University of California

Presentations 2016

Brozovic, Nicholas

Presentation Title
Innovations in Agricultural Groundwater Management: Smart Markets for Transferable Pumping Rights
Daugherty Water for Food Institute, University of Nebraska
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While no national policy on groundwater use exists in the United States, local groundwater management is emerging across the country in response to concerns and conflicts over declining well yields, land subsidence, and the depletion of hydrologically connected surface waters. Management strategies include well drilling moratoria, pumping restrictions, and restrictions on the expansion of irrigated land. To provide flexibility to groundwater users, local regulatory authorities increasingly have begun to allow the transfer of groundwater rights as a cost-effective management tool. Markets can be a versatile risk management tool, helping agricultural communities to cope with scarcity, to meet goals for sustainability, and to grow resilient local economies. For example, active groundwater rights transfers exist in the High Plains region of the United States. Since most groundwater pumped in the High Plains region is used for irrigation, the transfers of use rights are therefore predominantly between agricultural producers. Yet, several barriers to trade exist: high search costs for interested parties, complicated requirements for regulatory compliance, and reluctance to share sensitive financial information. Additionally, groundwater pumping leads to several kinds of spatial and intertemporal externalities such as stream depletion. Indeed, groundwater management schemes that reallocate water between alternate pumping locations are often explicitly designed to change the distribution and magnitude of pumping externalities. Reallocation may be designed to minimize unwanted impacts on third parties or to encourage trades that reduce the magnitude of externalities.We discuss how “smart” markets can deal with complex biophysical constraints while also encouraging active trading, therefore ensuring local goals for aquifer sustainability while growing local economies. Smart markets address these issues by providing a centralized hub for trading, automating the process of regulatory compliance by only matching buyers and sellers eligible to trade as specified in the regulations, and maintaining anonymous, confidential bidding.

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