January, 2019

Expanding Water Markets in the Western United States

Barriers and Lessons from Other Natural Resource Markets
  • Bryan Leonard

    Assistant Professor, School of Sustainability, Arizona State University
  • Gary Libecap

    Professor of Corporate Environmental Management, University of California, Santa Barbara
  • Christopher Costello

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View the article online at Oxford Academic.

This article identifies key barriers to the expansion of surface water markets in the western United States and examines the lessons learned from the development of market-based management of other resources. We argue that the most salient barriers to water market development are conducting and verifying trades of environmental goods and services and the challenges associated with the political economy of defining, altering, and transferring property rights. We review the extensive economics literature on markets for fishing rights, air pollution abatement, and water quality; discuss the lessons learned from experience with these markets; and suggest specific reforms for increasing the role of markets in water resource management, including minimizing the cost of trades and implementing strategies to address political opposition.