The Role of Government in Water Markets  book cover
1st Edition

The Role of Government in Water Markets

ISBN 9781138655744
Published December 15, 2016 by Routledge
251 Pages

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Book Description

While water is an increasingly scarce resource, most existing methods to allocate it are neither economically nor environmentally efficient. In these circumstances, water markets offer developed countries a form of regulatory response capable of overcoming many of the shortcomings of current water management.

The debate on water markets is, however, a polarized one. This is mostly a result of the misunderstanding of the roles played by governments in water markets. Proponents mistakenly portrayed them as leaving governments, for the most part, out of the picture. Opponents, in turn, understand commodification of water and administration by public agencies as incompatible. Casado Pérez argues that both sides of the debate overlook that water markets require a deeper and more varied governmental intervention than markets for other goods. Drawing on economic theories of regulation based on market failure, she explains the different roles governments should play to ensure a well-functioning water market, and concludes that only the visible hand of governments can ensure the success of water markets.

Casado Pérez proves her case by examining case studies of California and Spain to assess the success of their water markets. She explores why water markets were more extensively institutionalized in California than in Spain in the first ten years since their introduction and how the role of governments in each case study impacted water market operation.

This unique analysis of governmental roles in water markets, alongside qualitative studies of California and Spain, offers valuable guidance to understand environmental markets and to face the challenges presented by water management in regions with periodical droughts.

Table of Contents



Most frequently Used Acronyms

Chapter 1. Scarcity, droughts, and the gap to be filled by water markets

1.1. Introduction: a Toolkit for Governing Scarcity

1.2. Water Scarcity, an All-Too-Common Problem

1.3. Potential Solutions to Water Scarcity

1.3.1. Supply side strategies

1.3.2. Demand side strategies

1.3.3. Markets

1.4. Water Governance Models

1.5. Centralized Administrative Systems

1.6. Water Markets

1.6.1. Definition

1.6.2. Typology

1.7. Critiques of Centralized Administrative Systems and Advantages of Water Markets

1.7.1. Markets as information aggregators: pricing water at its real value

1.7.2. Markets as innovation spurs

1.7.3. Markets as uncertainty management tools

1.7.4. Markets as a shield from politically-driven decisions

Chapter 2. Market failures and Governmental Roles

    1. Introduction
    2. The Case for Water Markets: A Literature Review
      1. A normative debate
      2. Policy oriented literature

    3. Governmental Roles: Market Failures
    4. Definition of Property Rights
      1. Property rights as public goods
      2. Variables in the property rights definition
      3. Instream flow protection

    5. Enforcement of Property Rights or Externalities
      1. Definition
      2. Different mechanisms to ensure that the effects on third parties or the environment resulting from a transaction are internalized
      3. Externalities on communities: a contested concept and a political necessity

    6. Infrastructure
      1. Provision
      2. Management of water infrastructure: third party access

    7. Market Maker
      1. Information and Recording
      2. Match-making
      3. Fungibility
      4. Guaranty

Chapter 3.Roadmap to the Case Studies


3.2. the Master and the Purported Disciple: California and Spain

3.3. Dependent Variable: Market Success and Market Activity

3.3.1. Data sources

3.3.2. Proxies for the Dependent Variable

3.4. Timeline

3.5. Explanatory Variables

3.5.1. General analysis

3.5.2. Scarcity

3.5.3. Governmental Roles: operationalizing the variable

3.5.4. A note on interest group pressure as a precursor of governmental action

Chapter 4.California’s Water Markets

4.1. Introduction

4.2. Overview of Water Management and Water Rights in California

4.2.1. Types of water rights

4.2.2. California’s allocation of power over water management

4.3. Overview of the Evolution of Water Market Regulations

4.4. Market Activity from 1991 to 2000

4.5. The Role of Natural and Regulatory Scarcity

4.6. Governmental Roles

4.6.1. The uncontested governmental role in water markets: definition of property rights

4.6.2. Externalities

4.6.3. Infrastructure: provision and management

4.6.4. Market maker

4.7. Conclusions

Chapter 5. Spanish Water Markets

5.1. Introduction

5.2. Spanish Allocation of Power Over Water Management

5.3. Water Rights in Spain: Administrative Concessions

5.3.1.General overview of the property rights over water

5.3.2.Concessions for water use

5.3.3.Private property rights

      1. Irrigation rights in irrigation areas of public initiative

5.4. Evolution of Water Market Regulations, Prompted by Scarcity

5.4.1. Content of the amendment

5.4.2. Political debate on the amendment

5.4.3. Evolution of water market regulation

5.5. Transaction Figures: Were Water Markets in Spain Active?

5.5.1. Data shortcomings

5.5.2. Not so active markets and the mediated role of scarcity

5.6. Governmental Roles

5.6.1. The uncontested governmental role in water markets: definition of property rights

5.6.2. Externalities: apparently not a major concern

5.6.3. Infrastructure: insufficient common carrier duty

5.6.4. Market maker role

5.7. Conclusions

Chapter 6. Comparison Between Water Markets in California and in Spain

6.1. Introduction

6.2. Dependent Variable: Water Market Activity

6.3. Fulfillment of Governmental Roles: Comparison and Critique

6.3.1. Definition of property rights

6.3.2. Enforcement of property rights or externalities

6.3.3. Infrastructure management

6.3.4. Market maker

6.4. Concluding Remarks


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Vanessa Casado Pérez is an associate professor at the Texas A&M School of Law and an affiliated scholar at the Bill Lane Center for the American West at Stanford University. Her research focuses on property law and management of natural resources, particularly water.