An Integrated Assessment of WaterMarkets: A Cross-CountryComparisonR. Quentin Grafton*, Gary Libecapy, Samuel McGlennonz,Clay Landryjj, and Bob OBrien#IntroductionMany of the worlds arid and semiarid regions face the challenge of declining water supplies(Ludwig and Moench 2009) and increasing demand for water resources due to populationand income growth (Falkenmark 1999). Without comprehensive efforts to address waterscarcity, there will be dire effects on the livelihoods of the poor in water-scarce and lowincome countries, especially those with high population growth rates.Effective institutional arrangements and allocation mechanisms among competing users areneeded to mitigate and manage water scarcity. Water markets, which are intended to enhancethe economic efficiency with which water resources are utilized, are one such institutionalarrangement. The purpose of this article is to develop, for the first time, a comprehensiveand integrated framework to assess and compare water markets. This framework is usedto identify the strengths and limitations of five water markets: Australias Murray-Darling*Chairholder, UNESCO Chair in Water Economics and Transboundary Governance; Director of the Centrefor Water Economics, Environment and Policy (CWEEP); and Professor of Economics at the CrawfordSchool, Crawford School of Economics and Government, Crawford Building (132), Lennox Crossing,The Australian National University, Acton, ACT 0200, Australia. Telephone: þ61-2-6125-6558; e-mail:quentin.grafton@anu.edu.au.yProfessor, Bren School of Environmental Science and Management; Economics Department, UCSB; Economics Department, Cambridge University; Research Associate, NBER; and Fellow, Hoover Institution andPERC.zDoctoral Scholar, the Fenner School; and Research Associate, CWEEP, Crawford School of Economics andGovernment, the Australian National University.jjManaging Director, WestWater Research, LLC, Boise, ID, USA; and Research Associate, PERC, Bozeman,MT, USA.#Managing Director, Percat Water.Senior authorship is shared by the first three authors, listed alphabetically.We have benefitted from comments provided by the editor, two anonymous reviewers and Oscar Cristi, ZackDonohew, Eric Edwards, Stefano Farolfi, Lovell Jarvis, Guillermo Donoso Harris, and Robert Speed.Review of Environmental Economics and Policy, volume 5, issue 2, summer 2011, pp. 219–239doi:10.1093/reep/rer002Advance Access publication on July 18, 2011 The Author 2011. Published by Oxford University Press on behalf of the Association of Environmental and ResourceEconomists. All rights reserved. For permissions, please email: journals.permissions@oup.com219Downloaded from http://reep.oxfordjournals.org/ at The Australian National University on September 30, 2012Basin, the western United States, Chile (in particular the Limarı ´ Valley), South Africa, andChina (in particular, the North). These locations are all semiarid and face, to varying degrees,the prospect of reduced water availability associated with climate change. Two of the marketsare in rich countries (Australia and the United States), two are in low- to middle-incomecountries (Chile and South Africa), and one is in a poor, but rapidly developing country(China). However, all five countries (and markets) differ substantially in terms of their wateruse and reform histories as well as their legal and institutional frameworks.The framework presented here uses qualitative and quantitative criteria in three keycategories—institutional foundations, economic efficiency, and environmental sustainability—to assess and make comparisons across the five water markets. This frameworkhelps identify which of these water markets are currently able to contribute to integratedwater resource management, which criteria underpin these markets, and the features ofthese markets that may require further development.The following section provides an overview of the integrated framework and the five watermarkets. The next three sections evaluate the five water markets using the institutional foundations, economic efficiency, and environmental sustainability criteria. The final section summarizes the findings and identifies some general lessons concerning water markets that maybe useful in improving water governance.An Integrated Water Markets FrameworkIndicators of water scarcity are typically defined in terms of water availability per person peryear or withdrawals as a proportion of water availability and accessible runoff (Postel et al.1996; Shiklomanov 2003). Sullivan (2002) has proposed a broader measure—a water povertyindex—that may include measures of human health, community well-being, and access tosafe water and sanitation, as well as water availability. However, as far as we are aware, onlyDinar and Saleth (2005) and Saleth and Dinar (2004) have developed a framework to compare water institutions. They use sixteen characteristics of water institutions in three broadcategories: law related, policy related, and organization or administration related, but onlyone of these characteristics is directly related to water markets.Previous reviews of water markets include Easter et al. (1998, 1999), Howe et al. (1986), andRosegrant and Binswanger (1994), among others. These reviews provide guidance for improving markets, typically from an economic efficiency perspective. Our goal here is to showhow water markets can, and do, function with very different legal and institutional frameworks and what this implies in terms of efficiency and sustainability. In particular, we developa comprehensive and integrated framework in order to generate a qualitative ordinal rank ofthe institutional foundations of water markets and their performance in terms of integratedwater resource management. While many of these rankings are subjective, we provide evidence to support our judgments and recognize that conclusions drawn from individual basinsmay not be fully representative of all water markets in a country.Our integrated water markets framework is designed to (a) assess and compare differentwater markets, (b) track the performance of water markets over time, and (c) identify waysin which water markets might be reformed to achieve desired goals. The framework assessesand ranks nineteen criteria of water markets in three categories: institutional foundations (eight220 R. Q. Grafton et al.Downloaded from http://reep.oxfordjournals.org/ at The Australian National University on September 30, 2012criteria), economic efficiency (six criteria), and environmental sustainability (five criteria).Equity considerations are included in several subcategories: recognition of public interest, priority of use, initial allocation and reallocation, and dealing with market failures. Many of thecriteria are qualitative measures that are derived from primary or secondary data, but some ofthe economic efficiency criteria are quantitative. The qualitative criteria are ranked on a fourpoint scale: the highest (three ‘‘drops’’) indicates the criterion is nearly or fully operational; twodrops indicates the criterion is mostly satisfied but some further development is required; onedrop indicates the criterion is partly satisfied and substantial development is required; and thelowest ranking (X) specifies that the criterion is not operational or is missing. Correlationbetween criteria is possible given the interwoven challenges of water governance.We apply the integrated framework to five water markets: Australias Murray-Darling Basin, the western United States, Chile (the Limarı´ Valley), South Africa, and China. Limitedlocal water markets have existed in the United States since the nineteenth century, while inChina water trading is still very much in its infancy1 and in South Africa water markets areseverely constrained by the lack of full legal recognition of existing use rights. Water rights inChiles Limarı´ Valley are, arguably, the most entrenched in terms of legal rights, but thismarket is small compared to water markets in Australias Murray-Darling Basin, which werefirst established in the early 1980s.For all five markets, we use secondary data sources. These sources have been supplementedby data, first-hand knowledge, and research and water policy experience with three of thesemarkets (Australia, South Africa, and United States) and verified by water experts in the caseof China and Chile. The next three sections describe the criteria (by category) in more detailand discuss the findings of the assessments.Institutional FoundationsThe framework uses eight criteria to assess the institutional foundations of the five water markets: (a) recognition of the public interest (legal and practical recognition of multiple interests inwater resources); (b) administrative capacity (sufficient administrative authority, resources, andinformation to manage water resources effectively); (c) well-developed horizontal and verticallinkages (robust and clear institutional relationships, both at a given level of governance andbetween different levels of governance); (d) legal/administrative clarity (including definitionand recognition of water rights and trading rules as well as transparent administrative actions);(e) priority of use (provision of water for basic human needs and the existence of beneficial userequirements); (f) initial allocation and reallocation (transparent processes for allocating waterrights and reallocating as priorities evolve); (g) dealing with market failures (recognition of thirdparty effects and appropriate and robust mechanisms for resolving conflict); and (h) adaptivemanagement of institutions (capacity for institutional adaptation). A summary of the rankingsfor these criteria (by water market) is provided in Table 1. Additional details about the criteriaand their status and performance in each of the water markets are presented below.1Chinas experience with water trading has to date been limited to (a) the ‘‘administered reallocation’’ ofwater savings from channel lining and (b) several intercounty and interprefecture agreements to reallocatebulk water entitlements (Speed, pers. comm.). There is, however, a directive from the 2006 State Council todevelop ‘‘a water rights transfer system’’ (Sun 2010).Integrated Assessment of Water Markets 221Downloaded from http://reep.oxfordjournals.org/ at The Australian National University on September 30, 2012Table 1 Assessment of water markets: Institutional foundationsRecognitionof publicinterestAdministrativecapacityHorizontaland verticallinkagesLegal/administrativeclarityPriorityof useInitialallocation andreallocationDealingwith marketfailuresAdaptivemanagementof institutionsAustraliaU.S. WestChileSouth Africa X (pending) (pending)China X N/A X, Nearly or fully satisfied; , Mostly satisfied, some further development required; , Partly satisfied, substantial further development required; X, Not satisfied/Missing/Not operational; (pending),Pending implementation of espoused policy reforms; N/A, Not applicable.222 R. Q. Grafton et al.Downloaded from http://reep.oxfordjournals.org/ at The Australian National University on September 30, 2012Recognition of the Public InterestThe public interest refers to beneficiaries from water resources other than direct water users,notably the environment. In the case of Australia, water resource plans are obliged to‘‘establish the intended balance between environmental and consumptive use outcomes,as well as setting out terms and conditions for water access’’ (National Water Commission2009a), although in practice this does not necessarily occur (Connell and Grafton 2008).In the United States, western states own water in trust for their citizens. Individuals holdusufruct rights, or user rights to the water, subject to the requirement that the use is beneficialand reasonable as well as oversight by the state in monitoring applications and water transfersto ensure that they are consistent with the public interest (Gould 1995). The notion of ‘‘publicinterest,’’ however, has been sufficiently vague to justify state intervention, which has led touncertainty regarding water rights.In Chile, the 1981 Water Code specifies ‘‘. . . . water is a natural resource for public use’’(Hearne 1998), but public interest regulation under the law is constrained by scarce resources,especially with regard to third party losses or environmental services (Oscar Cristi, pers. comm.).In South Africa, the public interest in water resources is defined under its National WaterAct 1998, and the national government is held as the custodian of the public interest (Nieuwoudt and Armitage 2004). However, the national government has failed to prevent majorpollution problems, such as acid mine drainage (Water Research Commission 2009), whichgenerate substantial external costs.Chinas constitution provides that water resources are owned by the state on behalf of thepeople (Speed 2010a), and its 2002 Water Law provides a framework for integrated waterresource management and includes sections dealing with planning, conservation, andpollution control (Khan and Liu 2008). Despite these good intentions, however, comprehensive Chinese water resource planning is still in a ‘‘developmental phase’’ (Liu and Speed 2010).Administrative CapacityAdministrative capacity refers to the capacity to enact governments stated water policies, andit is most developed in the high-income countries: Australia and the United States. Due toboth countries historical development as federalist systems, much of this capacity resides atthe state level, although in the case of Australia this capacity is rapidly being developed at thefederal level following passage of the Water Act 2007. In the United States, each state hasa regulatory agency to monitor whether water is held, used, and transferred in ways thatare consistent with the requirements of beneficial use and the public interest. These agenciesmay vary, from the State Engineer in New Mexico and Utah, to the Department of WaterResources in Arizona, to the Department of Natural Resources and special water courtsin Colorado.In Chile, administrative capacity is limited by the human and financial capacity of thegovernments water rights agency, Direccion General de Aguas (DGA). Similarly, in SouthAfrica, administrative capacity in the water sector is constrained by a lack of central government support. Attempts to establish effective catchment (river valley) management authorities have also been stalled by the social problems generated under the previous regime(Farolfi and Rowntree 2007). Further difficulties in developing administrative capacity atIntegrated Assessment of Water Markets 223Downloaded from http://reep.oxfordjournals.org/ at The Australian National University on September 30, 2012the national level have emerged from the continued influence of regional offices of the SouthAfrican Department of Water Affairs, which are, at present, the entities providing local watermanagement. These factors combine to limit the ability of the state to effectively manage andcontrol water resources (Malzbender et al. 2005).In China, ‘‘serious questions about the states capacity to tackle water problems’’ remain(Lee 2006), although the establishment of river basin commissions for major rivers and therevision of master basin plans are promising (Speed, pers. comm.).Horizontal and Vertical LinkagesWell-developed linkages across governments and agencies are necessary to ensure effectivewater governance if responsibilities are shared. In Australia, cross-government agreementshave formed the basis of water reform since the mid-1990s. A willingness to cooperateand cede authority to the federal government in return for financial benefits led to the WaterAct 2007, which provides for centralized Basin planning.In the United States, because water management has been left primarily to the states, vertical and horizontal institutional linkages are relatively weak. For example, water trades mayrequire approval by the relevant irrigation district board, the county where the district isfound, the state regulatory body, and, potentially, federal agencies such as the Bureau of Reclamation. These institutional limitations complicate and obstruct water trading, leading toinconsistencies across catchments or river valleys.In Chile, while horizontal relationships are transparent at lower levels of governance (e.g.,between irrigation organizations), significant problems can exist between the DGA and thecourt system in dealing with water conflicts (Bauer 2004). Chile does appear to have welldeveloped vertical linkages, although this is partly attributable to the interconnected nature ofthe Limarı´ Valleys water infrastructure (Zegarra 2008).In South Africa, significant interbasin transfers—as well as transfers across national borders—have necessitated functioning horizontal cooperation, and numerous water agreements have been implemented (Turton et al. 2008). The National Water Act 1998 definesthe lines of authority between levels of government, but the capacity for local water management still resides largely in the regional offices of the Department of Water Affairs ratherthan in its catchment management authorities.China has fragmented horizontal linkages that result in diminished administrative authority and confusion (Lee 2006; Liu and Speed 2010; Zhou 2006). Fractured water managementsystems have been identified by the World Bank (2002) as ‘‘the critical unsolved problem’’ forChinas water resources, including nine separate bureaus with water policy interests (Lee2006).Legal/Administrative ClarityLegal clarity over water rights is a key feature of effective water markets. In Australia, waterrights are statutory rights that could, in principle, be revoked or modified without compensation. In practice, governments have sought to protect existing rights holders by purchasingwater rights from willing sellers in order to increase environmental flows (Connell and Grafton 2011).224 R. Q. Grafton et al.Downloaded from http://reep.oxfordjournals.org/ at The Australian National University on September 30, 2012Water rights in the western United States are, typically, based on prior appropriation anddiversion (Johnson et al. 1981), with diversions prioritized based on the date of the right. Incertain areas, water rights are not well defined, while in others the assurance of junior rights isundermined by overallocation of the available water. There is no single or central water titleoffice. Rights are also conditional upon varying state regulations for beneficial use, preferreduses, area of origin restrictions, and public interest/public trust doctrine mandates (Getches1997). These requirements vary across states and can raise the transaction costs of transfersand lower the value of water rights.Chile has the strongest and most broadly defined water rights, based on the Water Code of1981, whereby the government must pay for the attenuation of water rights (Bauer 1997).Water use efficiency has increased under the system, but there remain some conflicts createdby third party effects as well as confusion over the relative priority of consumptive rights andnonconsumptive (mainly hydropower) rights (Brehm and Quiroz 1995). To help avoid thisproblem, users can register their water rights in registers, a practice that is also underway inChina and South Africa.In South Africa, addressing equity concerns—including through water management—remains the chief national priority, relegating the trading of water rights between farmersto a lower-order concern. Water rights are formally recognized and registered by the Department of Water and Environmental Affairs and are renewable every five years (Pott et al.2009). Delays in registration and licensing have prevented water users in many catchmentsfrom being assured of their existing rights, thus impeding trade (Speelman et al. 2010).Unclear property rights in China continue to cause significant problems for themanagement of Chinas water resources (Speed 2010b). There remains a lack of transparency surrounding water allocation decisions (Lee 2006; Zhou 2006), and the ambiguous legal status of water allocation has led to implementation difficulties (Shen andSpeed 2010).Priority of UsePriority of use refers to the provision of water for basic human needs (defined as theimmediate requirements of households in terms of drinking water and sanitation) and conditions relating to beneficial use (referring to whether, and how, the water is used).Australia does not have explicit provisions for beneficial use. Basic human needs are defined in terms of water supplies for communities that depend on rivers for their water supplies. Such communities have the highest order priority of access.The United States has appropriative water rights that are conditional upon placing thewater in beneficial use. Most western states define beneficial use in terms of the benefitfor the appropriator, other persons, or the public, with corresponding lists of what is considered beneficial use (evolving through time), but should there be extreme water shortages,domestic and municipal uses would take priority over agricultural, industrial, and in-streamuses (Trelease 1955).Like Australia, Chile has no explicit provisions for beneficial use. There is a general deference to the urban water supply (Hearne 1998), and water availability is such that the provision of basic human needs has tended not to compromise existing water markets andIntegrated Assessment of Water Markets 225Downloaded from http://reep.oxfordjournals.org/ at The Australian National University on September 30, 2012allocations. Increased demand, however, poses allocation challenges in areas where miningactivity has been increasing (e.g., Barrionuevo 2009).The provision of basic water services for human needs—often for free—has beena major priority of the South African governments water policies. This approach is basedon the National Water Act 1998, which aims to ensure adequate water for basic humanneeds and ecological and development purposes (Farolfi and Perret 2002). Beneficial useis also an explicit consideration and is taken into account when licenses are reviewed(Nieuwoudt 2000). However, there is a lack of transparency concerning what this meansin practice, and free provision of water may have incentive effects for use andmanagement.In China, basic human needs for water are met due to the priority given to urban and ruraldomestic water (Speed, pers. comm.). It may be that beneficial use is taken into account, butbecause of the centrally administered nature of water allocation in China, it is not clear howthis is done.Initial Allocation and ReallocationInitial allocations of water rights can be contentious, especially if prior users of water areexcluded or provided with a lower share than they had historically. Such allocations maybe viewed as inequitable and can contribute to water conflicts that jeopardize the efficientfunctioning of water markets.The challenge in Australia has been to reallocate water rights from existing users to theenvironment in ways that are equitable and meet societal goals. To date, this has been accomplished through federal government purchases of water rights from willing sellers,funded from general tax revenues (Connell and Grafton 2008, 2011).In the United States, water rights in western states are largely based on the prior appropriation doctrine or ‘‘first possession’’ (Getches 1997; Kanazawa 1998), whereby senior rightsholders have first claim to water and junior rights holders bear more risk during drought.While there is no central registry of water rights, rights in each basin generally are well knownand transferable separately or with land.Under Chiles 1981 Water Code, prior users, primarily in agriculture, were allocated consumptive water rights, but nonconsumptive rights such as hydroelectric power generationwere also included. There is some confusion as to which of these two rights holders has priority (Bauer 2004). The allocation of return flows to holders of water rights, required underthe 1981 Water Code, also may disadvantage customary downstream flow users who previously had access to these flows.Since the passage of its National Water Act 1998, South Africa has been undergoing a process of compulsory licensing, after which an ‘‘initial allocation’’ of water licenses will occur(Water Research Commission 2009). This process may reallocate water to other purposes,such as to previously disadvantaged individuals, without compensation to prior users/rightsholders.In China, the eleventh five-year plan (2006–2010) requires the development of a nationalinitial allocation system (Sun 2010), but no clear interpretation of this requirement has beenprovided to date. Large interbasin transfers from the South to the North indicate that pastwater use does not ensure current access.226 R. Q. Grafton et al.Downloaded from http://reep.oxfordjournals.org/ at The Australian National University on September 30, 2012Dealing with Market FailuresMarket failures can emerge for a variety of reasons, including impacts from third party use,market power, and an inadequate provision of public goods. Market power has yet toemerge as a significant issue in water markets, but third party impacts are important inall markets and arise when water trades impose external costs not accounted for in thewater trade.In Australia, states and irrigation districts have limits on the quantity of sales permissiblein water markets so as to protect communities from reduced water diversions. These controls have had a negative effect on water transactions and the efficient functioning of watermarkets (Productivity Commission 2010). Conflicts and tradeoffs between water uses areresolved primarily at both a basin and catchment level. Where there have been difficulttradeoffs (e.g., water allocations to the environment to the detriment of irrigators), thefederal government has provided substantial funding to smooth the transition for thosenegatively affected.In the United States, water trades are regulated by states to meet beneficial use and noharm or no injury requirements when they involve changes in location, timing, and natureof use that could affect other rights holders (Getches 1997). There can also be restrictions tolimit negative pecuniary impacts of trades. The approach to conflicts in the United Stateshas primarily been one of litigation, including those under the Public Trust Doctrine,a common law notion that emphasizes the public nature of water and other natural resources (Sax 1970; Brewer and Libecap 2009). Because there is no compensation for rights holders who lose water under the doctrine, conflicts over water reallocation can be long lasting(Libecap 2007).Chiles 1981 Water Code does not specifically address third party effects or environmentalimpacts. The World Bank considers externalities in Chiles water sector to be of potentialconcern (Briscoe et al. 1998). As in the United States, Chiles approach to conflicts has primarily been one of litigation, a process that has proved to be time-consuming and costly(Briscoe et al. 1998).Nieuwoudt (2000) reports that the South African National Water Act 1998 ‘‘gives prominence to third party (environment and human) issues,’’ although it is difficult to assess howeffective these protections are in the absence of significant levels of water trading. It is clear,however, that conflicts over water are ongoing. Until effective catchment management isimplemented, these difficulties are unlikely to be resolved. Some stakeholder-driven watermanagement processes have been developed by the Water Research Commission (e.g., seeFarolfi and Rowntree 2007).In China, water transfers as a result of water ‘‘savings’’ through lining of irrigation channelsproduce third party effects which, to date, have been inadequately considered (Speed 2010b),especially for surface–groundwater linkages and wetlands (Xie 2008, 76). Importantly, thethird party effects of large interbasin transfers from South to the North (Ghassemi and White2007) have not been fully considered nor have third parties been fully compensated. Regarding conflicts, the 2002 Water Law contains provisions for dispute settlement (Liu and Speed2010), although shortcomings in the water planning framework have allowed inconsistenciesto emerge between regional and local water plans, increasing the potential for conflict in timesof water shortage (Liu and Speed 2010).Integrated Assessment of Water Markets 227Downloaded from http://reep.oxfordjournals.org/ at The Australian National University on September 30, 2012Adaptive InstitutionsAdaptive institutions are able to adjust to unexpected shocks, incorporate new and revisedinformation, and respond in a timely manner to changes in societal preferences over howwater is managed and used. Australias Water Act 2007 represented a radical shift in responsibility for water planning and management and was agreed to by all levels of government andwith bipartisan support. This suggests that, at least at the present time, Australia has the mostadaptable institutions of the countries in this study, although, as elsewhere, political tensionsaffect the pace and degree of reform implementation.In the United States, institutional heterogeneity within and across states provides opportunities for learning and innovation. For instance, many water supply organizations havehistorically resisted water transfers (Thompson 1993), but as the potential gain from exchange rises, irrigation districts—the largest water supply organizations—have become moreresponsive to trading potential (Eden et al. 2008).In Chile, there have been numerous attempts since 1990 to modify the countrys water law,and some changes were implemented in 2005 (Bauer 1997, 2008; Zegarra 2008). By contrast,South Africa radically changed its water institutional framework with its National Water Act1998, which provides for decentralized control of water resources. Since its passage, the focushas been to implement the various reforms rather than embark on further institutional change.Chinas recent development of river commissions for itsseven major basins is illustrative of adaptability, as is the Water Law 2002, which, on paper, contains many provisions conducive to soundwater management. The ability of institutions to adapt in practice, however, has lagged behind theideals espoused in official laws and regulations. This is at least partly due to the inertia that emergesfrom the enormity of Chinas water sector: 1.1 million employees within the institutions of theMinistry of Water Resources and around 1,300 ‘‘water affairs bureaus’’ (Speed, pers. comm.).Economic EfficiencyThe framework uses three quantitative measures of the economic efficiency of water markets:(a) size of the market (volume of water traded from permanent and temporary water rights asa percentage of total water rights); (b) estimates of the annual monetary gains (in U.S. dollars)from water trade; and (c) size of storage (which allows for trades over a longer duration andtrades upriver). In addition, the framework includes three qualitative measures of economicefficiency: (d) nature of water rights (the extent to which they are unbundled so that waterrights are separated from land rights); (e) breadth of market (capacity for water trading between catchments, including upstream trades, as well as intersectoral trading); and (f) marketprice formation and availability (predictability of prices given changing water availability andaccessibility of price information). The performance of these criteria in the five water marketsis summarized in Table 2 and discussed in more detail below.Size of Water MarketThe size of water markets provides a good indication of their ability to facilitate transfers fromlower- to higher-value uses. Chiles Limarı´ Valley (Hadjigeorgalis and Lillywhite 2004) andAustralias Murray-Darling Basin (National Water Commission 2009b) have well-developed228 R. Q. Grafton et al.Downloaded from http://reep.oxfordjournals.org/ at The Australian National University on September 30, 2012water markets in terms of the volume traded as a proportion of total water rights available.The annual amount traded is over 20 percent in both locations, including permanent andtemporary water rights, which is extraordinarily high. Data are not available across all thewestern United States to make a similar calculation, but the amount of water traded as a proportion of total water use is much less. Nevertheless, substantial volumes of water are tradedin U.S. water markets. For example, between 1987 and 2008, a total of 38,700 gigaliters (GL)were traded in Tex
