Abstract
Abstract Cap-and-trade (C&T) policy has led to environmental benefits in some groundwater markets by restricting and economically reallocating water permits. However, top-down approaches for capping permits may face resistance from every affected stakeholder. This paper presents an efficient policy framework to improve the implementation of C&T policies in a real shared aquifer in Iran. To this end, groundwater permits for water-selling farms are capped through a bottom-up capping (BUC) policy. A policy analysis that employs static and dynamic bargaining techniques incorporates farms' utilities. Results reveal that the bargaining techniques propose more acceptable capping strategies than the top-down approach. The BUC policy analysis introduces the proposed strategy by dynamic bargaining as the tradable groundwater permits. The effects of irrigation water sales to the industry sector, evaluated using a cooperative game-based optimization model, show that with the fair reallocation of water trading benefits, the current net benefits of agriculture and industry sectors increase by 55 and 27%, respectively. Furthermore, farms reduce their groundwater withdrawals by 35% compared with the current mode. Therefore, the BUC policy for inter-sectoral groundwater trading under dynamic bargaining can lead to the sustainable use of limited groundwater resources by facilitating the capping strategies and improving the water permits productivity.
Highlights
With diminishing the role of water supply improvement, the necessity of improving the economic efficiency of water consumption is felt more than ever before (Grafton et al, 2012; Wheeler et al, 2017)
This study introduces the bottom-up capping (BUC) policy for guaranteeing the implementation of a capping policy for groundwater permits
Capping groundwater permits Based on the guidelines for implementing Articles 27 and 28 of the Law on Fair Water Distribution in Iran (Ahmadi et al, 2019), this paper considers the command-and-control scenario involving a 25% reduction in groundwater permits for water-selling farms
Summary
With diminishing the role of water supply improvement, the necessity of improving the economic efficiency of water consumption is felt more than ever before (Grafton et al, 2012; Wheeler et al, 2017). A water trading approach that allocates water resources from less productive uses to more productive ones is one way to increase economic efficiency (Shah et al, 2006; Zetland, 2013; Aghaie et al, 2020). The centralized and decentralized optimization of water trading is the subject of various studies. Previous studies have shown the positive economic performance of water trading, where the hydrological balance should be considered (Wheeler et al, 2014; Safari et al, 2016)
Sign-in/Register to view highlights & summary 
Published Version (
Free)
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call