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

Author

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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.

Suggested Citation

  • Skurray, James H. & Pandit, Ram & Pannell, David J., 2011. "Institutional Impediments to Groundwater Trading: the case of the Gnangara groundwater system of Western Australia," Working Papers 117825, University of Western Australia, School of Agricultural and Resource Economics.
  • Handle: RePEc:ags:uwauwp:117825
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. 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, January.
    4. 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.
    5. 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.
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    Cited by:

    1. Skurray, James H., 2015. "The scope for collective action in a large groundwater basin: An institutional analysis of aquifer governance in Western Australia," Ecological Economics, Elsevier, vol. 114(C), pages 128-140.
    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.
    3. 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.

    More about this item

    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;

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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