Water Markets’ Potential for Addressing Drought, Water Availability

Water markets are one potential mechanism for reallocating water among competing uses as drought and climate variability strain water supplies. In these markets, water rights can be voluntarily leased or sold between users, allowing water to move from one use to another, such as from agriculture to municipal needs or to support instream flows for fish. While the concept appears straightforward, water markets are complicated by the physical, legal, and social characteristics of water systems. Water availability varies across space and time, infrastructure is required to move and measure water, and regulatory oversight is necessary to protect downstream users.

Participation in water markets is often limited by information gaps, high transaction costs, and uncertainty around fair pricing for water rights. Policymakers must also consider broader impacts such as agricultural land leaving production, speculation in water rights, and social or ecological consequences for rural communities. Researchers are examining how improved information and new technologies might reduce these barriers and support more transparent and effective water allocation decisions in Washington.

This work was supported by the USDA National Institute of Food and Agriculture, project #1016467.