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Institutional Impediments to Groundwater Trading: the case of the Gnangara groundwater system of Western Australia

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  • Skurray, James H.
  • Pandit, Ram
  • Pannell, David J.

Abstract

The development of a market in groundwater usage rights can be inhibited by constraints arising from the institutional context. Such impediments may reduce the potential gains from trade and may generate high transaction costs for prospective traders. We analyse the regulations and policies influencing groundwater transfers in a case-study area -- the Gnangara groundwater system around Perth, Western Australia -- and identify significant impediments to a groundwater market. Property rights are found to be conditional, temporary, and vulnerable to amendment. Regulatory approval is required for all transfers. Facilitating infrastructure is lacking, and price information is unavailable. Management area boundaries reflect land ownership and use rather than hydrogeological realities; the limitation of transfers to within these boundaries eliminates much of the potential for gains from trade. Over-allocation and weak monitoring also impede the development of a market. The current management system is likely to obscure unmet demand for water-rights transfers between users and usage-types.

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Bibliographic Info

Paper provided by University of Western Australia, School of Agricultural and Resource Economics in its series Working Papers with number 117825.

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Date of creation: 14 Nov 2011
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Handle: RePEc:ags:uwauwp:117825

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Keywords: Agricultural and Food Policy; Environmental Economics and Policy; Institutional and Behavioral Economics; Land Economics/Use; Political Economy; Public Economics; Resource /Energy Economics and Policy; Q15; Q25; Q28; Q38; Q56; Q57; Q58; D02; R52; H41; H23; H11; D23; D47; D78; H44;

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  1. Young, Michael D. & McColl, Jim C., 2009. "Double trouble: the importance of accounting for and defining water entitlements consistent with hydrological realities," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(1), March.
  2. Jedidiah Brewer & Robert Glennon & Alan Ker & Gary D. Libecap, 2007. "Water Markets in the West: Prices, Trading, and Contractual Forms," NBER Working Papers 13002, National Bureau of Economic Research, Inc.
  3. Howe, Charles W., 2002. "Policy issues and institutional impediments in the management of groundwater: lessons from case studies," Environment and Development Economics, Cambridge University Press, vol. 7(04), pages 625-641, October.
  4. Quiggin, John C., 2001. "Environmental economics and the Murray-Darling river system," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 45(1), March.
  5. Michael D. Young & Jim C. McColl, 2009. "Double trouble: the importance of accounting for and defining water entitlements consistent with hydrological realities ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(1), pages 19-35, 01.
  6. Gomez-Limon, Jose A. & Martinez, Yolanda, 2006. "Multi-criteria modelling of irrigation water market at basin level: A Spanish case study," European Journal of Operational Research, Elsevier, vol. 173(1), pages 313-336, August.
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Cited by:
  1. Skurray, James H. & Roberts, E.J. & Pannell, David J., 2013. "Hydrological challenges to groundwater trading: lessons from south-west Western Australia," Working Papers 161073, University of Western Australia, School of Agricultural and Resource Economics.
  2. Skurray, James H., 2013. "The scope for collective action in a large groundwater basin: an institutional analysis of aquifer governance in Western Australia," Working Papers 161075, University of Western Australia, School of Agricultural and Resource Economics.

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