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Reviewing the arguments for market based approaches to water distribution: a critical assessment for sustainable water management in Spain

Listed author(s):
  • Jordi Honey-Rosés

    (John F. Kennedy School of Government, Harvard University, USA Current address: Department of Urban and Regional Planning, University of Illinois Urbana Champaign, 111 Temple Buell Hall, 611 Taft Drive, 61820 Champaign, IL, USA.)

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    Countries in dry climates need to find more efficient water management practices to meet growing water demand. Traditional command-and-control water policies are associated with inefficiencies and have motivated the exploration of market based approaches, including water trading. Water trading has its intellectual origin with the theory of Pareto optimality and the Coase theorem, which asserts that resources will be allocated efficiently given well defined property rights and no transaction costs. This research reviews the case for water trading and finds that, in the Spanish context, institutional innovations and reforms are needed to address externalities in the water market and lower transaction costs before water trading can become viable. Policies based purely on market incentives are unlikely to produce desirable results. The challenge for Spanish policy-makers will be to create the appropriate mix of market incentives and institutional conditions that will promote an efficient distribution of water resources. Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment.

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    Article provided by John Wiley & Sons, Ltd. in its journal Sustainable Development.

    Volume (Year): 17 (2009)
    Issue (Month): 6 ()
    Pages: 357-364

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    Handle: RePEc:wly:sustdv:v:17:y:2009:i:6:p:357-364
    DOI: 10.1002/sd.391
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    1. Manuel Martín Rodríguez & Francisco Javier Sáez Fernández & Juan Alberto Aragón Correa & Elías Melchor Ferrer & Noelina Rodríguez Ferrero, 2002. "Evaluation of irrigation projects and water resource management: a methodological proposal," Sustainable Development, John Wiley & Sons, Ltd., vol. 10(2), pages 90-102.
    2. John Freebairn & John Quiggin, 2006. "Water rights for variable supplies ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 295-312, 09.
    3. Mark W Rosegrant & Renato Gazmuri, 1995. "Reforming Water Allocation Policy Through Markets in Tradable Water Rights: Lessons from Chile, Mexico and California," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 32(97), pages 291-316.
    4. Xuemei Bai & Hidefumi Imura, 2001. "Towards sustainable urban water resource management: a case study in Tianjin, China," Sustainable Development, John Wiley & Sons, Ltd., vol. 9(1), pages 24-35.
    5. Goetz, Renan U. & Martinez, Yolanda & Rodrigo, Jofre, 2008. "Water allocation by social choice rules: The case of sequential rules," Ecological Economics, Elsevier, vol. 65(2), pages 304-314, April.
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