Water is one of the world's most precious natural resources. Yet current climate patterns are making water scarce in many regions. Water rights provides an innovative solution to help address water scarcity by facilitating its efficient allocation.

Water rights refers to the practices of buying and selling surface water or groundwater allocation entitlements. It allows water rights holders to purchase water from willing sellers and transfer it to higher valued uses. The key participants in water rights are irrigation districts, local governments, industry, and environmental water holders.

Water rights has existed informally for decades through occasional one-off transfers. However, over the past 20 years formal water markets have emerged across Australia and parts of the United States to better match water supply with demand. In a Water Trading market, water rights are securely defined and can be freely bought and sold through a transparent price mechanism.

Driving Economic Efficiency

By enabling water to move to its highest value use, water trading encourages more efficient water allocation and use. Farmers can generate additional income by selling unused water rights to cities, industry, or the environmental water holder. Municipal and industrial users, meanwhile, have a reliable supply of water without building new dams or infrastructure.

The economic incentive of trading also promotes water conservation. Farmers have adopted more efficient irrigation techniques, allowing them to save water that can then be sold. Communities too have curtailed water usage through water meters, pricing reforms and other demand management strategies. Such responses help stretch limited water supplies further.

Environmental Benefits

                                       
In many trading schemes, a portion of trade volumes is set aside explicitly for environmental purposes. Environmental water holders can participate in the market, purchasing water entitlements and strategically using or holding the water to benefit river and wetland ecosystems.

With a secure environmental water portfolio, natural systems receive scheduled watering even in severe drought. Regulated environmental flows are rebuilding floodplains, wetlands and native vegetation along once degraded rivers. Recovered aquatic species are signs that water rights need not come at the cost of sustainability when environmental needs are integrated into the framework.

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