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Water Markets ‘Could Reduce Drought Costs’

DroughtThe creation of water trading in California could help reduce the costs of drought, a group of professors and non-profit fellows have argued.

The authors – including Jay Lund, director of the Center for Watershed Sciences at the University of California – say that in the past, drought pressures have led to reduced protections for native fish. State and federal regulators will come under pressure to repeat this pattern, they say.

But a water market can ensure a reliable water supply and protect the environment, by making growers and cities pay for the additional water that relaxed environmental standards make available.

Trading would dampen the costs of drought, as farmers irrigating high-cash crops buy water from growers of alfalfa, rice and other crops with a lower profit-per-drop ratio. “Such market transactions ensure that those who use less water than their entitlement are compensated for the reduction,” the authors say.

Money generated by the market could then pay for compensating actions to help protect wildlife.

The authors included Ellen Hanak, a senior fellow at the Public Policy Institute of California (PPIC); Barton “Buzz” Thompson, director of the Stanford Woods Institute for the Environment; Brian Gray, professor at the UC Hastings College of the Law; Jeffrey Mount, senior fellow at the PPIC; and Katrina Jessoe, assistant professor of agricultural and resource economics at UC Davis.

The historic drought in California is hurting businesses from ski resorts to farms and utilities.

Last week the USDA announced $20 million available to California ranchers and farmers to fund agricultural water conservation to combat the effects of the statewide drought.

Takeaway: The creation of a carbon market in California could help reward businesses that conserve water, while protecting native wildlife.

Tamar Wilner is Senior Editor at Environmental Leader PRO.

Pictured: Dry lakebed, 1988. Source: California Department of Water Resources, via California WaterBlog.

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