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Water markets and freshwater ecosystem services: Policy reform and implementation in the Columbia and Murray-Darling Basins

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  • Garrick, D.
  • Siebentritt, M.A.
  • Aylward, B.
  • Bauer, C.J.
  • Purkey, A.
Abstract
Water markets have featured prominently in the reallocation of water rights to restore freshwater ecosystem health. Incentive-based water rights acquisition and transactions have emerged as a market-oriented policy approach to reallocate water resources from existing uses to enhance the provision, regulation, and sustainability of freshwater ecosystem services. This paper develops a conceptual framework to examine factors enabling and constraining successful policy reform and implementation in market-based environmental water allocation. This analysis distills and extends the findings and lessons of a September 2007 workshop in Brisbane, Australia on environmental water transactions. Two case studies were selected in water stressed basins - the Columbia (U.S.A) and Murray-Darling (Australia) Basins - where transactional approaches to environmental water allocation first emerged. The case studies draw upon practitioner perspectives and previous policy and economic analysis in two regions where shared political economic and physical conditions lend a strong analytical basis for comparison. A common set of policy and regulatory reforms has occurred in both cases - albeit in different forms and via distinct paths - to develop three enabling conditions: (1) establishment of rights to and limits on freshwater extraction and alteration; (2) recognition of the environment as a legitimate water use; and (3) authority to transfer existing water rights to an environmental purpose. However, these elements of policy reform are necessary but not sufficient for effective implementation; a second set of driving forces, barriers, and adaptations explains the ability to achieve larger scale ecological outcomes. These conditions include the physical, social and economic factors driving demand for environmental water allocation; administrative procedures, organizational development and institutional capacity to effect transfers; and adaptive mechanisms to overcome legal, cultural, economic, and environmental barriers. The case study analysis suggests that environmental water transactions can play an important role in establishing environmental water allocations, although water markets require ongoing institutional capacity and adaptive governance. The conceptual framework and empirical lessons generated through this cross-case comparison provide the basis for an expanded research agenda to evaluate the design and performance of market-oriented reforms as implementation experience accrues and new programs emerge in diverse ecological and political economic settings.

Suggested Citation

  • Garrick, D. & Siebentritt, M.A. & Aylward, B. & Bauer, C.J. & Purkey, A., 2009. "Water markets and freshwater ecosystem services: Policy reform and implementation in the Columbia and Murray-Darling Basins," Ecological Economics, Elsevier, vol. 69(2), pages 366-379, December.
    • Handle: RePEc:eee:ecolec:v:69:y:2009:i:2:p:366-379
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    References listed on IDEAS

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    1. Productivity Commission, 2006. "Rural Water Use and the Environment: The Role of Market Mechanisms," Research Reports, Productivity Commission, Government of Australia, number 21, January.
    2. Bonnie G. Colby, 1990. "Transactions Costs and Efficiency in Western Water Allocation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(5), pages 1184-1192.
    3. Anderson, Terry L & Johnson, Ronald N, 1986. "The Problem of Instream Flows," Economic Inquiry, Western Economic Association International, vol. 24(4), pages 535-554, October.
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    Cited by:

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    2. Iglesias, Ana & Garrote, Luis, 2015. "Adaptation strategies for agricultural water management under climate change in Europe," Agricultural Water Management, Elsevier, vol. 155(C), pages 113-124.
    3. Hao Wang & Sander Meijerink & Erwin van der Krabben, 2020. "Institutional Design and Performance of Markets for Watershed Ecosystem Services: A Systematic Literature Review," Sustainability, MDPI, vol. 12(16), pages 1-26, August.
    4. Dustin Garrick & Bruce Aylward, 2012. "Transaction Costs and Institutional Performance in Market-Based Environmental Water Allocation," Land Economics, University of Wisconsin Press, vol. 88(3), pages 536-560.
    5. Carlos Mario Gómez Gómez & C. D. Pérez-Blanco & David Adamson & Adam Loch, 2018. "Managing Water Scarcity at a River Basin Scale with Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-31, January.
    6. Sarah Wheeler & Dustin Garrick & Adam Loch & Henning Bjornlund, 2011. "Incorporating Temporary Trade with the Buy-Back of Water Entitlements inAustralia," Centre for Water Economics, Environment and Policy Papers 1101, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
    7. Tapsuwan, Sorada & Polyakov, Maksym & Bark, Rosalind & Nolan, Martin, 2015. "Valuing the Barmah–Millewa Forest and in stream river flows: A spatial heteroskedasticity and autocorrelation consistent (SHAC) approach," Ecological Economics, Elsevier, vol. 110(C), pages 98-105.
    8. Palomo-Hierro, Sara & Loch, Adam & Pérez-Blanco, C. Dionisio, 2022. "Improving water markets in Spain: Lesson-drawing from the Murray-Darling Basin in Australia," Agricultural Water Management, Elsevier, vol. 259(C).
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    10. Colby, Bonnie, 2020. "Acquiring environmental flows: ecological economics of policy development in western U.S," Ecological Economics, Elsevier, vol. 173(C).
    11. Smith, Helen F. & Sullivan, Caroline A., 2014. "Ecosystem services within agricultural landscapes—Farmers' perceptions," Ecological Economics, Elsevier, vol. 98(C), pages 72-80.
    12. Ana Iglesias & Berta Sánchez & Luis Garrote & Iván López, 2017. "Towards Adaptation to Climate Change: Water for Rice in the Coastal Wetlands of Doñana, Southern Spain," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(2), pages 629-653, January.
    13. Tiangui Lv & Hualin Xie & Hua Lu & Xinmin Zhang & Lei Yang, 2019. "A Game Theory-Based Approach for Exploring Water Resource Exploitation Behavior in the Poyang Lake Basin, China," Sustainability, MDPI, vol. 11(22), pages 1-14, November.
    14. Broadbent, Craig D. & Brookshire, David S. & Coursey, Don & Tidwell, Vince, 2014. "An experimental analysis of water leasing markets focusing on the agricultural sector," Agricultural Water Management, Elsevier, vol. 142(C), pages 88-98.
    15. Gaoliu Huang & Shiming Feng & Chunguang Hu, 2024. "A Study of the Spatiotemporal Evolution Patterns and Coupling Coordination between Ecosystem Service Values and Habitat Quality in Diverse Scenarios: The Case of Chengdu Metropolitan Area, China," Sustainability, MDPI, vol. 16(9), pages 1-30, April.
    16. Booth, Eric G. & Zipper, Samuel C. & Loheide, Steven P. & Kucharik, Christopher J., 2016. "Is groundwater recharge always serving us well? Water supply provisioning, crop production, and flood attenuation in conflict in Wisconsin, USA," Ecosystem Services, Elsevier, vol. 21(PA), pages 153-165.
    17. Wight, Charles & Garmany, Kyle & Arima, Eugenio & Garrick, Dustin, 2024. "Texas water markets: Understanding their trends, drivers, and future potential," Ecological Economics, Elsevier, vol. 224(C).
    18. Yan, Dong & Chen, Lin & Sun, Huaiwei & Liao, Weihong & Chen, Haorui & Wei, Guanghui & Zhang, Wenxin & Tuo, Ye, 2022. "Allocation of ecological water rights considering ecological networks in arid watersheds: A framework and case study of Tarim River basin," Agricultural Water Management, Elsevier, vol. 267(C).

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