Research uncovers model for water rights trading

Aug. 10, 2015

ADELAIDE, Australia — The study results can contribute to better evaluation of environmental and economic policy initiatives.

ADELAIDE, Australia — Researchers from the University of Adelaide have put together a model that could help governments when it comes to buying and selling water rights, according to

Agriculture is the largest water user in many countries, said lead researcher Associate Professor Sarah Wheeler in the article. "Despite water markets being in existence for many years, there has been a real lack of knowledge about water price elasticity — that is, how do changes in the price of water entitlements influence changes in supply and demand of water."

The study results can contribute to better evaluation of environmental and economic policy initiatives, noted the article. "For example, what is a ‘fair’ price irrigators should expect to give up their water for the environment?" asked Wheeler.

The researchers looked at Australia’s Murray-Darling Basin as a case study, stated the article. Survey responses from 535 irrigators across three Australia states were analyzed to determine how much "they would buy or sell water entitlements depending on different prices." These answers were compared with actual buying and selling data.

While no specific price point was determined, the model should further understanding of the water market, shared the article.

“What the model gives us is a range of prices that will stimulate buying and selling behavior among irrigators under certain supply and demand conditions, and depending on the type of water entitlement and characteristics of the irrigator," Wheeler shared in the article. "So it’s not as simple as saying that everyone will buy or sell at a certain price."

"However, we can say with some certainty that a 1 percent increase in a high-security water entitlement price will increase the water supplied by irrigators by up to 0.43 percent," Wheeler added in the article. "Irrigators will supply more water at high prices, and we also know that at prices higher than $4,000/ML for high security water, the majority of irrigators would sell all their water."

You can find the entire article here.

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