Transforming water scarcity through trading

Sponsor: EPSRC

Amount: £724,681 of which £107,203 in Leeds

Duration: 1 July 2011 - 31 December 2014

Involved staff: Luuk Fleskens

Water scarcity is widespread and increasing worldwide, including in many areas of the UK. Climate change, population growth and increased water demand require a dynamic reallocation of the water resources that the present water allocation and licensing system in England and Wales cannot provide. More flexibility in transferring and sharing water resources would decrease water scarcity by encouraging the development of the most economical new supply options, and would increase the benefit obtained from the existing water, by encouraging transfers to higher value uses. Water markets already exist elsewhere (e.g. Australia, Western USA, Chile) but have often had negative impacts on vulnerable groups and ecosystems. Within England and Wales, trading of water rights has been encouraged by government since 2003, but only about 60 trades have occurred. More flexibility is now being promoted (e.g. OFWAT, 2010). However, it is imperative that the impacts of different market rules and regulation are better understood. Our project aims to inform the current move towards water markets, among others by showing how active markets could transform the current water management system and research into the opportunities for novel engineering options for increasing supplies, and how/whether they might be funded by downstream buyer. The core of this project is the development and use of a market simulator, modelling how water suppliers and users behave under various market structures.

Partners: Cranfield University (co-ordinator); University College London; Herriot-Watt University; University of Oxford