Goal-based water trading expands and diversifies supplies for enhanced resilience

Nature Portfolio (Springer Nature) | February 11th, 2019

In response to rising water scarcity concerns around the world, water utilities are expanding and diversifying their water supply portfolios, including attempting to valu

In response to rising water scarcity concerns around the world, water utilities are expanding and diversifying their water supply portfolios, including attempting to value and reuse every drop throughout the water cycle. This transition is creating new hybrid infrastructure systems that combine centralized and decentralized sources at various scales. To help strategize and manage these emerging hybrid systems, we introduce a flexible goal-based water-trading framework using a combination of regulatory and market incentives. We apply this framework in a simulation of the San Francisco Bay Area, and test the effects of policy parameters, local preferences and collaboration between utilities. Results show that the option of engaging in an open trading scheme can lead to a more strategic and holistic path to higher regional resiliency through increased diversity in water portfolios, at lower costs than if utilities were tasked with pursuing goals independently. Highest benefits are observed when utilities cooperate in the exchange of information, which highlights the importance of transparency and trust operating in conjunction with regulatory and market forces.

Groundwater Exchange Pools and Urban Water Supply Sustainability: Modeling Directed and Undirected Networks

American Society of Civil Engineers (ASCE) | August 1st, 2018

Groundwater basins are important sources of water supply and storage for many cities. Groundwater exchange pools offer additional opportunities for utilizing these

Groundwater basins are important sources of water supply and storage for many cities. Groundwater exchange pools offer additional opportunities for utilizing these common pool resources, but their potential role in urban water management is not clear, and modeling such exchanges can be challenging. This paper presents an analysis of the potential for groundwater basin exchange pools to contribute to urban water supply sustainability. Building on an existing model of urban water management in Los Angeles, the analysis assesses the potential for groundwater exchange pools to reduce scarcity and demonstrates a method for modeling two-way (undirected) flows within a directed-network model using linear programming. Results indicate that exchange pools can help alleviate shortages from operational changes (reduced imported water) in Los Angeles, but providing more parties with access to storage improves their effectiveness. Exchange pools could potentially provide 6–12% of total supplies and reduce shortages as much as 86%. Considerations for organizing exchange pools are discussed to explore policy implications for managing common pool resources. The analytical method for embedding undirected network flows within a larger directed-network model has wide applicability for water resource systems analysis applications, including modeling water markets and interbasin transfers. * U.C. Davis hosts a discussion of the content by the authors at California Water Blog. 

Groundwater Trading as a Tool for Implementing California’s Sustainable Groundwater Management Act

Environmental Defense Fund (EDF) | December 8th, 2017

Until recently, the State of California lacked comprehensive groundwater management policy. While many basins havebeen adjudicated in court or have adopted voluntary grou

Until recently, the State of California lacked comprehensive groundwater management policy. While many basins havebeen adjudicated in court or have adopted voluntary groundwater management programs following Assembly Bill 3030 and Senate Bill 1938, the vast majority of groundwater use remained unregulated. In 2014, the State Legislature passed the landmark Sustainable Groundwater Management Act (SGMA) in response to wide-ranging consequences of prolonged and unchecked groundwater pumping. While groundwater serves as an important primary and supplemental water supply for many water users, over-pumping can result in negative consequences, six of which are listed as “undesirable results” under SGMA: chronic aquifer overdraft, reduction of groundwater storage, seawater intrusion, degradation of water quality, land subsidence, and depletion of hydrologically connected surface water. SGMA requires local Groundwater Sustainability Agencies (GSAs) to develop and implement Groundwater Sustainability Plans (GSPs) to manage groundwater to avoid such consequences. To meet the requirements of SGMA, GSAs will need to employ a wide range of management tools. This paper focuses on one set of these tools: groundwater trading programs. Trading goes by many different names, including markets, cap and trade, transfers, credit programs, banking, pooling, and exchanges. For the purposes of this paper, we have elected to use the terms “trading” and “trading programs” as the broader categorization of incentive-based management tools. Trading can be executed through a wide range of exchange vehicles, including short- and long-term leases, permanent transfers, and other more advanced or unique arrangements, such as inter-annual water exchanges or dry-year options contracts.

How are Western water districts managing groundwater basins?

California Agriculture (UCANR) | March 13th, 2018

Making the transition from open-access groundwater rights to sustainable groundwater management is a formidable task for newly formed groundwater sustainability age

Making the transition from open-access groundwater rights to sustainable groundwater management is a formidable task for newly formed groundwater sustainability agencies in California. As agencies begin to decide how to make equitable water allocations, how to monitor groundwater use and what mix of supply- and demand-side mechanisms to adopt to satisfy sustainability criteria, the groundwater management strategies in place across other basins in the western United States are worth studying. We surveyed 18 groundwater districts in California and other Western states to identify the management approaches and practices they have instituted. The conclusions we draw suggest a correlative rights framework of water allocation with phase-ins for heavy users; metered pumping; flexible arrangements for trading and carrying over allocations for multiple years; and incentivizing groundwater recharge, including recharge from deep percolation from crops. Rigid formulas for significantly reducing groundwater use in medium- and high-priority basins are likely to have significant negative effects on the regional economy.

Identifying Major Hydrologic Change Drivers in a Highly Managed Transboundary Endorheic Basin: Integrating Hydro-ecological Models and Time-Series Data Mining Techniques

American Geophysical Union (AGU) | August 23rd, 2022

The fragile balance of endorheic lakes in highly managed semi-arid basins with transboundary water issues has been altered by the intertwined effects of global warming an

The fragile balance of endorheic lakes in highly managed semi-arid basins with transboundary water issues has been altered by the intertwined effects of global warming and long-term water mismanagement to support agricultural and industrial demand. The alarming rate of global endorheic lakes’ depletion in recent decades necessitates formulating mitigation strategies for ecosystem restoration. However, detecting and quantifying the relative contribution of causal factors (climate variability and anthropogenic stressors) is challenging. This study developed a diagnostic multivariate framework to identify major hydrologic drivers of lake depletion in a highly managed endorheic basin with a complex water distribution system. The framework integrates the Soil and Water Assessment Tool (SWAT) simulations with time-series decomposition and clustering methods to identify the major drivers of change. This diagnostic framework was applied to the Salton Sea Transboundary Basin (SSTB), the host of the world's most impaired inland lake. The results showed signs of depletion across the SSTB since late 1998 with no significant changes in climate conditions. The time-series data mining of the SSTB water balance components indicated that decreases in lake tributary inflows (-16.4 Mm3 yr-2) in response to decline in Colorado River inflows, associated with state water transfer agreements, are causing the Salton Sea to shrink, not changes in the irrigation operation as commonly believed. The developed multivariate detection and attribution framework is useful for identifying major drivers of change in coupled natural-human systems.

Incentive-based Instruments for Freshwater Management

Pacific Institute | December 1st, 2015

This new synthesis report from the Pacific Institute and the Foundation Center provides a review of existing evidence about the use of incentive-based instruments worldwi

This new synthesis report from the Pacific Institute and the Foundation Center provides a review of existing evidence about the use of incentive-based instruments worldwide. Based on case studies, evaluations, journal articles, and white papers, the authors provide a detailed review of three incentive-based instruments: water trading, payment for ecosystem services, and water quality trading. The report and interactive tool highlight the importance of finding the right fit between a community’s water goals and the water management tool(s) it might choose and, perhaps most importantly, characterize the conditions required for their effective implementation. Originally commissioned by The Rockefeller Foundation, all of the results from this project: the synthesis report, interactive tool, and digital collection are freely available for funders, practitioners, and researchers to use, contribute to, and build on in their work.

Information for Parties Preparing Proposals for Water Transfers Requiring Department of Water Resources or Bureau of Reclamation Approval

California Department of Water Resources (DWR) | December 1st, 2015

Information Needs for Water Markets

University of California, Berkeley (UC Berkeley) | March 14th, 2024

This report is part of a larger project to better understand how institutional context affects the potential for water markets to enhance climate resilience for agricultu

This report is part of a larger project to better understand how institutional context affects the potential for water markets to enhance climate resilience for agriculture and ecosystems, what legal and organizational features are likely to facilitate fair and effective water markets in the U.S. Southwest, and where opportunities exist to adapt existing institutions to support more sustainable water management. The report focuses on one legal and organizational feature that is a necessary precursor to fair and effective water markets: the collection and sharing of adequate information about water diversion and use. It synthesizes the discussions and notes from a convening of water experts with additional research and analysis.

Information Needs for Water Markets: Fair and Effective Water Markets Require Adequate Measurement and Reporting of Diversion and Use

University of California, Berkeley (UC Berkeley) | November 14th, 2024

Legal Change and Water Market Transaction Costs in Colorado

American Geophysical Union (AGU) | January 29th, 2020

Water markets are commonly described as failing to achieve efficient water management because of transaction cost barriers to trade. In the western United States, two sou

Water markets are commonly described as failing to achieve efficient water management because of transaction cost barriers to trade. In the western United States, two sources of legal conflict frequently drive transaction costs: (1) negative externalities of trading and (2) uncertain property rights. Conflicts arise because water law applies a no‐injury rule that prevents water transfers from modifying water available to third‐party water rights and defines water rights by historical water use, among other reasons. Existing literature suggests many legal changes to reduce transaction costs, but no studies in the western United States quantify transaction costs under proposed future changes. Here we developed statistical models of transaction costs for water transfer proponents under four specific legal changes in the state of Colorado. Two legal changes would modify the no‐injury rule, and two aim to clarify property rights. Colorado hosts active markets and has recently experienced debate over such legal changes. By surveying 100 legal and hydrologic experts, we elicited transaction cost estimates and rankings of which legal changes were most likely to increase third‐party injury. The legal changes that aim to clarify property rights had significantly lower likelihoods of increasing injury. One of these legal changes, which would not limit transferable water to historical use in certain circumstances, also had the greatest reductions in proponents' transaction costs. Meanwhile, the legal changes that directly modify the no‐injury rule project substantial transaction cost savings but much higher likelihoods of increased injury. The results demonstrate trade‐offs between reducing transaction costs and increasing third‐party effects.