Water market
From Water Wiki
When water withdrawal permits are legally allowed to be traded between users, some say this produces a water market. Water markets, in this way of describing them, are more common in the western United States where water is generally allocated through prior appropriation. However, others point out that, whether or not there is legal recognition of the right to trade something, anything with value (such as a permit to withdraw water) may be traded on "informal" markets. For example, the State of Florida has no formally recognized trading scheme for development rights that require approved water supplies, but it has "concurrency" requirements that can hinder development in areas with water supply problems. Cynthia Barnett, in her book Mirage, claims that developers in Southwest Florida have developed informal trading mechanisms to get around these restrictions. Similarly, farmers in Piedmont North Carolina have been known to informally trade water from streams that are running to other farmers whose sources are dried up, charging whatever price the two parties agree on.
Yet others, most notably Prof. Joseph Dellapenna of Villanova University School of Law, disagree that true "water markets" exist outside rare circumstances. See, e.g., his article, The Importance of Getting Names Right: The Myth of Markets for Water, William and Mary Environmental Law and Policy Review, Vol. 25, Pp. 317-377, 2000
Abstract of Prof. Dellapenna's argument:
Markets allegedly are ideal institutions for managing water both nationally and internationally. Markets are presented as functioning automatically and nearly painlessly. As a result, they are much in vogue among policy makers today. True markets, however, have seldom existed for water rights and there are good reasons for believing that they seldom will. Water is an ambient resource where the actions of any one user necessarily affect many other users. Thus, if true markets are to be relied on to allocate for particular uses and distribute water among users, the transaction costs of organizing contracts with all holders of water rights (let alone those holding less formal claims affected by a sale or lease) generally have been and will be prohibitive. Water, in short, is the quintessential public good for which markets simply do not work. This paper explores the nature of markets and the forms of property developed for the rights to use water, beginning by explaining why water has customarily been treated as a public good. The paper then explains why treating water as common property leads into a tragic over exploitation as soon as water becomes a scarce commodity, and goes on to describe the market failures that are characteristic of treating the right to use water as private property. The paper then explores the California Water Bank, often described as proving that markets for water work, but finding instead regulation masquerading as a market. As Confucius reminds us, if we do not get the names right, we cannot expect affairs to be in order. Finally, the paper presents the "regulated riparian" mode of water management that operates on the basis that water is a form of inherently public property about which basic allocation distribution decisions must be made by public agencies. The paper concludes that various economic incentives, including fees, taxes, and "water banks," have a useful role to play in managing public property, but that true markets must remain a phenomenon marginal to the enterprise of managing large quantities of water for the benefit of numerous users.
Some commenters proposed the term "quasi-market" to describe institutions that promote trades but that, for one reason or another, do not have all the attributes classicly attributed to markets. On this page, the N.C. Water Allocation Study has begun a discussion of the costs, benefits and implementation issues of developing water markets or quasi-markets in North Carolina.
