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<br />Water markets can mean an end to water shortages <br /> <br />Page 18 of27 <br /> <br />Chile, known for applying market solutions to a <br />variety of social problems, implemented a market- <br />oriented water policy in 1974. A new constitution <br />reversed the expropriation of water rights the <br />government had started in 1966 and established <br />secure, transferable water rights. Individuals and <br />enterprises can buy or lease water, and they do. <br />Renato Schleyer (1994, 76) concludes: "One of the <br />greatest achievements of Chile's water policy is <br />allowing cities to buy water without having to buy <br />land or expropriate water." In this setting, gains <br />from trade promote efficiency and cooperation <br />rather than acrimony. <br /> <br />Interbasin Water Marketing <br /> <br />"The difficulties of trading water between <br />individuals within a water basin pale in comparison <br />to interbasin and cross-boundary transfers. In the <br />debates over the North American Free Trade <br />Agreement, Canadians were especially concerned <br />about water transfers to the United States, and <br />ultimately the trade agreement did not free up water <br />markets. But since 47 percent of the earth's land <br />mass straddles international water basins and since <br />water shortages do not respect political boundaries, <br />the pressure for interbasin and cross-border <br />transfers will continue. <br /> <br />Interest in interstate trades is emerging in the <br />southwestern United States. In 1994, Arizona, <br />California, and Nevada began discussing a water <br />bank for the lower basin ofthe Colorado River. At <br />the root ofthe water bank: discussions is the fact that <br />California and Nevada face shortages, while <br />Arizona is awash in subsidized Colorado River <br /> <br />water from the Central Arizona Project (CAP).DU <br />CAP delivers water to its users at rates that are <br />subsidized but still above the cost of alternative <br />sources, chiefly groundwater. As a result, CAP is <br />not being used to capacity. In 1994, CAP delivered <br />less than 55 percent of the 1.5 million acre-feet of <br />Colorado River water available to the state. <br />Moreover, the project loses more than $24 million <br />per year. <br /> <br />In contrast, California and Nevada use all their <br />share of the Colorado River and then some. The two <br /> <br />http://www . perc.org/pub lications/policyseries/priming_ full. php ?s=2 <br /> <br />9/12/2006 <br />