About Water Exchanges
What is a water exchange?
In general, water exchange refers to a institution that transfers water rights from one purpose or use to another by bringing together buyers and sellers and facilitating the transaction. In many areas, water banks or exchanges have proven to be an effective way to reallocate water rights to higher valued uses, either agricultural, industrial, municipal, or environmental, and therefore help optimize water use among these various stakeholders. Functions of a water exchange In general, water exchanges provide improved information, brings together available transactions, and appropriately values water rights transfers to better allow voluntary transactions to take place within the community. The success of a water exchange relies on the careful assessment of what constitutes a tradable unit, a clear understanding of stakeholder preferences, adaptability to local water use conditions, an effective central organization, and - most importantly - the appropriate valuation of water rights to incentivize productive transfers. Existing water exchanges are diverse and possess characteristics and operations that best address the unique needs of the community that they serve. However, some common functions of water exchanges include:
Benefits of water exchanges Water exchanges thus act as an effective market mechanism for water rights transfers and reduces the burden on bank participants to find and fulfill the various transaction requirements involved in these exchanges. There are also many social and environmental benefits to water exchanges. Water exchanges can promote water conservation and offer a mechanism to smooth water supply through dry years. Additionally, water exchanges foster compliance with existing water regulations and address the needs of both existing and new water right users. Future of water exchanges Water exchanges and water banking began growing in popularity around the 1990's as an effective management strategy for optimizing water use within a community. Empirical evidence has demonstrated that these markets have become more efficient as they persist in a community, lending additional credibility to their role as a long term water management solution for some regions. |