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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.

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
    DOI: 10.22004/ag.econ.117825
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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.
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    Cited by:

    1. Zeyu Wang & Juqin Shen & Fuhua Sun & Zhaofang Zhang & Dandan Zhang & Yizhen Jia & Kaize Zhang, 2019. "A Pricing Model for Groundwater Rights in Ningxia, China Based on the Fuzzy Mathematical Model," IJERPH, MDPI, vol. 16(12), pages 1-20, June.
    2. 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.
    3. 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.
    4. Le Lan & Md Sayed Iftekhar & James Fogarty & Steven Schilizzi, 2021. "Auctions for buying back groundwater for environmental purposes: Which design performs better?," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(3), pages 931-948, September.
    5. Cécile Hérivaux & Jean-Daniel Rinaudo & Marielle Montginoul, 2019. "Exploring the Potential of Groundwater Markets in Agriculture: Results of a Participatory Evaluation in Five French Case Studies," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 1-28, September.
    6. 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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