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


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.

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  1. 1.

    Spain has 17 autonomous regions, which are hereafter called ‘states’ to ease comparison with the sub-national jurisdictions in Australia and the USA.

  2. 2.

    Time series data on Western US water markets are unavailable since the end of the Water Strategist newsletter circulated by the private firm, Stratecon, Inc. until 2010.

  3. 3.

    An adjudication refers to the process of establishing the extent, validity and priority of water rights under the prior appropriation doctrine; the process involves a judge or an appointed special master reviewing evidence about historic water use and claims, often with substantial data and administrative support from water agencies.

  4. 4.

    Unbundled water rights separate the permanent water access entitlement and the temporary water allocation from the land where the water is used; in fact, it is not necessary to use water on land at all.

  5. 5.

    High market activity is noted by WestWater (2016) in the Central Valley of California, Southern California, Southern Nevada, Phoenix of Arizona, Northern Front Range of Colorado, Middle Rio Grande of New Mexico, Edwards Aquifer of Texas and Lower Rio Grande (also Texas). All but the Edwards Aquifer are beneficiaries of federal water projects.


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Correspondence to Dustin E. Garrick.

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Garrick, D.E., Hernández-Mora, N. & O’Donnell, E. Water markets in federal countries: comparing coordination institutions in Australia, Spain and the Western USA. Reg Environ Change 18, 1593–1606 (2018). https://doi.org/10.1007/s10113-018-1320-z

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  • Water markets
  • Federalism
  • Decentralisation
  • Murray-Darling Basin
  • Spain
  • Western USA