Using water markets to improve environmental quality: Two innovative programs in Nevada

S. Lovell; K. Millock; D. L. Sunding

ABSTRACT:

Economists have long advocated the use of market mechanisms as a means to improve environmental quality at minimum cost. Voluntary water purchase programs are an example of such a policy. This paper examines the structure and performance of two water right purchase programs operating in Nevada: the Truckee River Water Quality Agreement and the Lahontan Valley purchase program administered by the U.S. Fish and Wildlife Service, the State of Nevada and The Nature Conservancy Statistical analysis of the latter program indicates that it is performing efficiently. Notably, personal factors prompt water right sales, and the least productive rights (e.g., those appurtenant to poor soil) are sold to the government. Concluding comments offer suggestions about ways to improve program performance, including allowing the sale of fractional water rights.

Footnotes

Sabrina Lovell is with the Office of Policy Planning and Evaluation at the U.S. Environmental Protection Agency, Washington, DC Katrin Mil-lock is with the Centre International de Research sur l'Environment et le Development, France; and David L. Sunding is with the Department of Agricultural and Resource Economics, University of California, Berkeley, and is a member of the Gian-nini Foundation of Agricultural Economics. This research was funded by grants from the U.S. Environmental Protection Agency and the U.S. Department of the Interior. The authors acknowledge helpful conversations with David Zilberman, Graham Chisolm, and David Yardas. They also acknowledge cooperation of The Nature Conservancy, the U.S. Fish and Wildlife Service, the Environmental Defense Fund, and the Truckee-Carson Irrigation District. Opinions expressed in this paper are not necessarily those of the funding agencies.
Copyright 2000 by the Soil and Water Conservation Society

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