Protecting environmental flows through enhanced water licensing and water markets

摘要

To enable economically efficient future adaptation to water scarcity somecountries are revising water management institutions such as water rights orlicensing systems to more effectively protect ecosystems and their services.However, allocating more flow to the environment can mean less abstraction foreconomic production, or the inability to accommodate new entrants(diverters). Modern licensing arrangements should simultaneously enhanceenvironmental flows and protect water abstractors who depend on water.Making new licensing regimes compatible with tradable water rights is animportant component of water allocation reform. Regulated water markets canhelp decrease the societal cost of water scarcity whilst enforcingenvironmental and/or social protections. In this article we simulate watermarkets under a regime of fixed volumetric water abstraction licenses withfixed minimum flows or under a scalable water license regime (using water"shares") with dynamic environmental minimum flows. Shares allow adaptingallocations to available water and dynamic environmental minimum flowsvary as a function of ecological requirements. We investigate how ashort-term spot market manifests within each licensing regime. We use ariver-basin-scale hydroeconomic agent model that represents individualabstractors and can simulate a spot market under both licensing regimes. Weapply this model to the Great Ouse River basin in eastern England withpublic water supply, agricultural, energy and industrial water-using agents.Results show the proposed shares with dynamic environmental flow licensingsystem protects river flows more effectively than the current static minimumflow requirements during a dry historical year, but that the totalopportunity cost to water abstractors of the environmental gains is a 10–15% loss in economic benefits.