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An Innovative Option Contract for Allocating Water in Inter-Basin Transfers: the Case of the Tagus-Segura Transfer in Spain

Author

Listed:
  • Dolores Rey

    (Technical University of Madrid
    Cranfield University)

  • Alberto Garrido

    (Technical University of Madrid)

  • Javier Calatrava

    (Technical University of Cartagena)

Abstract

The Tagus-Segura Transfer (TST), the largest water infrastructure in Spain, connects the Tagus basin’s headwaters and the Segura basin, one of the most water-stressed areas in Europe. The need to increase the minimum environmental flows in the Tagus River and to meet new urban demands has lead to the redefinition of the TST’s management rules, what will cause a reduction of transferable volumes to the Segura basin. After evaluating the effects of this change in the whole Tagus-Segura system, focusing on the availability of irrigation water in the Segura, the environmental flows in the Tagus and the economic impacts on both basins; we propose an innovative two-tranche option contract that could reduce the negative impacts of the modification of the Transfer’s management rule, and represents an institutional innovation with respect to previous inter-basin water trading. We evaluate this contract with respect to spot and non-market scenarios. Results show that the proposed contract would reduce the impact of a change in the transfer’s management rule on water availability in the recipient area.

Suggested Citation

  • Dolores Rey & Alberto Garrido & Javier Calatrava, 2016. "An Innovative Option Contract for Allocating Water in Inter-Basin Transfers: the Case of the Tagus-Segura Transfer in Spain," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(3), pages 1165-1182, February.
    • Handle: RePEc:spr:waterr:v:30:y:2016:i:3:d:10.1007_s11269-015-1219-0
    DOI: 10.1007/s11269-015-1219-0
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    References listed on IDEAS

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    1. J. Maestre-Valero & D. Martínez-Granados & V. Martínez-Alvarez & J. Calatrava, 2013. "Socio-Economic Impact of Evaporation Losses from Reservoirs Under Past, Current and Future Water Availability Scenarios in the Semi-Arid Segura Basin," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(5), pages 1411-1426, March.
    2. Dolores Rey & Javier Calatrava & Alberto Garrido, 2016. "Optimisation of water procurement decisions in an irrigation district: the role of option contracts," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(1), pages 130-154, January.
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    Cited by:

    1. Beatriz Larraz & Enrique San-Martin, 2021. "A Tale of Two Dams: The Impact of Reservoir Management on Rural Depopulation in Central Spain," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 35(14), pages 4769-4787, November.
    2. Wenquan Gu & Dongguo Shao & Xuezhi Tan & Chen Shu & Zhen Wu, 2017. "Simulation and Optimization of Multi-Reservoir Operation in Inter-Basin Water Transfer System," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(11), pages 3401-3412, September.
    3. Carlos Mario Gómez Gómez & C. D. Pérez-Blanco & David Adamson & Adam Loch, 2018. "Managing Water Scarcity at a River Basin Scale with Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-31, January.
    4. Melissa Nogueira Sondermann & Rodrigo Proença Oliveira, 2021. "A Shared Vision on the Transboundary Water Management Challenges of the Tagus River Basin," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 35(13), pages 4647-4664, October.
    5. Sun, Jian & Dang, Zhiliang & Zheng, Shaokui, 2017. "Development of payment standards for ecosystem services in the largest interbasin water transfer projects in the world," Agricultural Water Management, Elsevier, vol. 182(C), pages 158-164.
    6. Zhisong Chen & Lingling Pei, 2018. "Inter-Basin Water Transfer Green Supply Chain Equilibrium and Coordination under Social Welfare Maximization," Sustainability, MDPI, vol. 10(4), pages 1-28, April.

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