Regional Environmental Change

, Volume 18, Issue 6, pp 1593–1606 | Cite as

Water markets in federal countries: comparing coordination institutions in Australia, Spain and the Western USA

  • Dustin E. GarrickEmail author
  • Nuria Hernández-Mora
  • Erin O’Donnell
Original Article


Water markets are a prime example of decentralised resource allocation, yet their success often depends on strong coordination institutions, particularly as water is redistributed across sectors and political borders. The territorial division of authority in federal countries creates potential intergovernmental coordination challenges in river basins shared by multiple jurisdictions. This paper compares water markets and associated institutional reforms in Australia, Spain and the Western USA—three countries with long-standing experience with water markets but different approaches to distributing authority and intergovernmental coordination. We conduct an institutional mapping of national and sub-national roles in market-based water allocation reforms across the three countries and employ process tracing techniques to examine coordination challenges and institutional responses associated with water markets. We find that (1) policy goals addressed by water markets vary across—and within—the three countries, reflecting differences in the level of decentralisation, but (2) all three countries have required capable coordination institutions to address the distributional conflicts associated with water markets. Coordination institutions can take multiple forms and include both formal and informal venues for planning, financing and conflict management matched to local conditions.


Water markets Federalism Decentralisation Murray-Darling Basin Spain Western USA 


  1. Aither (2016) Water markets report: 2015–16 review and 2016–17 outlook., Aither, Pty Ltd.
  2. Bednar J (2008) The robust federation: principles of design. Cambridge University PressGoogle Scholar
  3. Bettles C (2013) States Cut MDBA budget [online]. Farm Weekly, 27 Feb 2013. Available: [Accessed 15 January 2017].
  4. Bretsen SN, Hill PJ (2006) Irrigation institutions in the American West. UCLA J Environ Law Policy 25:283–330 Google Scholar
  5. Birkenholtz T (2016). Dispossessing irrigators: Water grabbing, supply-side growth and farmer resistance in India. Geoforum, 69, 94–105.
  6. Bureau of Meteorology. (2016). "Water Market Information." from
  7. Calatrava J & Martínez Granados D (2016) Los mercados formales de agua en la cuenca del Segura. IN: Gómez-Limón, J.A. and J. Calatrava (Coord.) Los mercados de agua en España: Presente y perspectivas, Fundación Cajamar, Almería, pp. 153–284Google Scholar
  8. Casado-Perez V (2016) The role of government in water markets. Taylor & Francis.Google Scholar
  9. Casado-Pérez V (2015) Missing water markets: a cautionary tale of governmental failure. NYU Environmental Law. Journal 23:157–241. CrossRefGoogle Scholar
  10. Colby BG (1990) Transactions costs and efficiency in western water allocation. Am J Agric Econ 72(5):1184–1192. CrossRefGoogle Scholar
  11. Collier D (2011) Understanding process tracing. PS: Political Science & Politics, 44(4), pp. 823–830 doi:
  12. Commonwealth of Australia (1993) National Competition Policy Review (the Hilmer report). Australian Government Publishing Service, CanberraGoogle Scholar
  13. Connell D (2007) Water politics in the Murray-Darling basin. Federation PressGoogle Scholar
  14. Culp PW, Glennon RJ and Libecap G (2014) Shopping for water: how the market can mitigate water shortages in the American West. Island Press.Google Scholar
  15. COAG (1994) Communiqué-water reform framework, Hobart, Council of Australian Governments.Google Scholar
  16. COAG (2004) Intergovernmental agreement on a National Water Initiative, Council of Australian Governments.Google Scholar
  17. Department of Sustainability and the Environment (VIC) (2008) Water trading in Northern Victoria 1991/92–2005/06. Technical Report. Melbourne: State of Victoria.Google Scholar
  18. De Stefano L & Hernández-Mora N. this issue Multi-level interactions in a context of political decentralization and evolving water-policy goals: the case of SpainGoogle Scholar
  19. De Stefano L (2005) Los mercados de agua y la conservación del medio ambiente: oportunidades y retos para su implantación en España. WWF-Spain position paper.Google Scholar
  20. Del Moral L, Giansante C, Babiano L (2000) L’evolution des modalités d’allocation de la resource en eau en Espagne. Révue d’Economie Mediterranéen 48(191):235–248Google Scholar
  21. Easter KW, Rosegrant MW, Dinar A (1999) Formal and informal markets for water: institutions, performance, and constraints. World Bank Res Obs 14(1):99–116. CrossRefGoogle Scholar
  22. Elazar DJ (1987) Exploring Federalism, University of Alabama Press.
  23. Feiock RC (2013) The institutional collective action framework. Policy Stud J 41(3):397–425. CrossRefGoogle Scholar
  24. Feller JM (2007) The adjudication that ate Arizona water law. Arizona Law Rev 49:405–440 Google Scholar
  25. Garrick DE, De Stefano L (2016) Adaptive capacity in federal rivers: coordination challenges and institutional responses. Curr Opin Environ Sustain 21:78–85. CrossRefGoogle Scholar
  26. Garrick D (2015) Water allocation in rivers under pressure: water trading, transaction costs and transboundary governance in the Western US and Australia. Edward Elgar. pp. 256. ISBN: 978 1 78100 385 5.Google Scholar
  27. Garrick D, Whitten SM, Coggan A (2013) Understanding the evolution and performance of water markets and allocation policy: a transaction costs analysis framework. Ecol Econ: J Int Soc Ecol Econ 88:195–205. CrossRefGoogle Scholar
  28. Gerlak AK (2005) Federalism and US water policy: lessons for the twenty-first century. Publius: J Federalism 36(2):231–257. CrossRefGoogle Scholar
  29. Grafton RQ, Libecap G, McGlennon S, Landry C, O’Brien B (2011) An integrated assessment of water markets: a cross-country comparison. Rev Environ Econ Policy 5(2):219–239. CrossRefGoogle Scholar
  30. Grafton RQ, Libecap GD, Edwards EC, O'Brien RB, & Landry C (2012). Comparative assessment of water markets: insights from the Murray–Darling Basin of Australia and the Western USA. Water Policy, 14(2), 175–193
  31. Grafton RQ, Horne J (2014) Water markets in the Murray-Darling Basin. Agric Water Manag 145:61–71. CrossRefGoogle Scholar
  32. Guest C (2017) Sharing the water—one hundred years of River Murray politics. Murray Darling Basin Authority, CanberraGoogle Scholar
  33. Hart BT (2015) The Australian Murray–Darling Basin plan: challenges in its implementation (part 1). Int J Water Resour Dev 32(6):835–852. CrossRefGoogle Scholar
  34. Heinmiller, B. T. (2007). The Politics of" Cap and Trade" Policies. Natural Resources Journal, 445-467
  35. Heinmiller T (2009) Path dependency and collective action in common pool governance. Int J Commons 3(1):131–147. CrossRefGoogle Scholar
  36. Hernández-Mora N, Del Moral L (2015) Developing markets for water reallocation: revisiting the experience of Spanish water mercantilización. Geoforum; J Phys Human Region Geosci 62:143–155. CrossRefGoogle Scholar
  37. Hernández-Mora, N., Del Moral, L., La Roca, F., La Calle, A., & Schmidt, G., 2014. Interbasin water transfers in Spain. Interregional conflicts and governance responses. In: Schneider-Madanes, G. (Ed.) Globalized water: a question of governance. Springer, Dordrecht, pp. 175–194.Google Scholar
  38. Horne A, O’Donnell E (2014) Decision making roles and responsibility for environmental water in the Murray-Darling Basin. Aust J Water Resour 18(2):118–132. CrossRefGoogle Scholar
  39. Howe CW, Schurmeier DR, Douglas Shaw W (1986) Innovative approaches to water allocation: the potential for water markets. Water Resour Res 22(4):439–445. CrossRefGoogle Scholar
  40. Kenney D (2013) Cross-boundary water transfers in the Colorado River basin: a review of efforts and issues associated with marketing water across state lines or reservation boundaries. Colorado River Governance Initiative, Boulder, ColoradoGoogle Scholar
  41. Kildea P, Williams G (2010) The constitution and the management of water in Australia’s rivers. Sydney Law Review 32:595–616 Google Scholar
  42. Kildea P, Williams G (2011) The water act and the Murray-Darling Basin plan. Public Law Rev 22:9–13Google Scholar
  43. Kirby M, Bark R, Connor J, Qureshi ME, Keyworth S (2014) Sustainable irrigation: how did irrigated agriculture in Australia’s Murray–Darling basin adapt in the millennium drought? Agric Water Manag 145:154–162. CrossRefGoogle Scholar
  44. Marston L, Cai X (2016) An overview of water reallocation and the barriers to its implementation. Wiley Interdiscip Rev: Water 3(5):658–677. CrossRefGoogle Scholar
  45. Matthews K (2017) Independent investigation into NSW water management and compliance: advice on implementation. NSW Department of Industry, SydneyGoogle Scholar
  46. Meinzen-Dick R (2014) Property rights and sustainable irrigation: a developing country perspective. Agric Water Manag 145:23–31. CrossRefGoogle Scholar
  47. Meinzen-Dick RS (1996) Groundwater markets in Pakistan: participation and productivity , Intl Food Policy Res Inst.
  48. Murray-Darling Basin Authority (2012) Murray-Darling Basin plan. Commonwealth of Australia, CanberraGoogle Scholar
  49. Murray-Darling Basin Commission (1995) An audit of water use in the Murray-Darling Basin: June 1995. Murray-Darling Basin Commission, CanberraGoogle Scholar
  50. Murray-Darling Basin Commission (1998) Murray-Darling Basin cap on diversions water year 1997/98: striking the balance. Murray-Darling Basin Commission, CanberraGoogle Scholar
  51. Murray-Darling Basin Commission (2006). "Permanent Interstate Water Trading: How To Manual". (Canberra: Murray-Darling Basin Commission)Google Scholar
  52. National Farmers’ Federation 2010. Submission to productivity commission’s draft research report: market mechanisms for recovering water in the Murray-Darling Basin. : National Farmers' Federation.
  53. National Water Commission (2013) Australian water markets report 2011–12. NWC, CanberraGoogle Scholar
  54. National Water Commission (2014) Australian water markets: trends and drivers 2007–08 to 2012–13. National Water Commission, CanberraGoogle Scholar
  55. Nelson R, Perrone D (2016). The role of permitting regimes in Western United States groundwater management. Groundwater, 54(6), 761–764
  56. Ostrom E (2005) Understanding institutional diversity. Princeton University PressGoogle Scholar
  57. Palomo-Hierro S, Gómez-Limón JA, Riesgo L (2015) Water markets in Spain: performance and challenges. Water 7:652–678. CrossRefGoogle Scholar
  58. Prime Minister of Australia (2007) A national plan for water security. Canberra, Australia: Commonwealth of Australia.Google Scholar
  59. Productivity Commission (2010) Market mechanisms for recovering water in the Murray-Darling Basin (final report, March). Productivity Commission, CanberraGoogle Scholar
  60. Pujol J, Raggi M, Viaggi D (2006) The potential impact of markets for irrigation water in Italy and Spain: a comparison of two study areas. Aust J Agric Resour Econ 50(3):361–380. CrossRefGoogle Scholar
  61. Qureshi ME, Shi T, Qureshi SE, Proctor W (2009) Removing barriers to facilitate efficient water markets in the Murray-Darling Basin of Australia. Agric Water Manag 96(11):1641–1651. CrossRefGoogle Scholar
  62. Ross A, Martinez-Santos P (2010) The challenge of groundwater governance: case studies from Spain and Australia. Reg Environ Chang 10(4):299–310. CrossRefGoogle Scholar
  63. Ruml CC (2005). The Coase theorem and western US appropriative water rights. Natural Resources Journal, 169–200.
  64. Tarlock A D. (2001). The future of prior appropriation in the new west. Natural Resources Journal, 41(4), 769–793
  65. US Bureau of Reclamation (2016) Water marketing activities in the Bureau of Reclamation. In: US Department of Interior. DC, WashingtonGoogle Scholar
  66. Young M, Hatton MacDonald D, Stringer R, Bjornlund H (2000) Interstate water trading: a 2-year review, CSIRO Policy and Economic Research Unit.Google Scholar
  67. WestWater Research (2016) Water market insider. Quarter 2. Available at: Accessed December 15th 2016.
  68. Wheeler K, Robinson CJ, Bark RH (2018) Transboundary river models: bridging the boundaries between science, participation and regional decision-making for the Colorado River and Murray-Darling River basins. Reg Environ Chang.
  69. Wheeler S, Loch A, Crase L, Young M, Grafton RQ (2017) Developing a water market readiness assessment framework. J Hydrol 552:807–820. CrossRefGoogle Scholar
  70. Williams JM, Webster A (2010) Section 100 and state water rights. Public Law Rev 21-284:267–284Google Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  • Dustin E. Garrick
    • 1
    Email author
  • Nuria Hernández-Mora
    • 2
  • Erin O’Donnell
    • 3
  1. 1.Smith School of Enterprise and the Environment, School of Geography and the EnvironmentUniversity of OxfordOxfordUK
  2. 2.MadridSpain
  3. 3.University of Melbourne Law SchoolMelbourneAustralia

Personalised recommendations