PERSPECTIVE • OPEN ACCESS You may also like - Corrigendum: A review of trends and A systems perspective on water markets: barriers, drivers of greenhouse gas emissions by sector from 1990 to 2018 (2021 Environ. bright spots, and building blocks for the next Res. Lett. 16 073005) William F Lamb, Thomas Wiedmann, Julia Pongratz et al. generation - Flux variations of cosmic ray air showers detected by LHAASO-KM2A during a To cite this article: Dustin Garrick et al 2023 Environ. Res. Lett. 18 031001 thunderstorm on June 10, 2021 F. Aharonian, Q. An, et al. - Erratum: A Search for Solar Axions and Anomalous Neutrino Magnetic Moment with the Complete PandaX-II Data [CHIN. View the article online for updates and enhancements. PHYS. LETT. 38 (2021) 011301] Xiaopeng Zhou, , Xinning Zeng et al. This content was downloaded from IP address 158.109.174.204 on 28/02/2023 at 09:59 Environ. Res. Lett. 18 (2023) 031001 https://doi.org/10.1088/1748-9326/acb227 PERSPECTIVE A systems perspective on water markets: barriers, bright spots, OPEN ACCESS and building blocks for the next generation RECEIVED 21 September 2022 Dustin Garrick1,2,∗, Soumya Balasubramanya3, Melissa Beresford4, Amber Wutich5, REVISED Gina G Gilson6, Isabel Jorgensen1, Nicholas Brozović7, Michael Cox8, Xiaoping Dai9,10, 23 December 2022 Sophie Erfurth6, Renata Rimšaitė11, Jesper Svensson6, Julia Talbot Jones12, Hita Unnikrishnan13, ACCEPTED FOR PUBLICATION 11 January 2023 Charles Wight6, Sergio Villamayor-Tomas14 and Karla Vazquez Mendoza15 1 PUBLISHED University of Waterloo, Water Institute and School of Environment, Resources, and Sustainability, Waterloo, Canada 13 February 2023 2 University of Oxford, Green Templeton College, Oxford, United Kingdom 3 World Bank, Environment, Natural Resources and Blue Economy Global Practice, Washington, DC, United States of America 4 Original content from San Jose State University, College of Social Sciences Department of Anthropology, San Jose, CA, United States of America 5 this work may be used Arizona State University, School of Human Evolution & Social Change and Center for Global Health, Tempe, AZ, United States of under the terms of the America Creative Commons 6 University of Oxford, School of Geography and the Environment, Oxford, United Kingdom Attribution 4.0 licence. 7 Daugherty Water for Food Global Institute at the University of Nebraska and Department of Agricultural Economics at the University Any further distribution of Nebraska-Lincoln, Lincoln, NE, United States of America of this work must 8 maintain attribution to Department of Environmental Studies, Dartmouth College, Hanover, NH, United States of America 9 the author(s) and the title North China University of Water Resources and Electric Power, Agricultural Water Management, Zhengzhou, Henan, People’s Republic of the work, journal of China citation and DOI. 10 Hohai University, College of Agricultural Science and Engineering, Nanjing, Jiangsu Province, People’s Republic of China 11 Daugherty Water for Food Global Institute at the University of Nebraska and National Drought Mitigation Center at the University of Nebraska-Lincoln, Lincoln, NE, United States of America 12 Te Herenga Waka—Victoria University of Wellington, School of Government, Wellington, New Zealand 13 The University of Sheffield, Urban Institute, Sheffield, United Kingdom 14 Autonomous University of Barcelona, Institute of Environmental Science and Technology, Bellaterra, Barcelona, Spain 15 The Nature Conservancy, Arlington, VA, United States of America ∗ Author to whom any correspondence should be addressed. E-mail: dustin.garrick@uwaterloo.ca Keywords: systems thinking, water markets, informality, water rights, institutions, observatory 1. Introduction evidence [11]. Research is splintered by competing definitions and assumptions, constraining the con- Water markets are a decentralized approach for solidation of theory and practical insights for allocating water and water rights that have been policymakers [12]. Water market proponents high- touted as part of the future of water policy for decades light their potential to address diverse policy object- [1–3]. While proponents have lamented their slow ives by allocating water efficiently and enabling adapt- uptake and critics have resisted their spread, water ation to shifting patterns of supply and demand. markets are neither new nor rare. Water trading in Policy objectives range from reducing groundwater the irrigation systems of Oman and Spain [4, 5], for overdraft and restoring environmental flows to example, has occurred for hundreds of years, and broader social and development goals, including evidence of trading in Australia and the USA has been poverty alleviation, sustainable urbanization, agri- traced to the 19th century. Even regions with relat- cultural risk management, and meeting the human ively abundant water rely on tanker water markets right to water. In contrast, critics note how water and other water entrepreneurs to address shortfalls of markets can cause negative impacts on communit- labor and infrastructure [6–8]. The diversity of water ies where water is bought and sold and can further market activity is illustrated by the nearly $2 billion sideline or exclude Indigenous peoples by reinforcing (Australian Dollar) average annual turnover in Aus- legacies of colonization and dispossession that have tralia’s surface water markets [9] or the tanker mar- limited formal allocation of rights [13–15]. kets in Kathmandu which deliver approximately 20% The theoretical advantages and disadvantages of of the water used by households in the dry season water markets have been debated for decades, leading [10]. to a growing call to ‘go beyond blanket statements of Despite growing experience, discussions of water whether markets do, or do not ‘work’, and are or are markets are often dominated by myths rather than not exploitative’ [16, p.9] by paying attention to the © 2023 The Author(s). Published by IOP Publishing Ltd Environ. Res. Lett. 18 (2023) 031001 D Garrick et al empirical evidence and ‘details on the ground’ in a informal, to water-related goods and services within a structured way. The diversity of water markets, ran- given social-hydrological system [12]. Necessary con- ging from tanker trucks selling water locally to long- ditions include scarcity, which need not be limited to distance rural-to-urban transactions, makes the accu- water scarcity, and differences in the marginal value mulation of such evidence challenging but also more of water (or labor and capital for delivering it), which important. makes trade mutually beneficial for the buyer and A systems perspective on water markets can help seller. Water markets often rely on price signals to scholars and policymakers identify the conditions communicate the scarcity of water and its oppor- under which water markets achieve their intended tunity costs in competing uses, but may also overlap policy and development objectives and how they with other forms of exchange, such as gifts or recip- interact with other policies and incentives. In this rocal practices [6]. Engineering and economic stud- paper, we bring together anthropology, economics, ies focus on the ability to trade as a defining fea- environmental science, hydrology, and public policy ture, along with assumptions that agents will max- to better understand the diversity of water mar- imize the utility or reliability of their water supply kets and motivate an interdisciplinary agenda. We [19, 20]. focus on drivers of water markets, how they vary, Institutional differences make it difficult to clas- and their dynamics and impacts in the context of sify water markets across contexts. As recently as broader social-hydrological systems. This fits with 2019, two reviews of water markets reached con- recent efforts to apply systems thinking to various flicting conclusions, one noting that water markets forms of markets and value chains from fisheries to are rare [21], while the other noting their prolif- food systems, enabling a more holistic view of mar- eration and persistence [22]. Technically, both are kets that reveals complex interdependencies and feed- right. Formal water markets (regulated by govern- backs, as well as processes and linkages that connect ments) remain rare, while informal markets (gov- markets with broader systems [17]. erned by locally crafted rules and norms) are wide- A systems perspective can lead to ‘more realistic spread. There are increasing examples of overlapping models…[that] increase both the rigor and relevance water markets with rules crafted at different levels of future research’ [18, p.260]. A systems perspective of governance. Despite their prevalence, informal can draw attention to the focal variables, interactions, water markets remain largely invisible (See figure 1). and outcomes relevant for different water markets. Though their illegibility defies standardized track- Instead of imposing a single framework or typology, ing and measurement, efforts are underway to better we contribute a systems perspective which is com- account for unregulated trading activity in the con- patible with multiple existing frameworks and can text of fisheries, land grabbing, and a range of illi- enrich and strengthen them. Regardless of the frame- cit, illegal, and/or informal settings [23]. Not only has work selected, a systems perspective draws attention there been a failure to recognize and distinguish dif- to complexity and context in a structured way, break- ferent types of water markets, but disciplinary stud- ing water markets into several interacting elements: ies offer a partial view that may neglect the structural the sources of water and drivers of scarcity, the goods factors, historical legacies, and other antecedent con- and services traded, the actors participating, the gov- ditions that shape the emergence of water markets, ernance arrangements and property rights for alloc- their evolution, and impacts. ating and reallocating water, and the interactions and outcomes at different scales and for different actors. 3. Bright Spots: Measurement advances In the next section, we look back on the past capture complexity, but are not 15 years of interdisciplinary research on water mar- comparable kets with a primary focus on conceptual issues and measurement problems hindering the accumulation In a 2006 review of water markets and trading, Chong of knowledge and policy insights. We then identify and Sunding [24] argued that ‘putting water mar- bright spots of progress in overcoming these chal- kets into practice introduces real-world complica- lenges from an interdisciplinary perspective. We con- tions’ (p.39) that deserve growing scrutiny. Doing clude with building blocks for the next generation, so has required advances in measurement, model- including priorities for research and practice for the ling, and management that show promising trends next 15 years and beyond. in a vibrant, but uncoordinated, body of scholarship. We focus on bright spots of interdisciplinary research 2. Barriers: No shared definition of water on water markets in the period since their review. markets; invisible informal markets A systems perspective can highlight new connections across these bright spots to generate a new inter- Despite differences across disciplines and regions, disciplinary field of research on water markets, with definitions of water markets converge on the decent- comparable datasets for assessing their evolution and ralized exchange of property rights, both formal and performance, and insights for policy and practice. 2 Environ. Res. Lett. 18 (2023) 031001 D Garrick et al Figure 1. Articles on water markets illustrate that explicit attention to informal water markets and water vending remains rare. Data: Stacked chart of Scopus query on 15 September 2022 (article title, abstract, keywords) using search terms: ‘water market’ (yellow), ‘water market’ AND informal (green), ‘water market’ AND groundwater (blue), and ‘water vend∗ ’ (line). 3.1 Measurement several US water markets have used micro-level trad- Advances in measurement involve empirical studies ing data to estimate the environmental performance that integrate previously disconnected datasets about of water market transactions [27, 28]. the evolution and performance of water markets Comparative research has also demonstrated how through interdisciplinary and longitudinal studies. cultural differences in norms of justice and fairness Several empirical studies trace the effects of differ- shape acceptability of water markets [6], how legal ences in institutional and policy approaches on mar- conditions affect their suitability [29] and how indi- ket participation and outcomes over the long-term viduals and communities have balanced benefits and (i.e. over 10 years). Survey and archival data generate risks of participating in markets [25]. These trends original datasets of water transactions, documenting have coincided with efforts to broaden performance the volume, price, location, and characteristics of measurement beyond important economic studies to buyers and sellers, including the types of farms, account for a range of impacts and outcomes related water vendors, and other actors selling water in to justice, sustainability, and health. markets. Ethnographic methods, including long- term participant-observation and interviews, gener- 3.2. Modelling ate hard-to-access data on cultural norms and lived Advances in modelling include efforts to assess mar- experiences, particularly for informal water markets ket potential and design through a suite of the- [6]. The most promising bright spots involve bring- oretical, mathematical, and simulation models that ing together qualitative and quantitative data in a increasingly account for complexity. Interdisciplin- spatially explicit and system-wide way. For example, ary frameworks (i.e. hydro-economic and social- an international team from Kathmandu conducted hydrological systems) coupled with access to low-cost a rare repeat study of water vending to develop a datasets have enabled more complete and realistic system-wide picture amidst changes in urbanization, models, and examine a range of assumptions around water availability, and infrastructure coverage [10]. human behavior and policy settings. The work by Farmer surveys of market participants from Aus- Pujol and colleagues [30] is a point of departure, tralia to Algeria have generated insight about irrig- offering a theoretical framework that accounts for ator behavior in the face of shifting incentives created transaction costs in optimization studies to assess by markets, including the determinants of water sales, how market frictions can constrain gains from trade farm exit, and mental health impacts [9, 25]. Experi- [28]. More generally, hydro-economic models have mental and quasi-experimental research designs have integrated historical datasets to assess the responsive- enabled causal inferences about the effects of differ- ness of water markets to scarcity and shocks. The spa- ent policy levers and technologies, such as in West tial resolution of modelling has increased for a finer- Bengal, where farmers who owned electric pumps grained assessment of trading and its externalities, sold more water to smallholders than farmers who particularly in the context of groundwater markets owned diesel pumps due to cost differences across that may need to be tailored to complex hydrogeolo- technologies [26]. In the last few years, studies from gical interactions [31]. 3 Environ. Res. Lett. 18 (2023) 031001 D Garrick et al Despite limited geographical scope of time-series approval of trades), and policy levers in other sectors data on water markets, creative approaches to causal which influence market participation and perform- inference (i.e. natural experiments, propensity score ance (e.g. via energy pricing or agricultural subsidies) matching) are being deployed to assess the effects [36]. of policy instruments on investment decisions, water sales, productivity, and equity. Attention to informal 4. Building blocks: Using systems thinking water markets in systems modelling studies [34], to build a global network of observatories although uncommon, has examined the interaction between piped water networks and tanker water vend- Despite major strides, research on water markets is ing to understand the drivers of vending activity struggling to address the most basic and important amidst infrastructure and service delivery gaps from questions: Why do different types of water markets Chennai to colonias along the US-Mexico border [11]. emerge where they do? How and why do they vary? Do they work? If so, for whom and on what terms? 3.3. Market design A systems perspective can help to address these ques- Advances in measurement and management have tions by bringing multiple disciplinary lenses together generated new insights about market design. In to capture different elements of water markets often the context of water markets, this has traditionally examined separately, and to track these features of focused on issues related to allocating water rights water markets consistently across geographies. and designing market clearing mechanisms (such as First, what drives the development of water mar- spot markets or auctions). Although conventional kets? A systems perspective focuses on the institu- economic theory focuses on exclusivity, enforcement, tions, external factors, and historical legacies that and transferability, rights can range from formal together shape the emergence and evolution of water systems of legal rights to informal arrangements markets. Hydrologists, engineers, and systems model- relying on unwritten social norms and traditions ers assess the potential for markets in the context [6, 10, 22, 32]. of different water management problems, while his- A systems perspective on market design requires torians and policy scholars trace how markets come attention to at least two types of institutional devel- into being through case study research that attends opment related to the design of the market itself as to structural conditions whereby markets become the well as a broader set of foundational and general preferred solution. Both offer a partial perspective. By considerations [33]. In the case of market-specific focusing holistically on the drivers of scarcity—and considerations, the conventional focus is on the alloc- the characteristics of different water systems, uses, ation of rights and the development of trading rules and users—it is possible to distinguish markets based and management of conflicts. In terms of the founda- on their functions and fit with local context [37]. A tional elements and general considerations, a systems systems perspective also highlights the interconnec- perspective draws attention to basic water accounting ted systems that shape water markets (e.g. agricul- and different types of impacts, including the spatial ture, energy, and urban transitions) and their nes- and temporal considerations that tracks the impacts ted externalities (e.g. third party effects on rural of markets locally, at present, and into the future development). [33–35]. In addition to its focus on policies, rules, Second, decades of research have shown there and rights used to establish water markets, market is no one-size-fits-all solution to water challenges. design also addresses the externalities (unaccounted There are multiple ways to create and govern water costs and benefits) that affect a range of third parties, markets, including who can participate, which trades such as effects on return flows or consequences for can occur, and how conflicts are resolved. Diagnostic regional economies. Political and social safeguards approaches have been used to make sense of this insti- include limiting water exports, community monitor- tutional diversity and the recurring patterns. ‘Read- ing, and conflict resolution mechanisms. Such safe- iness’ assessments increasingly track factors expec- guards are increasingly coordinated across sectors and ted to facilitate water trading [40]. Such approaches levels of governance as water moves longer distances must account for multiple possible configurations of and growing competition increases the interdepend- enabling conditions, rather than promote a universal ence of different water users. In other words, the cas- set of necessary conditions. For example, in the case cading impacts of water trade have exposed the grow- of China’s water trading reforms, multiple pathways ing interconnections across sectors and scales and the can lead to trading from agricultural to urban users need for policies and institutions to address third [41]. Cataloging institutional diversity can identify party effects and system-wide impacts on regional which different approaches are likely to work or development. Trends toward more interdisciplinary not in different contexts, including the policies, analyses have highlighted the importance of produc- incentives, and other factors that condition their tion relations (whether sellers are independent or performance. part of a group), group-level property rights (who Finally, a systems perspective requires researchers has decision-making rights, particularly around the to move beyond economic efficiency when assessing 4 Environ. Res. Lett. 18 (2023) 031001 D Garrick et al Table 1. A systems perspective on data collection priorities for water transactions. Definition Selected data collection priorities Measurement challenges Recommendations Transaction Physical and natural dimensions • Lack of standards, “Quick Wins” What is the source of water? priorities, and • Use existing trading plat- protocols for forms for low-cost mon- An exchange of Which water-related goods and/or transactions data itoring of trading water-related goods services are traded? • Inadequate metering activity. and services, often in at farm level to • Leverage agricultural How are they conveyed from seller response to price monitor water use and census and other data to buyer? signals (following trade collection activities for [38]) Human and institutional dimensions • Lack of centralized questions about How much is traded at what price and long-term participation in water over what time period? databases or trading markets. What are the transaction costs of platforms “Best buys” trading? • Partial coverage of • Establish ISO-like historical record, standards for transaction Who buys and sells water, and how qualitative data, and accounting. are they organized? of informal • Compile transactions What local, cultural, or situational transactions through surveys of rules and norms shape the • Stigmas, danger, and market participants transaction? difficulty of collecting across data on informal sites and over time. Interactions, impacts and outcomes water markets • Generate case study How are people and ecosystems • Challenges with databases to facilitate affected by trading activity at (dis)aggregating collation and compar- multiple scales? transactions data to ison examine spatial and of qualitative and temporal trends and historical data to identify “Game Changers” distributional impacts • Establish observatory network guided by shared protocols. Note: The terminology regarding ‘quick wins’, ‘best buys’ and ‘game changers’ comes from the UN 2022 Roadmap for Covid-19 Recovery [39, pg. 23]. These categories were used in that context to identify research priorities and classify them based on the timeframe and resources required, including quick wins (‘focused research is expected to generate immediate impacts’), best buys (‘expected to yield outsized impacts’), and game changers (‘expected to inform more transformative changes that will create immense positive impacts over time’). the potential and performance of water markets. datasets are needed. A code book and metadata can A broader and multi-dimensional perspective on guide data collection, but should draw lessons from performance pays attention not only to distributional existing experiences which note trade-offs between justice and who wins and loses, but also to procedural complexity and comparability, and ethical and prac- justice (decision-making processes) and long-term tical factors which constrain coordinated approaches trade-offs. A systems perspective ties performance to data collection, sharing, and management [42]. back to macro-level outcomes, such as economy-wide Where to begin? Put simply, if we want to know impacts, resource sustainability, and impacts on pre- a market, start with the transaction (see table 1). existing inequalities. We know little about the amount of water traded, In this context, our research vision is inspired prices, and the types of buyers and sellers parti- by the potential for a global network of observat- cipating. Transactions also connect different sub- ories to examine where and how water markets systems—the source of water, the infrastructure used come into being, what problems they address and to deliver it, the drivers of scarcity, the focal parti- create, and how they work. Although observator- cipants, the rules and norms that govern trading, and ies are most common in the environmental sci- the micro-, meso-, and macro-level impacts that con- ences, they are apt for situations like water markets nect behavioral changes and system-level outcomes. that cut across social and hydrological systems and For decades, research on water markets has relied depend on field measurements of disconnected data- on grey literature transactions data, even in settings sets covered by different disciplines. In some cases, with the most formalized approaches to administrat- existing data sources are not being effectively lever- ive approval and record keeping. An agreed common aged or harmonized (such as sample surveys conduc- protocol for tracking transactions and trading activ- ted by governments, e.g. Demographic and Health ity is now within reach, and can form the bedrock Surveys or agricultural censuses). In other cases, new for a global network of researchers and practitioners. 5 Environ. Res. Lett. 18 (2023) 031001 D Garrick et al A distributed network of local partnerships, guided Hita Unnikrishnan  https://orcid.org/0000-0002- by common protocols and standards, can uncover the 4298-4939 potential, limits, and pathways for water markets to Charles Wight  https://orcid.org/0000-0002-8704- contribute to more sustainable and inclusive water 9637 management. 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