public interests in the water resource itself leads to incomplete definition of the private rights to use the water, and it is those private rights which are sold or leased in the market. The increase in size and efficiency of any market in water rights will be dependent on the willingness of legislatures to specifically define the nature and extent of public interests in water supplies, and detailed definition is unlikely.     

Outsourcing sustainability: a game-theoretic modeling approach

As a response to stakeholders’ interest in sustainable products and services, an organization may change its approach to sustainability issues, from isolated social and environmental projects to corporate sustainability strategies and practices that are part of their core business. However, many of the efforts associated with these sustainability strategies cannot be directly exerted by focal organizations. We consider the situation in which a focal organization (sustainability buyer) outsources sustainability efforts to another organization (sustainability seller). While buyers cannot directly exert sustainability efforts, they can provide economic or technical support to their sellers in order to incentivize these efforts. We investigate how the effort and support decisions change according to characteristics of stakeholders, buyers, and sellers. Additionally, the presence of sustainability-minded stakeholders may lead to buyers’ competition on the sustainability effort exerted by their sellers. Therefore, we extend our analysis of sustainability efforts and incentives to the case of two competing buyers, and we determine conditions under which sharing a seller is preferred by the buyers to having a separate seller for each buyer.     

GROUNDWATER MANAGEMENT ON THE TEXAS HIGH PLAINS1

ABSTRACT The effects of major water management practices on the pumping requirement from the Ogallala aquifer are discussed. Demand on the aquifer may be reduced as much as 15 percent by recycling irrigation runoff, 25 percent by recycling irrigation runoff and irrigating with water from playas, and 29 percent by recycling irrigation water in combination with irrigation from playas and artificial recharge of playa water to the aquifer. Other practices that can result in more efficient use of precipitation and groundwater are limited irrigation, land forming, soil profile modification, and improved irrigation systems, thereby reducing the pumping demand on the Ogallala. Additional water supplies can possibly be obtained by water harvesting, weather modification, and water importation. Conclusions reached were that the overdraft on the aquifer can be reduced by the application of sound water management practices on an area-wide basis.     

Irrigation pricing policies and its impact on agricultural inputs demand in Tunisia: a DEA-based methodology

This paper estimates farmers' individual irrigation water demand functions employing the information hidden in individual farmers' technical efficiency. This information is extracted through the development of a new deductive methodology based on inverse Data Envelopment Analysis (DEA) models. The empirical results for Tunisia show that farmers who are more technically efficient have less elastic irrigation water demand functions; these farmers would adjust demand only to a limited extent and they can afford the water price. In contrast, water pricing significantly affects those that are less efficient. These farmers shift towards a different cropping pattern using significantly less water and more land when the price of water increases. Thus, higher water prices would threaten this category's livelihood if their efficiency is not improved. However, if the technical efficiency of these farmers were to improve, then it would be more difficult to reach water saving objectives since their demand will also become highly inelastic. The findings have important implications in view of the objectives of Tunisia water policy which include:full cost recovery, continuity of the irrigation activity, and water saving at the national level.     

Simulating the Impacts of Irrigation Levels on Soybean Production in Texas High Plains to Manage Diminishing Groundwater Levels

There is an increasing need to strategize and plan irrigation systems under varied climatic conditions to support efficient irrigation practices while maintaining and improving the sustainability of groundwater systems. This study was undertaken to simulate the growth and production of soybean [Glycine max (L.)] under different irrigation scenarios. The objectives of this study were to calibrate and validate the CROPGRO‐Soybean model under Texas High Plains’ (THP) climatic conditions and to apply the calibrated model to simulate the impacts of different irrigation levels and triggers on soybean production. The methodology involved combining short‐term experimental data with long‐term historical weather data (1951–2012), and use of mechanistic crop growth simulation algorithms to determine optimum irrigation management strategies. Irrigation was scheduled based on five different plant extractable water levels (irrigation threshold [ITHR]) set at 20%, 35%, 50%, 65%, and 80%. The calibrated model was able to satisfactorily reproduce measured leaf area index, biomass, and evapotranspiration for soybean, indicating it can be used for investigating different strategies for irrigating soybean in the THP. Calculations of crop water productivity for biomass and yield along with irrigation water use efficiency indicated soybean can be irrigated at ITHR set at 50% or 65% with minimal yield loss as compared to 80% ITHR, thus conserving water and contributing toward lower groundwater withdrawals. Editor's note: This paper is part of the featured series on Optimizing Ogallala Aquifer Water Use to Sustain Food Systems. See the February 2019 issue for the introduction and background to the series.     

IMPACT ON GROUNDWATER RESOURCES OF CONVERSION FROM FURROW TO DRIP IRRIGATION1

ABSTRACT A model is developed to analyze the groundwater conservation and depletion effects of converting sugarcane irrigation from the furrow to the drip method. The results do not support the commonly held notion that more efficient use of irrigation water will release scarce water supplies for metropolitan growth.     

A multi-objective optimisation approach to water management

The management of river basins is complex especially when decisions about environmental flows are considered in addition to those concerning urban and agricultural water demand. The solution to these complex decision problems requires the use of mathematical techniques that are formulated to take into account conflicting objectives. Many optimization models exist for water management systems but there is a knowledge gap in linking bio-economic objectives with the optimum use of all water resources under conflicting demands. The efficient operation and management of a network of nodes comprising storages, canals, river reaches and irrigation districts under environmental flow constraints is challenging. Minimization of risks associated with agricultural production requires accounting for uncertainty involved with climate, environmental policy and markets. Markets and economic criteria determine what crops farmers would like to grow with subsequent effect on water resources and the environment. Due to conflicts between multiple goal requirements and the competing water demands of different sectors, a multi-criteria decision-making (MCDM) framework was developed to analyze production targets under physical, biological, economic and environmental constraints. This approach is described by analyzing the conflicts that may arise between profitability, variable costs of production and pumping of groundwater for a hypothetical irrigation area.     

Problems and Prospects for Water Reallocation in Australia

The misallocation of water supplies and the pressures for reallocation in Australia are well-recognized. Suggestions to achieve more efficient use of the very limited water supplies of the nation through pricing or through water markets have been raised. However, such approaches appear to have little chance of implementation because of established legal practice and political reality. If more efficient use of limited water supplies is a pressing social priority, a more practical approach to achieving such ends may be to consider reallocative mechanisms which will operate within the existing institutional structure. One approach which fits these criteria is the irrigation land buy-back.     

Sustaining Asia's groundwater boom: An overview of issues and evidence

This article suggests that Asia’s groundwater socio‐ecology is at an impasse. Rapid growth in groundwater irrigation in South Asia and the North China plains during the period 1970–95 has been the main driver of the agrarian boom in these regions. India, Pakistan, Bangladesh and China account for the bulk of the world’s use of groundwater in agriculture. On the plus side, groundwater development has provided sustenance to agrarian economies and millions of rural livelihoods. On the downside, it has created chronic problems of resource depletion and quality deterioration. While problems of groundwater depletion, pollution and quality deterioration are indeed serious, so are the consequences of the degradation of the resource for those that have come to precariously depend upon groundwater irrigation. Three problems currently afflict groundwater use: depletion due to overdraft; water logging and salinization; and pollution due to agricultural, industrial and other human activity. The pathology of the decline in groundwater socio‐ecology reflects a remarkably similar pattern across regions. The critical issue for Asia now is: what might be done to sustain and revive these groundwater socio‐ecologies vital to the region’s economy? This article reviews a variety of techno‐institutional approaches. However, transposing lessons from the industrialized world uncritically in the Asian context may not work. A more nuanced understanding of the peculiarities of Asia’s groundwater socio‐ecology is needed.     

Irrigation water management policies: Allocation and pricing principles and implementation experience

Food security and sustainable development require efficient use of water resources, especially in irrigation. Economic pricing can be an effective tool to achieve more efficient water use, provided it is supported by other policies in implementation. Applying various water pricing and cost recovery arrangements is suggested for efficient allocation. Any adverse impact on farmers’ incomes must be addressed and more reliable service must accompany higher prices. Experience from several countries suggests a variety of implementation issues. Essential complements to water pricing are water distribution rules and technological choices at critical nodes in the delivery system that allow farmers flexibility in conserving water in response to higher prices. Among supporting institutions, water users associations seem a higher priority than water markets.