A case study analysis of permanent transfers of water rights in southern Alberta

In Alberta, water license holders can transfer water allocations on a temporary basis and water rights on a permanent basis. The temporary trade of water allocations provides flexibility to manage water in times of short-term water supply constraints, while the permanent trade of water rights facilitates long-term adjustment in anticipation of future water constraints and the shifting of water from inefficient low value users to efficient high value users. This study investigates the market for the trade of water rights in southern Alberta and finds that this market is exhibiting many of the characteristics of early water markets elsewhere. At a time when the Alberta government is ushering in a new water management system through its Water for Life Strategy, the market for water rights is contributing to the government's efficiency and productivity goals, albeit to a minimal degree due to the marginal amount of market activity occurring. At the same time such activity may be compromising water conservation efforts. In the long run, environmental and policy changes that impose greater water constraints will hasten market development. In the meantime, practical changes to administrative systems that facilitate information flow and reduce transaction costs are recommended.