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A tale of two water markets in Australia: lessons for understanding participation in formal water markets

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  • Sarah Ann Wheeler
  • Dustin E Garrick

Abstract

Water markets are promoted as a demand-management strategy for addressing water scarcity. Although there is an increasing literature on the institutional preconditions required for successful formal water markets, there has been less focus on understanding what drives participation after establishment of the basic enabling conditions. Participation can be measured in terms of either trading activity (conducting either a permanent or temporary water trade) and/or trade volumes across time and market products. Australia’s water markets in the Southern and Northern Basins of the Murray-Darling Basin provide a notable example of a ‘tale of two water markets’, offering insights about the economic policy levers that can drive participation across different hydrological, irrigation, and socioeconomic contexts. Key lessons include: distribution of initial property rights in resource allocation; the need to prepare for and seize opportunities to strengthen property rights; and robust monitoring and compliance requirements—all of which will reduce transaction costs and increase participation.

Suggested Citation

  • Sarah Ann Wheeler & Dustin E Garrick, 2020. "A tale of two water markets in Australia: lessons for understanding participation in formal water markets," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 36(1), pages 132-153.
    • Handle: RePEc:oup:oxford:v:36:y:2020:i:1:p:132-153.
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    File URL: http://hdl.handle.net/10.1093/oxrep/grz032
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    Citations

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    Cited by:

    1. Juliane Haensch & Sarah Ann Wheeler & Alec Zuo, 2021. "Explaining permanent and temporary water market trade patterns within local areas in the southern Murray–Darling Basin," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(2), pages 318-348, April.
    2. Haiyan Liu & Roy Brouwer, 2023. "What is the future of water quality trading?," Contemporary Economic Policy, Western Economic Association International, vol. 41(1), pages 194-217, January.
    3. Bajaj, Akshi & Singh, S.P. & Nayak, Diptimayee, 2023. "Are farmers willing to pay for groundwater irrigation? Insights from informal groundwater markets in Western Uttar Pradesh, India," Agricultural Water Management, Elsevier, vol. 288(C).
    4. Zuo, Alec & Wheeler, Sarah Ann & Xu, Ying, 2022. "Expanders, diversifiers or downsizers? Identifying clusters of irrigators’ water trade and farm management strategies in Australia," Agricultural Water Management, Elsevier, vol. 264(C).
    5. Xiang-nan Chen & Feng-ping Wu & Fang Li & Yue Zhao & Xia Xu, 2021. "Analysis of Tradable Water Volumes of Industry in Water-Rich Areas of China: A Case Study of Changsha City," IJERPH, MDPI, vol. 18(2), pages 1-20, January.
    6. Sarah Ann Wheeler & Alec Zuo & John Kandulu, 2021. "What Water are We Really Pumping? The Nature and Extent of Surface and Groundwater Substitutability in Australia and Implications for Water Management Policies," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(4), pages 1550-1570, December.
    7. Bajaj, Akshi & Singh, S.P. & Nayak, Diptimayee, 2022. "Impact of water markets on equity and efficiency in irrigation water use: A systematic review and meta-analysis," Agricultural Water Management, Elsevier, vol. 259(C).
    8. Hartwig, Lana D. & Jackson, Sue & Osborne, Natalie, 2020. "Trends in Aboriginal water ownership in New South Wales, Australia: The continuities between colonial and neoliberal forms of dispossession," Land Use Policy, Elsevier, vol. 99(C).
    9. Sarah Ann Wheeler, 2022. "Debunking Murray‐Darling Basin water trade myths," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(4), pages 797-821, October.
    10. Christian Klassert & Jim Yoon & Katja Sigel & Bernd Klauer & Samer Talozi & Thibaut Lachaut & Philip Selby & Stephen Knox & Nicolas Avisse & Amaury Tilmant & Julien J. Harou & Daanish Mustafa & Josué , 2023. "Unexpected growth of an illegal water market," Nature Sustainability, Nature, vol. 6(11), pages 1406-1417, November.
    11. Hassan, Wasim & Manzoor, Talha & Muhammad, Abubakr, 2023. "Improving equity in demand-driven irrigation systems through a rights-preserving water allocation mechanism," Agricultural Water Management, Elsevier, vol. 287(C).
    12. de Bonviller, Simon & Wheeler, Sarah Ann & Zuo, Alec, 2020. "The dynamics of groundwater markets: Price leadership and groundwater demand elasticity in the Murrumbidgee, Australia," Agricultural Water Management, Elsevier, vol. 239(C).
    13. Kym Anderson, 2022. "Structural transformation in growing open economies: Australia’s experience," Departmental Working Papers 2022-13, The Australian National University, Arndt-Corden Department of Economics.

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