The development of a market in groundwater usage rights can be inhibited by constraints arising from the institutional context. Such impediments may reduce the potential gains from trade and may generate high transaction costs for prospective traders. We analyse the regulations and
policies influencing groundwater transfers in a case study area – the Gnangara groundwater system around Perth, Western Australia – and identify significant impediments to a groundwater market. Property rights are found to be conditional, temporary and vulnerable to amendment.
Regulatory approval is required for all transfers. Facilitating infrastructure is lacking, and price information is unavailable. Management area boundaries reflect land ownership and use rather than hydrogeological realities; the limitation of transfers to within these boundaries eliminates
much of the potential for gains from trade. Over-allocation and weak monitoring also impede the development of a market. The current management system is likely to obscure unmet demand for water-rights transfers between users and usage-types.
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Document Type: Research Article
Centre for Environmental Economics & Policy, University of Western Australia, M089, 35 Stirling Highway Crawley, WA 6009, Australia
School of Agricultural & Resource Economics, University of Western Australia, M089, 35 Stirling Highway Crawley, WA, 6009, Australia
Publication date: September 1, 2013
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