Date of this Version
Cornhusker Economics (April 24, 2013)
While surface water trading has occurred regularly throughout the Western United States and the rest of the world for decades, the use of any type of groundwater trading has been very limited. However, groundwater is increasingly under stress from overuse and many areas are starting to regulate groundwater use. While the public benefits from efficient use of groundwater include adequate stream flow in hydrologically connected areas and future availability of groundwater supplies, there are significant private benefits to landowners, especially in water short areas. Groundwater trading can help move water from low-value to high-value areas of use. Previous work on water trading has focused on surface water trading and theoretical approaches to analyzing groundwater trading. Empirical analysis of groundwater trading is a new area of research, due in part to the lack of recorded usage, trade data and binding constraints on groundwater use by landowners.