EDF Recommends Policy Reforms for California Water Market

Reforms can help ecosystems and poor communities weather the drought, report says

May 3, 2016
Julie Benson (415) 293-6069, jbenson@edf.org

(SAN FRANCISCO – May 3, 2016) Environmental Defense Fund today released a set of policy recommendations for reforming California’s water market to help alleviate the drought’s impact on the environment and make the state’s cities and rural communities more resilient to climate change.

“We envision a future where California’s water management system provides incentives for meeting human needs while benefitting nature instead of harming it,” said David Festa, EDF senior vice president of the Ecosystems Program. “When designed well and harnessed by the right rules, the market can drive positive results on several fronts: better access to water, a healthier environment and prosperous communities.”

Although California has a water market, it is burdened by patchwork regulations that discourage transfers and routinely benefit only well-capitalized water users. As a result, water users with fewer resources – such as small farmers, the environment and disadvantaged communities in the Central Valley – have suffered disproportionately.

EDF’s report analyzes California’s current water market and proposes several, specific reforms that can benefit all water users without altering the existing water rights system. The reforms are designed to drive five key outcomes. 

  • Improve market transparency by, among other things, standardizing and publicly disclosing supporting data for all transfers. 
  • Decrease transaction costs and eliminate barriers to participation by, among other things, establishing a new entity to coordinate the approval process and develop a centralized exchange platform. 
  • Ensure benefits to disadvantaged communities and the environment by incorporating incentive mechanisms into the market. 
  • Free up more water for sharing by expediting transfers that achieve water savings. 
  • Reduce pressure on overstressed aquifers by integrating markets into implementation of the Sustainable Groundwater Management Act.

“Water sharing doesn’t create a new supply of water – rather it encourages conservation and allows more of the finite resource to move to higher value uses,” said Festa. “By getting water markets right, the state can allocate water more quickly and cost-effectively than alternative sources like water recycling or seawater desalination – and that’s good for the natural systems that sustain us all.”


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