Analysis of water markets as an adaptive tool to water scarcity in SE Spain’s agriculture

Abstract

Abstract. Structural water scarcity is a reality in southeastern Spain, where there has been an important increase in agricultural water demand throughout the last decades, and climate change is producing a progressive reduction of water resources. This scenario will necessarily require the widespread adoption of adaptive measures in irrigated agriculture. These measures may be aimed (1) to increase the water supply (regional transfers, desalination and reuse), (2) to improve the efficiency of water use (irrigation districts modernization), or (3) to manage the demand. Water markets are demand management tools that allow for a more flexible and efficient reallocation of water resources towards higher value users, and thus contribute to improving social welfare by maximizing the income derived from its use, as well as reduce water availability-related hazards and mitigate the economic impacts of drought periods in agriculture. Water markets are allowed by the Spanish water legislation, but there are still numerous gaps on the knowledge about their functioning that must necessarily be covered as an essential starting point to make practical proposals for their improvement. The objective of this study is to describe the current performance of water markets in southeastern (SE) Spain, identifying their limitations and strengths. The activity of water markets in SE Spain over the past three decades has been less than might have been expected given the hydrological conditions and characteristics of the economy of water in the basin, and has been limited almost exclusively to agricultural irrigation. After a characterization of the water markets experiences that have occurred to date, the study shows a preliminary analysis of availability and adequacy of water infrastructure. Especially interesting is the analysis of transaction costs, i.e. those derived from the costs of physical transportation of water and its potential environmental impacts. The analysis of water-energy-CO 2 nexus is also interesting in order to know both the specific energy and the emissions of greenhouse gases associated with water markets, information of strategic interest when assessing the sustainability of water markets over other adaptive measures for irrigated agriculture adaptation to water scarcity, such as seawater desalination or regional water transfers.