Allocation trade in Australia: a qualitative understanding of irrigator motives and behaviour*

Loch, Adam; Bjørnlund, Henning; Wheeler, Sarah Ann; Connor, Jeffery D.

doi:10.1111/j.1467-8489.2011.00575.x

Cited by 52 publications

(48 citation statements)

References 17 publications

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“…Since RBAs are responsible for distributing water under scarcity conditions, water users must wait until public allocation decisions have been made in order to evaluate whether they should participate in water markets by leasing their water rights or by purchasing additional water resources. Analogous results have been found by Loch et al [51] in South Australia, where the prospect of government assistance to horticultural farmers to protect permanent crops deterred irrigators from early water buying.…”

Section: Allocation Of Water Resources Under Drought Conditionssupporting

confidence: 82%

Water Markets in Spain: Performance and Challenges

Palomo-Hierro

Gómez‐Limón

Riesgo

2015

Water

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Law 46/1999 incorporated formal water markets into the Spanish legal and regulatory framework, allowing spot water markets and the creation of water banks. The implementation of water markets in Spain aimed at improving the efficiency of water use by reallocating water towards uses with higher added value. However, the performance of water markets in Spain has been rather disappointing, since they have been operative only during drought periods, and even under these extreme scarcity situations, trading activity counted for less than 5.0% of total water use. The narrowness of the market suggests that there are some barriers hampering their effective functioning. This paper examines the evolution and performance of water markets in Spain, relying on a transaction costs analysis framework. This analysis allows the identification of the main factors impeding water markets from operating effectively as a water reallocation tool. This analysis also provides some guidelines on how to overcome these obstacles and, thus, how to improve the efficiency of water use.

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Section: Allocation Of Water Resources Under Drought Conditionssupporting

confidence: 82%

Water Markets in Spain: Performance and Challenges

Palomo-Hierro

Gómez‐Limón

Riesgo

2015

Water

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“…Increasingly, there are arguments that governments should also consider buying water from the allocation market (otherwise known as temporary water available in one season) to provide environmental flows [11]. The rationale for government utilizing the water allocation market is that benefits of carry-over, lower water allocation prices, and temporal demand can provide a more efficient and flexible supply of water to meet stochastic environmental flow requirements since the timing of entitlement releases does not correspond well with the volume and timing of water applications required to achieve environmental objectives [3,12].…”

Section: Introductionmentioning

confidence: 99%

Understanding Irrigator Bidding Behavior in Australian Water Markets in Response to Uncertainty

Zuo

Brooks

Wheeler

et al. 2014

Water

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Water markets have been used by Australian irrigators as a way to reduce risk and uncertainty in times of low water allocations and rainfall. However, little is known about how irrigators' bidding trading behavior in water markets compares to other markets, nor is it known what role uncertainty and a lack of water in a variable and changing climate plays in influencing behavior. This paper studies irrigator behavior in Victorian water markets over a decade (a time period that included a severe drought). In particular, it studies the evidence for price clustering (when water bids/offers end mostly around particular numbers), a common phenomenon present in other established markets. We found that clustering in bid/offer prices in Victorian water allocation markets was influenced by uncertainty and strategic behavior. Water traders evaluate the costs and benefits of clustering and act according to their risk aversion levels. Water market buyer clustering behavior was mostly explained by increased market uncertainty (in particular, hotter and drier conditions), while seller-clustering behavior is mostly explained by strategic behavioral factors which evaluate the costs and benefits of clustering.

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“…This is the case for water markets in Australia, Chile and western USA, although some literature suggests the effect is more limited in the latter two cases (Garrick et al 2009;Grafton et al 2011). Water trade can also improve water-user adaptability by making water allocation contingent to available resources in order to reduce welfare losses and provide a better response to droughts (Crase and Gawne 2011;Loch et al 2012). An example of this is, replacing water licenses with shares that allow holders to use a proportion (instead of a fixed amount) of allotments in Australian water markets (Young 2014).…”

Section: Water Tradingmentioning

confidence: 99%

Managing Water Scarcity at a River Basin Scale with Economic Instruments

Gómez

Pérez-Blanco

Adamson

et al. 2018

Water Econs. Policy

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This paper presents a conceptual framework for both assessing the role of economic instruments, and reshaping them in order to enhance their contribution to the goals of managing water scarcity. Water management problems stem from the mismatch between a multitude of individual decisions, on the one hand, and the current and projected status of water resources on the other. Economics can provide valuable incentives that drive individual decisions, and can design efficient instruments to address water governance problems in a context of conflicting interests and relevant transaction costs. Yet, instruments such as water pricing or trading are mostly based on general principles of welfare economics that are not readily applicable to assets as complex as water. A flaw in welfare economic approaches lies in the presumption that economic instruments may be good or || Corresponding author. This is an Open Access article published by World Scientific Publishing Company. It is distributed under the terms of the Creative Commons Attribution 4.0 (CC-BY) License. Further distribution of this work is permitted, provided the original work is properly cited.Water Economics and Policy, Vol. 4, No. 1 (2018) bad on their own (e.g., finding the "right" price). This vision changes radically when we focus on the problem, instead of the instrument. In this paper, we examine how economic instruments to achieve welfare-enhancing water resource outcomes can realize their full potential in basin-scale management contexts. We follow a political economy perspective that views conflicts between public and private interest as the main instrumental challenge of water management. Our analysis allows us to better understand the critical importance of economic instruments for reconciling individual actions towards collective ambitions of water efficiency, equity and sustainability with lessons for later-adopting jurisdictions. Rather than providing panaceas, the successful design and implementation of economic instruments as key river basin management arrangements involves high transaction costs, wide institutional changes and collective action at different levels.

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Allocation trade in Australia: a qualitative understanding of irrigator motives and behaviour*

Cited by 52 publications

References 17 publications

Water Markets in Spain: Performance and Challenges

Water Markets in Spain: Performance and Challenges

Understanding Irrigator Bidding Behavior in Australian Water Markets in Response to Uncertainty

Managing Water Scarcity at a River Basin Scale with Economic Instruments

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