Water Bank, US
Ceased April 1991
Scope and Coverage
Water shortages for domestic and industrial use, led the State Water Board to create a water bank which would pay a certain price per cubic foot to anyone willing to sell water.
Fixed price of $100/1000 m3.
The Bank was operated by the State Department of Water Resources.
Allocation of Revenues
Purchasers paid a fixed charge of $140 at the Sacramento Delta, with most of the difference between purchase and sale price to pay for carriage water, i.e. the volume ‘consumed' in getting a given quantum of water from A to B.
Many farmers took part in the scheme since it provided a source of income with minimal implications for farm production. The scheme proved to be a least cost solution, and overcame the water shortage problem without resorting to the much opposed idea of charging the farmers for water use. Thirty per cent of the transferred water was needed for carriage water to provide salt protection in the Sacramento Delta and the Bank sold 488 million m3 (Howitt 1994 cited in Clinch 1999, pp18). Three quarters of the water was sold to urban agencies, at a cost - including transportation - of over $185/M3 The water was purchased mainly from farmers - 50% from irrigation water which they would otherwise consumed, 33% in the form of exchanging their surface water rights for ground water rights and selling the surface water to the Bank. The demand was obtained from a committee representing urban and agricultural purchasers. There were far fewer purchasers than suppliers, but the fixed price approach eliminated potential market power of purchasers. The estimated critical needs dropped from 769 million m3 before the Bank was fully operational to 601 million after, and indication as to how responsive to price such needs can be. The transfers generated an estimated net income and employment gain for the economy - as a result of transferring from lower to higher value uses - of $106 million and 3741 jobs respectively. Note however that jobs did move out of the water exporting regions, but the gain in the importing regions more than compensated for such loses.' (Howitt 1994 cited in Clinch 1999, pp18)
Howitt, 1994, cited in ‘Environmental Policy Reform in the EU', J. Peter Clinch, November 1999
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