Can alternative transfer mechanisms (ATMs) alleviate water scarcity? Key takeaways from the UCT-UCR seminar
Andrew Ayres, Assistant Professor of Economics at the University of Nevada, Reno (UNR), presented on "Can Alternative Transfer Mechanisms (ATMs) Alleviate Water Scarcity?" Andrew Ayres and his colleagues researched water rights in the American West, particularly the Colorado River Basin. Their work explores how ATMs can help address water scarcity by enabling temporary, flexible water transfers from agriculture to urban areas during droughts. Ayres highlighted the challenges of traditional methods, which often harm rural economies, and proposed ATMs as a solution to balance urban water needs with rural sustainability.
Using satellite data and advanced econometric methods, Ayres evaluated the effectiveness of ATMs in saving water and identified discrepancies in traditional water-saving estimates. His findings suggest that while ATMs show promise, accurate water accounting and improved contract designs are essential for maximising their potential. This research highlights the importance of evidence-based decision-making when considering new water management strategies.
Key takeaways:
- Historically, moving water out of agricultural irrigation districts has created some friction. The so-called "buy and dry" process, in which urban utilities purchase water rights from these districts to reallocate water towards higher-value urban uses, often lead to decreased economic activity and diminished economic vitality in rural areas.
- Alternative transfer mechanisms include retaining water rights while contracting land use (fallowing) and improving "incomplete" contracts where cities pay land-use fees. However, it is important to evaluate whether these approaches truly lead to water savings.
- A 2004 case study showed farmers being compensated for fallowing up to 30% of their land. Regression analysis using remote sensing of evapotranspiration (ET) highlighted new opportunities for water savings and better contract design.
The Q&A session provided insights into the use of alternative transfer mechanisms (ATMs) and their relevance to South Africa's water management challenges. Drawing lessons from their application in the US, the audience explored how ATMs could address market failures and potential distortions in South Africa, while emphasising the importance of understanding local institutional and environmental contexts to ensure their feasibility and effectiveness. The discussion highlighted key factors, including property rights, governance structures, and contract design improvements, such as the use of satellite data, to enhance water allocation and trade.
This presentation is part of the UCT-UCR Seminar Series: Water Economics and Politics, a joint initiative between the University of Cape Town (UCT) and the University of California, Riverside (UCR).