Water Markets

Abstract

Water Markets 5.1 Institutional, Hydrological and Infrastructural Preconditions 5.1.1 Design of Water Markets 5.1.1.1 Design Options Water markets are one possible institutional option to deal with water management. Currently, a few formal water markets are established in countries where water is scarce and governmental organization is fairly effective. The enforcement of basic laws and rules is essential for an effectively working formal water market, because they are needed for the registration of water rights and to specify conditions for the trading of water and water rights. Hirshleifer et al. (1969) illustrate in their reference, how water laws can promote or hinder the implementation of water markets. They focus their analysis on the riparian and appropriation rights regime in the United States. 1 There exist a number of legal preconditions for the promotion of water markets. Based on Endo et al. (2018), these are 1 Under the riparian water rights regime, the water is allocated among those who possess land along the water body. All landowners whose properties adjoin a water body have the right to make reasonable use of the water source as it flows through or over their properties. However, the appropriation water rights regime originated in California, during the time of Gold Rush (Grompe and Hansjürgens 2012). The idea of this right regime is that the first person who takes the water for beneficial use is allowed to continue the water usage of this quantity for that purpose. We can differ between the senior and junior water rights, with senior rights being emitted earlier than junior rights. The water is first allocated to the senior rights owner and afterward to the junior rights owner.