Management of Water Shortage in the Colorado River Basin: Evaluating Current Policy and the Viability of Interstate Water Trading

The water of the Colorado River of the southwestern United States (U.S.) is presently used beyond its reliable supply, and the flow of this river is forecast to decrease significantly due to climate change. A recent interim report of the Colorado River Basin Water Supply and Demand Study is the first acknowledgment of these facts by U.S. federal water managers. In light of this new stance, we evaluate the current policy of adaptation to water shortages in the Colorado River Basin. We find that initial shortages will be borne only by the cities of Arizona and Nevada and farms in Arizona whereas the other Basin states have no incentive to reduce consumptive use. Furthermore, the development of a long-term plan is deferred until greater water scarcity exists. As a potential response to long-term water scarcity, we evaluate the viability of an interstate water market in the Colorado River Basin. We inform our analysis with newly available data from the Murray-Darling Basin of Australia, which has used interstate water trading to create vital flexibility during extreme aridity during recent years. We find that, despite substantial obstacles, an interstate water market is a compelling reform that could be used not only to adapt to increased water scarcity but also to preserve core elements of Colorado River Basin law. (KEY TERMS: water supply; water allocation; water law; water policy; water resource economics; water scarcity economics; climate variability ⁄ change; drought.) Wildman, Richard A., Jr. and Noelani A. Forde, 2012. Management of Water Shortage in the Colorado River Basin: Evaluating Current Policy and the Viability of Interstate Water Trading. Journal of the American Water Resources Association (JAWRA) 1-12. DOI: 10.1111 ⁄ j.1752-1688.2012.00665.x