Dolores Rey

An Innovative Option Contract for Allocating Water in Inter-Basin Transfers: the Case of the Tagus-Segura Transfer in Spain

The Tagus-Segura Transfer (TST), the largest water infrastructure in Spain, connects the Tagus basin’s headwaters and the Segura basin, one of the most water-stressed areas in Europe. The need to increase the minimum environmental flows in the Tagus River and to meet new urban demands has lead to the redefinition of the TST’s management rules, what will cause a reduction of transferable volumes to the Segura basin. After evaluating the effects of this change in the whole Tagus-Segura system, focusing on the availability of irrigation water in the Segura, the environmental flows in the Tagus and the economic impacts on both basins; we propose an innovative two-tranche option contract that could reduce the negative impacts of the modification of the Transfer’s management rule, and represents an institutional innovation with respect to previous inter-basin water trading. We evaluate this contract with respect to spot and non-market scenarios. Results show that the proposed contract would reduce the impact of a change in the transfer’s management rule on water availability in the recipient area.

Developing drought resilience in irrigated agriculture in the face of increasing water scarcity

In many countries, drought is the natural hazard that causes the greatest agronomic impacts. After recurrent droughts, farmers typically learn from experience and implement changes in management to reduce their future drought risks and impacts. This paper aims to understand how irrigated agriculture in a humid climate has been affected by past droughts and how different actors have adapted their activities and strategies over time to increase their resilience. After examining recent drought episodes from an agroclimatic perspective, information from an online survey was combined with evidence from semi-structured interviews with farmers to assess: drought risk perceptions, impacts of past drought events, management strategies at different scales (regional to farm level) and responses to future risks. Interviews with the water regulatory agency were also conducted to explore their attitudes and decision-making processes during drought events. The results highlight how agricultural drought management strategies evolve over time, including how specific aspects have helped to reduce future drought risks. The importance of adopting a vertically integrated drought management approach in the farming sector coupled with a better understanding of past drought impacts and management options is shown to be crucial for improving decision-making during future drought events.

Regulatory and Economic Instruments: A Useful Partnership to Achieve Collective Objectives?

In this chapter we examine how water governance and demand management arrangements can be linked to economic instruments, such as water markets, to address the broad range of water reallocation problems that exist in many global contexts. The utilization of economic instruments is context-specific throughout the world and can take many forms. This chapter therefore lists the pros and cons of some more common instruments. While successfully combining regulatory and economic instruments is far from straightforward, policy-makers can learn from growing evidence of successful partnerships between these two approaches. It may be costly both in terms of political support and transaction investments to strip away existing arrangements in favour of more flexible and better-suited institutions to manage scarce water resources. However, it would be expected that ignoring the problems, and hoping they will resolve themselves, would be more harmful to private and public welfare outcomes in the long run.

Role of economic instruments in water allocation reform: lessons from Europe

Abstract A growing number of countries are reforming their water allocation regimes through the use of economic instruments. This article analyzes the performance of economic instruments in water allocation reforms compared against their original design objectives in five European countries: England, France, Italy, Spain and the Netherlands. We identify the strengths of, barriers to and unintended consequences of economic instruments in the varying socio-economic, legal, institutional and biophysical context in each case study area, and use this evidence to draw out underlying common guidelines and recommendations. These lessons will help improve the effectiveness of future reforms while supporting more efficient water resources allocation.