May 21, 2012--Selling water to the highest bidder (High Country News)

At some point, the way Colorado River water gets divvied up is going to have to change. As we've noted in past writings, the lower basin states of Arizona and Nevada use more water than they're allowed to under the compact that runs the river. Climate change will likely make droughts worse, and reduce the total amount of water available to states using the river's water. In preparation for this inevitable need to change the system, the Bureau of Reclamation, which manages the river's dams and reservoirs -- including the giant storage systems of Lakes Mead and Powell, recently took suggestions from the public for new ways to manage the river. One of these ideas involves what's known as a water market. If you follow environmental policy at all, you know it's become fashionable to look to markets to solve some types of environmental problems. The idea is, when prices are attached to a limited resource (like water or a pollution permit), those who need the resource the most will pay the most for it, and it ends up divvied up in the most efficient way. A paper published this week in the Journal of the American Water Resources Association details this concept for the Colorado River Basin. The researchers, economists Rich Wildman and Noelani Forde, take as their model Australia's Murray-Darling Basin, which has adopted a successful water market. The needs pressing the Australian basin are akin in many ways to the Colorado River Basin, and western policy makers  have been interested in learning what they can from the changes to management that Australia implemented during a 10-year drought known as the "Big Dry," where runoff was at 40 to 50 percent of normal. But while there are many parallels between the Australian situation and what is likely to happen in the Colorado River Basin, there are also many hurdles to following the land of Oz down its market-based path, as the paper details.

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