August 8, 2011 / 12:50 PM / 7 years ago

Factbox: Water trading schemes around the world

(Reuters) - Trading water access rights takes place across the world as water resources are stretched by a rising global population, climate change and increasing urbanization.

Global water use doubled from 1960 to 2000 and is projected to grow twice as fast as oil consumption by 2030, and forms of water trade are likely to play an important part in adapting.

Climate change experts say the problem of melting glaciers and severe droughts is likely to intensify, while the world’s population is expected to rise to 9.3 billion by 2050, adding to strain on food and other resources.

Below are detailed some of the world’s water trading schemes.

For a related analysis:

1. AUSTRALIA

Possibly the largest system in the world, the Australian market is estimated to have grown to nearly A$3 billion ($3.1 billion) of water licenses by 2010.

In the 1990s, fears farmers were depleting the country’s reserves prompted the authorities to decide that if they wanted permanent water rights or annual allocations, they should trade them with each other.

In 1994, the Council of Australian Governments’ water reforms enabled the separation of water rights from land — a first step in expanding trade in water. The reforms also sought to open up trading arrangements, including inter-state trading.

The council subsequently agreed to the expansion of permanent trade in water, aimed at increasing the area of coverage and volume of trade.

The states of New South Wales, South Australia and Victoria agreed to allow the transfer of state-based licenses to another state. This cooperation has continued, and the trading of permanent and temporary licenses across state borders has expanded.

An increasing number of temporary trade allocations takes place via electronic exchanges and third parties, such as brokers.

2. UNITED STATES

Water trading varies by state, according to each state’s water code, system of water rights, and the authorities regulating water trading.

Water trading is practised in states including Arizona, California, Colorado and New Mexico, where water can be scarce.

The most vibrant water market in the United States is the Colorado-Big Thomson Project, which transfers water east across the Rocky mountains to supply 30 towns and cities.

Experts have attributed the scheme’s success to the ease of trading — rights are clearly and uniformly defined. In the past 20 years, there have been more than 2,000 water transactions in Colorado.

3. SOUTH AFRICA

Introduced in 1997-1998 and often touted as one of the most advanced water frameworks in the world, South Africa’s system enables existing water rights to be re-allocated.

Both permanent and temporary trading is permitted. Licenses cover a finite period, and rights can be reduced if a water catchment is over-licensed.

Although thought to be well designed, trading is still at an early stage with small volumes and in local areas.

4. CHILE

Water markets were established in Chile in 1981 when traditional agricultural water rights were converted to water rights that are entirely separate from land and can be traded.

Water rights are derived from a percentage of the water available, so the risk of a lack of water is borne by rights’ holders. Buyers and sellers can execute short-term sales of specific volumes, annual leases or permanent sales.

In the 1990s, the World Bank cited Chile as an example of water trading for other developing countries to follow. But some experts have criticized the model for its weak regulation and unfairness.

In 2005, authorities introduced reforms to discourage people from hoarding water, including a tax on unused water rights.

5. BRITAIN

Trading in operation since 2001, but currently only the trading of water rights (trading of licenses) is authorized. Some changes could occur after a government white paper on water policy, which is scheduled to come out this year.

6. OMAN

The Aflag irrigation system in Oman has operated since 2,500 BC and is a UNESCO world heritage site. Tradable water rights among farmers have led to efficient and sustainable agricultural irrigation systems for more than 4,500 years.

The system provides free drinking water and free water for ceremonial washing at the mosque. Once those social needs are covered, water rights become private, inheritable and tradable.

7. CANARY ISLANDS

The Canary Island markets, namely Gran Canaria and Tenerife, are made up of a water rights market, a water spot market and shares in the water pipe market Sources include: UK environment agency, UK’s OFWAT, Australia National Water Commission, U.S. environmental protection agency, Nestle, Reuters.

Compiled by Nina Chestney, editing by Jane Baird

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