Sample Economics Case Studies Paper on Reforms to Water Rights and Pricing

TO:  Commission for Reforms


DATE:  23rd February 2016

SUBJECT: Reforms to Water Rights and Pricing

Water is a fundamental resource for subsistence use and agricultural production and the availability, supply and bills governing the use would likely have impacts on the communities dependent on it. It is recommendable to allow water trading with very limited barriers if any, as this can have economic benefits to most people in the society more specifically to farmers as well as individuals involved in the supply chain.

Water Trading Bill

There has been push to reforms that allow people holding water rights to buy and sell water with no danger of losing rights in California. Water trading would highly benefit farmers as it allows farmers to sell some of or all of their water rights within a given period without necessarily selling the land parcels that water rights are attached to. This offers great flexibility which allows maintained high agricultural production without wastage of resources. From the environmentalists’ perspective, water trading highly encourages water conservation and thus bills that allow water trading with limited barriers would not only benefit farmers but also be an important move towards environmental conservation. However, most states majority tend to oppose the move as over 50% voted for no for water referendum in most regions simply because of the marginal water pricing.

Negative Impacts of the Water Bill

Even though water trading with limited barriers seems beneficial to majority of parties involved, encouraging or pushing for such bills should be done considering a number of factors that could go wrong with the move. For instance, allowing water trading with limited barriers is likely to affect water prices and this could pose danger to agricultural production especially if water prices go up. Most crops are grown under irrigation in the different regions, increased water prices would generally increase the cost of production, a case that may either discourage farmers or lead to increased food prices. Water price control which also has its limitations could however help address this threat to water trading. Conclusively, if the water bills are well drafted with proper consideration of both the positive and negative consequences, the bill could benefit the collective society. Water pricing should be affordable to the end users especially farmers and should be based on volumes used or consumed rather than area irrigated. If changes in the current pricing scheme are to be implemented, then farmers growing crops that consume little water would highly benefit in comparison to regions growing crops that consume a lot of water. The marginal cost pricing of water would likely cause a shift in the use of water from agricultural to domestic and this may not be appropriate because it may lead to reduced agricultural production. Allowing farmers to sell water could be more beneficial than marginal cost pricing, in that the plan allows maximum utilization of water.