Graduation Year

2016

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Environmental Analysis

Reader 1

Bowman Cutter

Reader 2

Char Miller

Rights Information

© 2015 Johanna M. Rayl

Abstract

Water trading and water markets have been listed by leading climate change organizations as a possible tool for climate change adaptation. Experience with water trading exists in many places in the world, and three of the most well-known and widely-studied markets for water rights are found in the Western United States, Chile, and Australia's Murray-Darling Basin. While the body of literature on the performance of these markets is extensive, few papers relate the experiences of these three countries to adaptation as of yet. This thesis seeks to report on the outcomes of water markets in three cases with special attention to the following adaptation questions: Can water markets be a tool to address increasing variability in water supply; and what are the necessary environmental, political, and historic conditions for a market to be successful in allocating water resources under situations of scarcity? The experiences of these three cases yield the following conclusions about the use of water markets in climate change adaptation: the degree of existing infrastructure for water storage and transportation must be considered in the implementation of markets; water markets must be continually revised to internalize local third party effects; transaction costs must be minimized if markets are to serve increased short-term variability in water supply; sustainable outcomes are most readily met when markets approximate “cap-and-trade” programs; and the involvement of local institutions in market design will support market activity and the achievement of localized adaptation goals.

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