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Protecting environmental flows through enhanced water licensing and water markets

Erfani, T; Binions, O; Harou, JJ; (2014) Protecting environmental flows through enhanced water licensing and water markets. Hydrology and Earth System Sciences Discussions , 11 (3) 2967 - 3003. 10.5194/hessd-11-2967-2014. Green open access

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Abstract

To enable economically efficient future adaptation to water scarcity some countries are revising water management institutions such as water rights or licensing systems to more effectively protect ecosystems and their services. Allocating more flow to the environment though can mean less abstraction for economic production, or the inability to accommodate new entrants (diverters). Modern licensing arrangements should simultaneously enhance environmental flows and protect water abstractors who depend on water. Making new licensing regimes compatible with tradable water rights is an important component of water allocation reform. Regulated water markets can help decrease the societal cost of water scarcity whilst enforcing environmental and/or social protections. In this article we simulate water markets under a regime of fixed volumetric water abstraction licenses with fixed minimum flows or under a scalable water license regime (using water "shares") with dynamic environmental minimum flows. Shares allow adapting allocations to available water and dynamic environmental minimum flows can vary as a function of ecological requirements. We investigate how a short-term spot market manifests within each licensing regime. We use a river-basin-scale hydro-economic agent model that represents individual abstractors and can simulate a spot market under both licensing regimes. We apply this model to the Great Ouse river basin in Eastern England with public water supply, agricultural, energy and industrial water using agents. Results show the proposed shares with dynamic environmental flow licensing system protects river flows more effectively than the current static minimum flow requirements during a dry historical year, but that the total opportunity cost to water abstractors of the environmental gains is a 10 to 15% loss in economic benefits.

Type: Article
Title: Protecting environmental flows through enhanced water licensing and water markets
Open access status: An open access version is available from UCL Discovery
DOI: 10.5194/hessd-11-2967-2014
Publisher version: http://dx.doi.org/10.5194/hessd-11-2967-2014
Language: English
Additional information: This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Civil, Environ and Geomatic Eng
URI: https://discovery.ucl.ac.uk/id/eprint/1443300
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