A recent study provides a potential remedy to water shortages that arise during droughts, particularly in the context of economic growth, rising population, and unpredictable climate impacts affecting water users in Western states of the U.S. The suggested two-way leasing contracts aim to facilitate the exchanging of water resources from agricultural sectors to urban areas during dry spells, and vice versa during wetter seasons, thereby benefiting urban residents and agricultural producers alike.
A recent study led by researchers at the University of North Carolina at Chapel Hill presents a potential solution to water shortages that become critical during droughts. This situation is complicated by economic growth, increasing population, and climate unpredictability among water users in Western U.S. states. The study proposes two-way leasing contracts for water resources, enabling transfers from agriculture to urban centers during dry periods, and back to agriculture when there is ample rainfall, ultimately aiding both urban and agricultural water consumers.
“Water markets play a pivotal role in distributing water in the Western U.S. and similar regions globally facing water shortages, but their responses to drought are often inadequate. This delay in reallocating water can lead to significant financial repercussions,” explains Greg Characklis, the W.R. Kenan Distinguished Professor of environmental sciences and engineering at the UNC Gillings School of Global Public Health and director of UNC’s new Institute for Risk Management and Insurance Innovation (IRMII).
This study, recently featured in Earth’s Future, examines the hydrologic, engineered, and institutional frameworks governing water in the rapidly growing communities of Colorado’s Front Range. It tests a two-way option contract, designed for water users to rapidly adapt to dry or wet conditions. These contracts can be established ahead of droughts, offering cost efficiency and enhanced water assurance for municipalities, which can quickly secure water from farmers during droughts instead of investing in expansive and costly water sources that are seldom utilized. Farmers gain from annual option payments from city users, and earn more in dryer years when they provide water. During normal and wetter years, urban water surpluses can be redirected to farmers, leading to increased agricultural output during those times.
Typically, reassigning water through water rights leasing is a slow and costly affair, particularly in times of drought. Cities often buy many more permanent water rights than necessary to assure adequate supply even during extreme dry spells. After acquiring these seldom-used rights, the slow leasing process discourages municipalities from renting surplus rights back to farmers in normal or wet conditions, which in turn hampers sustainable agricultural productivity over the long term. Although Western U.S. states have started enacting laws to expedite and reduce the cost of short-term water transfers, innovative methods to leverage these legislative changes have yet to be devised. This study proposes that new and inventive contract formats might be crucial to addressing this challenge.
“Two-way option agreements can function over multiple years. By arranging approval and finalizing details before a drought occurs, transfers between willing parties can enable swift and efficient relocation of limited water supplies, significantly mitigating losses,” states Zachary Hirsch, the lead author and a recent graduate (MS ’23) from the Environmental Sciences and Engineering Department at the Gillings School of Global Public Health.
The research assessed the effectiveness of this model against a 63-year hydrologic record from 1950 to 2012 in Colorado and determined that it serves as an efficient, cost-saving strategy for both cities and agricultural users, allowing timely responses to changing water availability compared to conventional methods of water allocation.
“Over the years, the trend of one-way, permanent water transfers has led to notable negative consequences for agricultural economies and created friction between urban and rural water stakeholders. Establishing contracts that allow for mutual and adaptable transfers of water is essential to rebuilding trust, particularly during a time when cooperative drought solutions are urgently needed,” remarks H.B. Zeff, another author and the new research director at IRMII.
The study’s authors believe this two-way allocation model could be utilized in various water markets across the United States.
