Academic literature on the topic 'Water allocation trading'

Abstract The aim of this study is to assess the effectiveness of water trading policy as a solution for optimal use of water between farmers in Voshmgir dam, Iran. For assessment, four villages were selected and two water allocation programs under non-trading and trading systems were designed by two-stage stochastic programming technique and uncertainties expressed as intervals and probability distributions. The results obtained from the two programs were compared based on water volume which is released through trading and decrease in water deficiency as effectiveness indices. The results show that the water allocation under trading policy has changed so that it has led to released water and decrease in water deficiency by keeping the agricultural profit under non-trading, but irrigated area is decreased under trading. Generally, trading policy can lead to more effective allocation from the view of released water and decrease in water deficiency, but it can remove some farmers from agricultural activities by decreasing the irrigated area. As a result, trading policy can be effective in the short term especially in drought conditions due to insufficient water supply and can be unnecessary in normal and wet years in this case study.

Water trading is an effective method for efficient allocation of water resources, so it is essential to assess the potential impacts of water trading before the establishment of water rights trading market. The improved water rights allocation method may low down the uncertainty, although there is lots of uncertainty in the water trading for agriculture. This study compared the effects of two-part deployment method on economic profits of main crops by Game Theory method. The results show that water trading may optimally allocate water resources, moreover, the total free market could increase economic profits as far as possible; the more water users participating in water trading, the more profits the water trading can bring.

Water is a basic and essential natural resource, and its rational allocation plays a key role in environmental and economic sustainable development. Agriculture consumes a large share of water resources, but the allocation of water rights often deviates from water use in reality. Therefore, an appropriate management method for agricultural water rights trading is needed. In this paper, blockchain technology is applied to address the agricultural water rights trading issue. Firstly, an alliance chain and the practical Byzantine fault tolerance (PBFT) consensus mechanism are adopted to support a smart contract and application. Then, a trading platform based on blockchain for agricultural water rights trading is proposed. Finally, the role and function of a decentralized autonomous organization (DAO) in a self-financing irrigation drainage district (SIDD) are clarified. This study provides a secure and stable platform which can reduce the trading confirmation time and support numerous users. The trading process of agricultural water rights is updated to minimize the cost of water rights’ transactions and improve the system’s efficiency.

In this study, a two-stage interval-stochastic water trading (TIWT) model is developed for reallocating water resources under uncertainty, which integrates techniques of interval-parameter programing and two-stage stochastic programing into a general framework. The TIWT model can provide an effective linkage between system benefit and the associated economic penalty attributed to the violation of the pre-regulated water permit under uncertainties expressed as probabilistic distributions and interval values. The trading scheme is introduced to optimize water allocation of Kaidu-Kongque River in northwestern China. Results obtained suggest that trading program can effectively allocate limited water resources to competitive users by market approach in such an arid area, which improves economic efficiency in the mass (e.g., maximizing system benefits) and remedies water deficiency. A number of policies for water permits are analyzed and reveal that different water permits lead to different water shortages, system benefits, and system-failure risks. Tradeoffs between economic benefit and system-failure risk are also examined under different policies, which support generating an increased robustness in risk control for water resources allocation under uncertainty. The results are helpful for local decision-makers in adjusting the current water allocation pattern optimally.

Tradable water volumes is one of the basic elements of water-rights trading. In China, water-rights transactions mostly occur in water-deficient areas. However, the water-rich areas are also facing serious water-shortage problems. It is necessary to stimulate the water-rights trading power in abundant water areas to improve water-resource predicament. This paper studied the concept and calculation method of tradable water volumes of industry. First, based on the property rights theory, we analyzed the concept of tradable water volumes, and put forward the preliminary determination of water-rights trading subjects. Then, we defined the tradable water volumes of industry as the difference between the initial water-rights allocation and the water demand of industry. We used the proportion method to calculate the initial water-rights allocation of industry under different runoff frequencies, and grey model (1,1) to predict the water demand of industry. Finally, we applied the calculation method to Changsha city which is in a water-rich area of China. The calculation results contribute to water-resource management in Changsha city. This paper will provide a theoretical basis for researching the tradable water volumes, and promote the development of water-rights trading in China’s water-rich areas.

This paper outlines how an area-based water allocation system for irrigating crops could be converted to a system of shares, structured so as to allow the development of a low cost trading market for water and salinity shares. It stresses the need for separation of entitlements of water from land and the separation of water rights into their various components. By moving to this type of allocation system, combined with some safeguard provisions, trade in groundwater could be facilitated in the South East Water Catchment located in the State of South Australia. Separation of salinity and other environmental impacts from water volume trading will allow market assessment of highest and best use to include consideration of environmental impacts. Although the focus of the paper is on groundwater allocation and management, the principles and concepts outlined are applicable to surface water systems.

Abstract The economics of water trading in consumptive use has often overlooked the conservation incentives inherent in such trading when institutional rules like prior appropriation govern allocation of water. Utilizing an analytical framework of water trading between two irrigation water users employing irrigation techniques of similar efficiency, the study demonstrates how trade in consumptive use of water reduces incentives for greater diversion by users with prior claims to water, as compared with trade in water diverted. It also shows that such transfer increases the marginal value of water use for those users with junior (priority) claims to water rights. In addition, it explores the applicability of METRIC as a recent innovation in measuring consumptive water use at the field level, lowering the costs of water trading at a smaller spatial scale.

As water trading has become increasingly used to optimize the allocation of water resources, it has become necessary to transfer agricultural water allocations for economic development and ecological environmental uses by way of water rights trading. In this paper, we constructed an example water rights trading model in the arid oasis area of Shihezi Irrigation District (located in Northwest China), using the field investigation method and governmental water management decisions based on the systems theory of the agricultural water savings–economy–ecological environment. Furthermore, focusing on the added industrial value produced by trading water, the value of the ecological services provided by fresh water, the negative value of the reduction in greenhouse gas emissions, and the negative ecological value of reduced fertilizer application, a quantitative analysis was carried out using the Shihezi Irrigation District as an example. The results showed that under the most stringent water resource management plan and with the objective of returning land and reducing water, the irrigation area can save 52,504,500 m3 of surplus water from the agricultural sector, of which 49,879,300 m3 can be reallocated to the industrial sector and 2,625,200 m3 can be reallocated to the ecological sector. Using the water rights transaction method, this regional agricultural water saving could generate an industrial benefit equal to 35,024,300 yuan, an ecosystem service equal to 19,482,200 yuan, and an overall benefit equal to 54,420,500 yuan. The water rights trading model proposed in this paper for an arid oasis areas can provide a reference for other arid areas, helping to achieve the sustainable economic development of the economic and ecological environments in arid oasis areas through water rights trading.

There are some problems in China’s agricultural water resources, such as low per capita consumption and uneven spatial and temporal distribution. It is urgent to speed up the reform of water rights trading mode. Based on the market orientation and the experience of the United States and Australia, this paper studies the effectiveness of China’s agricultural water rights trade. Firstly, the characteristics of “quasi-market” should be clarified. Secondly, under the market mechanism, this paper analyzes the mechanism of the impact of economic incentives of trading subjects, reasonable delimitation of trading prices and multiple participation of institutions and departments. Furthermore, the factors that affect the efficiency are deeply analyzed. At last, the paper provides some suggestions on the construction of a trading mechanism with Chinese characteristics from the aspects of right confirmation registration, pricing mechanism and supervision regulations, to provide decision support for agricultural water rights management system.

An innovative approach for total maximum daily load (TMDL) allocation and implementation is the watershed-based pollutant trading. Given the inherent scientific uncertainty for the tradeoffs between point and nonpoint sources, setting of trading ratios can be a contentious issue and was already listed as an obstacle by several pollutant trading programs. One of the fundamental reasons that a trading ratio is often set higher (e.g. greater than 2) is to allow for uncertainty in the level of control needed to attain water quality standards, and to provide a buffer in case traded reductions are less effective than expected. However, most of the available studies did not provide an approach to explicitly address the determination of trading ratio. Uncertainty analysis has rarely been linked to determination of trading ratio. This paper presents a practical methodology in estimating “equivalent trading ratio (ETR)” and links uncertainty analysis with trading ratio determination from TMDL allocation process. Determination of ETR can provide a preliminary evaluation of “tradeoffs” between various combination of point and nonpoint source control strategies on ambient water quality improvement. A greater portion of NPS load reduction in overall TMDL load reduction generally correlates with greater uncertainty and thus requires greater trading ratio. The rigorous quantification of trading ratio will enhance the scientific basis and thus public perception for more informed decision in overall watershed-based pollutant trading program.

The concept "beneficial use" plays a pivotal role in South African water law reform. It forms the foundation of the mechanism to make water use rights available for the reform of the allocation of water use entitlements. The mechanism involves that water use rights that were unexercised in the two years before the promulgation of the National Water Act 36 of 1998 are not defined as existing lawful water uses. Where the concept "beneficial use" is utilised to cancel unexercised water use rights, it can cause potential hardship. Some people whose rights have been cancelled believe that they should be able to rely on the property clause in section 25 of the Constitution of 1996 to either have the legislation declared unconstitutional or to demand compensation. Section 25 of the Constitution of 1996 prohibits the arbitrary deprivation of property and states that property may only be expropriated for a public purpose or in the public interest, subject to compensation. Section 25(4) states, however, that the public interest includes the nation's commitment to land reform and to reforms to bring about equitable access to all South Africa's natural resources. It is clear from this that reforms to bring about access to water are allowed by the property clause. One of the main questions discussed in this thesis was whether section 32 of the National Water Act 36 of 1998 that made more water available for distribution for reform purposes by cancelling unexercised water user rights, leads to an arbitrary deprivation or an expropriation of property. It should be noted that section 32 of the National Water Act did not constitute an arbitrary deprivation of property, as sufficient reason exists for water law reform. A possible constitutional challenge based on the lack of due process of law because of the retrospective operation of the section may possibly be averted because of the existence of section 33 of the National Water Act. Section 33 of the Act mitigates hardship by allowing unexercised water uses to be declared existing lawful water uses in certain circumstances where a good reason for the non–exercise of the water use right existed. Even in cases where section 33 does not prevent section 32 from being regarded as an arbitrary deprivation of property because there still was not a proper procedure, the government will probably be able to show that the limitation in section 32 is, in terms of section 36(1) of the Constitution of 1996, reasonable and justifiable in an open and democratic society. Despite the fact that section 25(1) prohibits arbitrary deprivations, it does not prohibit the government from regulating competing rights to use water even though some people may be negatively affected by the regulation. Because the Minister merely acts as public trustee of the nation's water resources on behalf of the national government in terms section 3(1) of the National Water Act, it cannot be claimed that the government acquired the cancelled water use rights. A claim that compensation should be paid for an expropriation of property will therefore not succeed. Compensation is only payable in terms of section 22(6) and section 22(7) of the National Water Act 36 of 1998 for a loss of existing water entitlements, such as existing lawful water uses or existing licences. A court should thus consider interpreting section 25 by providing for compensation where an individual was unfairly burdened and was therefore denied the protection of the equality clause in section 9 of the Constitution when his unexercised water use rights were cancelled by section 32. The concept "beneficial use" currently restricts the content of the water use entitlement existing in terms of section 4 of the National Water Act 36 of 1998. The loss of the entitlement when inter alia a licence for an existing lawful water use is refused, is not protected by the payment of compensation when water is used in an unfair or disproportionate manner, because such utilisation would not be regarded to be beneficial use. It became apparent that in terms of the current water law dispensation in South Africa, the possibility of compensation for an amendment of a water use licence and the refusal of a licence for an existing lawful water use implies that a water use entitlement is a right in property. The fact that section 22(7) of the National Water Act states that the amount of the compensation must be determined in accordance with section 25(3) of the Constitution implies that the legislature also recognises that a water use entitlement is constitutional property. Section 22(7) of the National Water Act underlines the basic premises of the National Water Act by subjecting the amount of the compensation that is payable to the same limitations that restrict the entitlement to use the water. The stipulations of section 22(7) draw the attention to the fact that the exercise of both existing lawful water uses and water use licences as rights in property is subject to basic principles of the National Water Act such as the Reserve and the concepts "public trusteeship" and "beneficial use" of the water resources. The fact that compensation is only payable when there has been severe prejudice to the economic viability of an undertaking implies that water use entitlements have to be exercised at the time of the application for the compensation to be payable. The concept "beneficial use" – in the sense that a water use must not be wasteful or polluting and in the sense that only water use entitlements that are being exercised are protected – thus restricts the water use entitlement as a property right. During the research, American and Australian water law reform and their interpretation of their property clauses were compared to water law reform in South Africa and the South African property clause. Furthermore, Australian policy to encourage more beneficial water use by the trade in water entitlements or allocations, was also discussed. South Africans will likely in future be encouraged to trade in water use entitlements or allocations. The objective with allowing the trade in water use entitlements or allocations is to encourage people to rather use water for uses with a high value instead of uses with a lower value. In this way the concept "beneficial use" may be broadened to include water allocation or entitlement trading. However, it was argued that a disproportionate impact on third parties would mean that water allocation or entitlement trading would in some cases not be regarded as beneficial use anymore.
Thesis (LL.D.)--North-West University, Potchefstroom Campus, 2011.

Water quality management for agricultural production is a complicated and interesting problem. Hydrological and economic factors must be considered when designing strategies to reduce nutrient runoff from agricultural activities. This dissertation is composed of three chapters that investigate cost-effective ways to mitigate water pollution from agricultural nonpoint pollution sources and explore farmers' incentives when participating in water quality trading programs. Chapter 1 investigates landscape targeting of best management practices (BMPs) based on topographic index (TI) to determine how targeting would affect costs of meeting nitrogen (N) loading goals for Mahantango watershed, Pennsylvania. We use the results from two climate models and the mean of the ensemble of seven climate models to estimate expected climate changes and the Soil and Water Assessment Tool-Variable Source Area (SWAT-VSA) model to predict crop yields and N export. Costs of targeting and uniform placement of BMPs across the entire study area (4.23 km2) are compared under historical and future climate scenarios. We find that with a goal of reducing N loadings by 25%, spatial targeting methods could reduce costs by an average of 30% compared with uniform BMP placement under three historical climate scenarios. Cost savings from targeting are 38% under three future climate scenarios. Chapter 2 scales up the study area to the Susquehanna watershed (71,000 km2). We examine the effects of targeting the required reductions in N runoff within counties, across counties, and both within and across counties for the Susquehanna watershed. We set the required N reduction to 35%. Using the uniform strategy to meet the required N reduction as the baseline, results show that costs of achieving a regional 35% N reduction goal can be reduced by 13%, 31% and 36% with cross-county targeting, within-county targeting and within and across county targeting, respectively. Results from Chapters 1 and 2 suggest that cost effectiveness of government subsidy programs for water quality improvement in agriculture can be increased by targeting them to areas with lower N abatement costs. In addition, targeting benefits are likely to be even larger under climate change. Chapter 3 investigates the landowner's nutrient credit trading behavior when facing the price uncertainty given the credits are allowed to be banked for future use. A two-step decision model is used in this study. For the first step, we determine the landowner's application level of a BMP on working land in the initial time period. The nutrient credits awarded to the landowner depend on the nutrient reduction level at the edge of field generated by the BMP application. For the second step, we use an intertemporal model to examine the landowner's credit trading behavior with stochastic price fluctuations over time and with transaction costs. The theoretical framework is applied with a numerical simulation incorporated with a hydro-economic model and dynamic programming. Nutrient Management (NM) is selected as the BMP on working land to generate N credits. We find that gains to the landowner from credit banking increase with higher price volatility and with higher price drift, but that gains are larger with price volatility. However, for a landowner holding a small amount of nutrient credits, the gains from credit banking are small due to transaction costs.
Doctor of Philosophy
Two considerations are critical for efforts to mitigate nutrient runoff from nonpoint sources: cost effectiveness of strategies to reduce nutrient runoff and landowners' incentives to participate in these programs. This dissertation is composed of three manuscripts, aiming to evaluate the cost effectiveness of government subsidy programs for water quality management in agriculture and investigate the landowner's incentives to participate in water quality trading programs for the Chesapeake Bay watershed. Chapter 1 investigates gains from targeting Best Management Practices (BMPs) under current and future climate conditions based on the soil characteristics relative to uniform BMP application for a small experimental watershed (4.23km2). Chapter 2 scales up the study area to a 71,000 km2 watershed and treats each county within the watershed as a representative farm to explore economic gains from targeting within county and across county based on counties' physical conditions and agricultural patterns. Both Chapters show that cost-effectiveness of government subsidy programs can be improved by spatial targeting BMPs to areas with lower abatement costs. Gains from targeting increase under climate change. In Chapter 3 we shows how a landowner's revenues from nutrient credit selling will be affected if the credits are allowed to be banked for future use when she faces price uncertainty. We find that gains to the landowner from credit banking increase more with higher price volatility than with higher price drift. Gains from banking are largely reduced by transaction costs associated with trading.

Water trading is increasingly becoming an important farm management tool for irrigators to manage changing environmental conditions. Studies have found that water trading increases farmers’ flexibility in water use and moves water from lower value (or less efficient) uses to higher value (or more efficient) uses. Many countries that regularly suffer periods of droughts and have over-allocated water resources face a growing challenge to allocate water to competing water uses. Some of these countries have introduced water markets as a response to help enable an efficient allocation of a scarce resource. This is especially so in Australia’s Murray-Darling Basin (MDB), which has had water markets in place for decades. The southern MDB is one of the most active water trading region worldwide, and hence, provides an ideal case study for examining water trading behaviour. The MDB faced the Millennium Drought in the 2000s which caused intensive distress for all alike: irrigators, tourists, rural communities and especially the environment. During the midst of this drought the Federal government introduced a water buyback program that purchased water entitlements from willing irrigators to return to environmental use. To date, a number of studies have investigated irrigators’ determinants to trade water. This literature has primarily focused on farmers’ socio-economic and farm specific characteristics. But there is evidence that water trading is also affected by spatial factors, especially water entitlement trading. Thus, this thesis explores the relevance of spatial influences on irrigators’ water trade decision-making. Traditional economic models of water trading behaviour are expanded with several spatially explicit variables, such as biophysical and distance factors. The influence of neighbours’ water trading decision-making (‘neighbourhood effect’) is also tested, as anecdotal evidence shows that in the past irrigators experienced considerable social pressure if they sold or were willing to sell water entitlements. Furthermore, this thesis also examines the influence of spatial factors on irrigators’ price choices for selling and buying water entitlements. The results show that a number of spatial influences significantly affect water trading behaviour, especially water entitlement selling behaviour. Irrigators located in poorer resource areas (e.g. regarding soil degradation), in more rural areas and regions that suffer a socioeconomic decline (e.g. population decline) are more likely to sell water entitlements. There is evidence of a substitution effect between surface-water and groundwater (where viable groundwater resources exist). Irrigators in more rural areas tend to sell larger volumes of water entitlements and buy larger volumes of water allocations. Furthermore, a positive neighbourhood effect is confirmed, where irrigators’ decisions to sell water entitlements was influenced by their neighbours. Over time, it became more socially acceptable to sell water entitlements. Finally, spatial influences also affect irrigators’ valuation of their water, which is reflected in their price choices for water entitlement selling. Overall, the results of this thesis support some existing policy measures and programs (e.g. salinity impact zones) and lead to several other policy implications. One such conclusion is the need to focus policy on water entitlement buybacks rather than on water irrigation infrastructure. This thesis concludes that current and future polices (e.g. related to the water buyback) could be more spatially targeted while also considering the externalities and wider irrigator behaviour in policy development. Spatially refined policies have the potential to improve the outcome of water markets (and related environmental programs) and alleviate the pressure on socio-economic and environmental systems.
Thesis (Ph.D.) (Research by Publication) -- University of Adelaide, Centre for Global Food and Resources, 2017.

Abstract England and Wales have a long-established abstraction licensing regime for determining water allocations amongst economic sectors, particularly agriculture. This regime is implemented by the Environment Agency (EA) and Natural Resources Wales (NRW), primarily through Catchment Abstraction Management Strategies (CAMS) and attendant Abstraction Licensing Strategies (ALS), to support policy requirements for environmental sustainability. Over time, water licensing has been increasingly linked to water availability in catchments while licence trading now provides greater flexibility in allocations. Ongoing reforms will further seek to integrate resource sustainability and the catchment based approach (CaBA) to management into this evolving regime. Yet a critical question concerns whether such policy commitments to countering ‘unsustainable abstraction’ have been achieved, particularly by the agricultural sector. Here, we define sustainability in terms of the environmental, social and economic outcomes of governance.

This project developed conceptual and empirical frameworks to analyze the water management politics as water scarcity increases. The analyses showed that increased scarcity will tend to encourage a transition from systems in which water is allocated administratively to water trading. However, transaction costs and political economy considerations placed barriers on the introduction of markets. The recent droughts - both in Israel and California were shown to cause an increase in water use efficiency by adoption of modern technologies and improvement of water conveyance systems. The drought led to institutional innovations and an increased reliance on trading as mechanisms for water allocation. Case studies from both countries demonstrate that reducing barriers to water trading and increasing farmers' flexibility in exchange of water will lead to efficient outcomes and much better uses of existing water resources.

This project is a continuation of US 2081-91. Together they develop a conceptual and empirical framework to analyze alternative forms of water reform that lead to efficient pricing of water. Our analysis demonstrates that the transition from water rights systems to water trading may lead to improved resource allocation even when overall availability of water resources declines. We introduce two systems of water trading, passive markets and active markets, and show that passive markets lead to efficient resource allocation with lower transaction costs. We demonstrate that both methods of trading are superior to block pricing. We identify the political economic situations that would lead to each type of water resource allocation. Examples from Israel and California are used to demonstrate the conceptual results.