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Water option contracts for climate change adaptation in Santiago, Chile

Author

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  • Sebastián Vicuña
  • Marina Gil
  • Oscar Melo
  • Guillermo Donoso
  • Pablo Merino

Abstract

Climate change–induced extreme events pose an important challenge for urban water managers. In Santiago (Chile), the total cost of such events can be reduced by an option contract that sets ex ante water prices and water volumes to be traded when certain triggering conditions are met. This article discusses two types of option contracts: water leasing to trade water from agriculture to urban uses during droughts; and a savings option contract to reduce urban water consumption during short-term turbidity events. We find that water option contracts are flexible instruments that improve the distribution of hydrological risks.

Suggested Citation

  • Sebastián Vicuña & Marina Gil & Oscar Melo & Guillermo Donoso & Pablo Merino, 2018. "Water option contracts for climate change adaptation in Santiago, Chile," Water International, Taylor & Francis Journals, vol. 43(2), pages 237-256, February.
    • Handle: RePEc:taf:rwinxx:v:43:y:2018:i:2:p:237-256
    DOI: 10.1080/02508060.2017.1416444
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    Cited by:

    1. Xiao-yuan Wu & Feng-ping Wu & Fang Li & Xia Xu, 2021. "Dynamic Adjustment Model of the Water Rights Trading Price Based on Water Resource Scarcity Value Analysis," IJERPH, MDPI, vol. 18(5), pages 1-22, February.
    2. Laura Monteiro & Raquel Cristina & Dídia Covas, 2021. "Water and Energy Efficiency Assessment in Urban Green Spaces," Energies, MDPI, vol. 14(17), pages 1-15, September.
    3. Colby, Bonnie, 2020. "Acquiring environmental flows: ecological economics of policy development in western U.S," Ecological Economics, Elsevier, vol. 173(C).

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