Stanford Woods Institute for the Environment

Stanford Woods Institute for the Environment

Shopping for Water: How the Market Can Mitigate Water Shortages in the American West

« Back to

Shopping for Water: How the Market Can Mitigate Water Shortages in the American West

October 20, 2014

Authors:
Peter W. Culp, Robert Glennon , Gary Libecap

Greater use of water markets is one promising avenue to address the problem of increased water
scarcity. In the face of a severe drought and unprecedented declines in reservoir storage and groundwater
reserves throughout the West, the authors advocate for the use of market forces to facilitate the movement of
water resources and to mitigate the risk of water shortages. To promote the broader establishment and use of
market institutions, the authors propose that states allow simple, short-term water transactions; facilitate these
transactions by establishing essential market institutions such as water banks; support and encourage the use of
market-driven risk management strategies to address growing variability and uncertainty in water supplies; and
better regulate the use of groundwater to ensure sustainability. The authors also encourage strong federal
leadership to promote interstate and interagency cooperation in water management. Each of the five policy
recommendations offers a means of building resilience into our water management systems.