Research

Womble, P., Gorelick, S.M., Thompson, B.H., & Hernandez-Suarez, J.S. (2025). A Strategic Environmental Water Rights Market for Colorado River Reallocation. In review.

The Colorado River system is among the world’s most overallocated basins, struggling to supply water to the southwestern United States and Mexico. Consequently, 90% of the basin’s native fish species are endangered, threatened, or extinct. Driven by a regional 24-year megadrought, the U.S. allocated over $4 billion for water market transactions that pay farms, cities, and industries to extract less water. We developed a novel model of how strategic water markets can restore imperiled fish habitat, integrating hydrology, ecology, economics, and water rights for the river within Colorado under future climate change. Using the model, we explore how strategically spending modest additional funds improves fish habitat compared to least-cost water-use reduction plans under various plausible current and future formal and informal water markets. We demonstrate pathways to build towards strategic water markets by prioritizing individual transactions, and we compare ecological and economic outcomes of water markets to mandatory water cutbacks under the governing 1922 Colorado River Compact. By developing a decision support tool that conveys model results to water market participants, we can inform major ongoing initiatives to conserve water in the Colorado River basin.

Poster presented at American Geophysical Union 2024 Annual Meeting in Washington, D.C.

Womble, P., Townsend, A., & Szeptycki, L.F. (2022). Decoupling Environmental Water Markets from Water Law. Environmental Research Letters.

Environmental water markets have emerged as a tool for restoring flows in rivers across the world. Prior literature suggests that certain legal conditions are necessary for these markets to function. However, we find substantial market activity has occurred without these legal conditions through market and legal data collected in five core U.S. Colorado River basin states (Arizona, Colorado, New Mexico, Utah, and Wyoming) from 2014 to 2020. Ninety-five percent of the 446 water transactions sidestepped formal legal processes to transfer water rights to the environment. We also find that government regulatory and conservation programs, not private-sector investment, have driven most environmental water market activity. Government spending is the dominant funding source, with 90% of the $53 million spent coming from governments and 68% from the U.S. federal government alone. Finally, our analysis finds that current market activity would be insufficient to stave off future curtailment of critical water users under the Colorado River Compact and that $86–89 million annually in new investment is required to do so. In a basin experiencing a historic megadrought, our analysis suggests prioritizing such new investments over legal reform. Global implications are that such flow restoration is possible where legal regimes for environmental water markets do not already exist.

Womble, P. & Hanemann, W.M. (2020). Water Markets, Water Courts, and Transaction Costs in Colorado. Water Resources Research.

Water markets increasingly facilitate adaptation to water scarcity, but transaction costs can be barriers to expanded water marketing, particularly under water rights law in the western United States. However, transaction costs are rarely measured, and existing research commonly overlooks how transaction costs differ across individual water transfers and uncertainty in those costs. We collected hundreds of estimates of procedural transaction costs—costs incurred by transfer proponents for legal and hydrologic experts—by surveying 100 water professionals in the state of Colorado. There, water markets are among the most active in the United States, convey perhaps the most clearly defined private property rights of any state, and, unique to Colorado, require approval from specialized water courts. We elicited costs for water transfers with differing physical and legal characteristics, and we elicited separate assessments of (i) probabilities of legal outcomes for water transfers and (ii) transaction costs conditional on those outcomes. Then, we estimated expected transaction costs with a statistical model that combines (i) with (ii). The model reveals systematic differences in transaction costs, with scale economies and higher transaction costs for water‐scarce regions, senior water rights, and higher‐conflict legal outcomes. It also shows substantial transaction cost uncertainty, which itself can discourage trading. Our novel survey and estimation procedure develops a replicable approach for measuring transaction cost heterogeneity and uncertainty. Additionally, qualitative survey data we collected indicate transaction costs have increased over time due to growing competition for scarce water and that, despite high transaction costs, specialized water courts offer unique benefits.