Markets and Trading
Groundwater Trading as a Tool for Implementing California’s Sustainable Groundwater Management Act (Environmental Defense Fund)
A water market is much like a stock market for water, but instead of trading stocks and bonds, sellers in water markets offer short- or long-term transfers of water. In some cases, sellers may sell water rights permanently.
California has had a relatively active water market since the 1980’s with the majority of water transfers occurring with the same county or region. Despite significant growth in the number of water transfers in the 1990’s, the number of water transfer has remained largely stable with approximately 1.2 maf/year in transfers since 2000.
Water trading can be an effective tool for water managers to provide flexibility in the allocation and use of water by moving water to where it is needed most, especially during times of drought. Water transfers can also help accommodate shifts in water demand over the long-term. Transfers, however, must be carried out in a responsible manner in order to assure that they do not result in adverse impacts to other water users or unreasonable impacts on the environment.
The benefits of a water market can only be realized if the market is managed effectively. An effective water market needs to have clear and established water rights, an ability to make transactions related to those water rights, and access to relevant market information.