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Water trading as a tool to combat economic losses in agriculture under climate change

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The agricultural water market (or water trade) is an effective water resource management tool to redistribute water from low-value to high-value agricultural farms. Water markets can play an important role in reducing the economic losses attributed to droughts by increasing flexibility in responding to water scarcity. Climate change has increased the scarcity and uncertainty of the agricultural water supply in the Mobile River Basin, mainly in Alabama, USA, which has imposed a huge risk to crop production in the region. In this study, agricultural water productivity is used to evaluate the value of irrigation water, and an analytical framework is developed to quantify potential economic efficiency gains within the river basin if water markets were to be implemented under future hydroclimate conditions. This approach circumvents the caveats of the traditional methods of estimating irrigation water demand. The results show that agricultural water markets can reduce the adverse impacts of climate change on the overall catchment-scale agricultural output in economic terms. The scenario approach presented in this study can provide preliminary estimates of the benefits of water trading, particularly in periods of drought and under future conditions of decreasing precipitation. The findings can aid in reducing the economic losses encountered by farmers under rainfed agricultural practices at a global scale.

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Data availability

The data that support the findings of this study are available from the corresponding author upon reasonable request.


  1. Given that the research is conducted on more than 30 different crops, soil type distribution varies widely, as do planting and irrigation methods; therefore, the effective precipitation carries some uncertainties. For that reason, we decided to use the measured precipitation.

  2. The study was conducted using data from 2015 and simulation assumptions were thus based on the state of farm locations and crop mixes observed at that time. Accounting for time-varying crop mix and geographical distribution makes the prediction too complex and impractical, especially when it comes to agent-based behavior. Nonetheless, analyzing such factors is outside the scope of this study.


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The authors acknowledge the financial support provided by the National Science Foundation (NSF-INFEWS) (Grant EAR-1856054).

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Authors and Affiliations



XH: data curation, conceptualization, methodology, writing—original draft preparation; PD: methodology, writing—original draft and reviewing and editing; NRM: methodology, writing-reviewing and editing; DN: writing—reviewing and editing; HM: writing—reviewing and editing; RP: reviewing and editing; HM: supervision, conceptualization, methodology, writing—reviewing and editing.

Corresponding authors

Correspondence to Xiaoliang Han or Hamid Moradkhani.

Additional information

Handled by Akiyuki Kawasaki, University of Tokyo, Japan.

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Han, X., Deb, P., Magliocca, N.R. et al. Water trading as a tool to combat economic losses in agriculture under climate change. Sustain Sci 18, 1415–1428 (2023).

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