August 2017

Groundwater Markets Under SGMA: 
Avoiding Potential Pitfalls

Decades of unfettered pumping have depleted many of California's groundwater basins, causing dry wells, deteriorating water quality, stream depletion, and damaged infrastructure. 
Now state and local actors are working to address these problems. More than 200 local groundwater agencies have formed around California and are beginning to chart paths forward under the Sustainable Groundwater Management Act (SGMA). Many are wondering about the potential for market mechanisms to be part of local sustainability solutions.
Our new report (in partnership with UC Water and in collaboration with researchers from UC Merced) provides guidance about when a local groundwater market might be a useful and appropriate management tool. 

Trading Sustainably: Critical Considerations for Local Groundwater Markets Under the Sustainable Groundwater Management Act outlines a set of considerations designed to help groundwater agencies, the stakeholders they serve, and state agencies with oversight and intervention responsibilities evaluate whether markets might be viable tools for sustainably managing particular groundwater basins and, if so, how to effectively implement them.

Critical considerations for local groundwater markets (summarized in the figure at left) span several categories: (1) foundational considerations, which markets share in common with non-market programs that limit groundwater pumping; (2) market-specific considerations; and (3) general considerations that are important for all groundwater sustainability programs.

While carefully designed and implemented local groundwater markets could potentially contribute to sustainable management, markets will also generate risks and uncertainties. Success is not a foregone conclusion. Whether a local groundwater market might be a viable tool will depend on a host of factors that may vary significantly from basin to basin as well as within a single basin.  Markets that lack well-defined goals, appropriate rules, or effective oversight run real risks of generating unintended consequences. 

The stakes involved in SGMA implementation are high. Groundwater management decisions made today will affect everyone in a basin, now and well into the future. Our report makes clear that, where groundwater agencies plan to rely on markets to help reach sustainability goals, foresight and diligent preparation will be essential ingredients for success.

For more information, contact Nell Green Nylen, Senior Research Fellow at the Wheeler Water Institute.

Faculty + Staff
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Ahead of the vote to renew California's cap-and-trade program, Prof. Eric Biber acknowledges that the bill is not perfect, but calls it "a compromise worth making." 

In a new LinkedIn article, Ethan Elkind addresses rhetoric that combating climate change also harms the economy, citing evidence from our  Climate Change & Business Research Initiative.  
Prof. Dan Farber takes to Legal Planet 
to discuss the Second Circuit ruling in Allco Finance v. Dykes, calling it a "useful precedent" for defending state renewable energy programs.

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