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California

Groundwater Markets

A river winds alongside a plain on one side and a rugged bluff on the other.
Santa Clara River The Santa Clara River in California. © Barbara Wampole

The Nature Conservancy wants all Groundwater Sustainability Plans (GSPs) to address groundwater dependent ecosystems (GDEs), as required by SGMA, and for each plan to employ robust methods to accomplish its goals. One such method is a groundwater market.

SGMA may result in significant cuts to groundwater use, particularly in critically over drafted basins. It is this water scarcity that creates the primary driver for groundwater markets. By allowing the price of water to reflect its true value to users, markets incentivize water conservation and efficiency. This, in turn, frees up water that can increase the resilience of the basin, on a whole, in the face of supply constraints. By allowing groundwater users to trade, markets provide greater flexibility than pure regulatory schemes. In doing so, markets give individual pumpers control over their respective paths toward a basin’s sustainable yield. In addition, markets may be a valuable tool for Groundwater Sustainability Agencies (GSAs) as they implement their plans.

GSAs that are interested in groundwater markets should create their GSPs with markets in mind. Because forming a water market is a complex undertaking, TNC is sharing resources to assist GSAs and interested stakeholders. These resources are based on first-hand experience in Ventura County, where TNC has been formally involved in the process of creating GSPs and SGMA’s first groundwater market. Our primary goal has been to create a market structure that supports implementation of the associated GSP, including protection of GDEs. We hope these resources will provide guidance to others wishing to achieve these goals.

For information, contact E.J. Remson and Sarah Heard.