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- Title
Pricing Options on Water in Texas.
- Authors
McColly, Quinn; Mace, Robert; Tissot, Philippe; Yoskowitz, David
- Abstract
Water scarcity is a growing concern globally, in the United States, and in Texas. As Texans plan to meet this challenge, it is important to introduce new tools to help mitigate water shortages. Market mechanisms have historically provided methods to increase the allocative efficiency of scarce resources, though applying these mechanisms to facilitate water trading is not widespread. Cash markets have successfully been implemented under the Watermaster in the Rio Grande Valley, but the use of water markets is not prevalent throughout Texas. In addition to cash transactions for water, the ability to effectively price water options would allow an additional market-based product to facilitate more flexible transactions. As people from municipalities, agricultural interests, industry, environmental interests, and other groups look for adaptable methods to offset uncertainty surrounding future water needs and supplies, water options would be useful. This paper establishes a method to price water options on agricultural water and applies that method to a cash crop in Texas. Market mechanisms will not be a panacea for water woes, but they are an important and effective tool for helping planners deal with increasing demand amid uncertain supplies.
- Subjects
TEXAS; RIO Grande Valley (Colo.-Mexico &; Tex.); CASH transactions; WATER use; CASH crops; WATER supply; CITIES &; towns; WATER shortages
- Publication
Texas Water Journal, 2021, Vol 12, Issue 1, p91
- ISSN
2160-5319
- Publication type
Article
- DOI
10.21423/twj.v12i1.7121