Using a market-type allocation system to confront water scarcity: an inter-district approach in Greece

Abstract

This study examines the implication of a market-based system to allocate water regionally in one of the most intensively irrigated areas of Greece. The proposed approach combines elements from administrative allocation and tradable water rights in order to assess several water supply scenarios under growing water scarcity conditions. In this framework, irrigation water demand functions were derived by means of an optimization model that maximizes the expected annual net benefits from water use in agriculture. Then, an inter-district water market model is developed to compute the most effective water allocation at the basin-level. An institutional reform is suggested, that is linked with the creation of effective water users' associations. The aim of this reform is to achieve a functioning and low-cost trading system at the basin level. The results show that significant volumes of water would be traded under various deficit scenarios, mainly due to the spatial heterogeneity in water use and availability.