Western Water Markets: Effectiveness and Efficiency

Most rivers throughout the western U.S. are fully appropriated. New municipal, industrial, recreational and environmental water demands will likely be met by reallocating water out of agriculture, the region’s largest user of water. The question is: how best to do so? Water markets have long been advocated by many as the answer to this question. This chapter begins with an overview of water allocation law and water markets in the West including a discussion of the various alternative market-based reallocation mechanisms being considered. A summary of recent literature on market activity in the West is followed by a detailed look at transactions in the Colorado River Basin.