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Details of Grant 

EPSRC Reference: EP/J005274/1
Title: Transforming water scarcity through trading
Principal Investigator: Weatherhead, Professor EK
Other Investigators:
Fleskens, Dr L Beevers, Professor L Harou, Professor JJ
Researcher Co-Investigators:
Project Partners:
Department: Sch of Energy, Environment and Agrifood
Organisation: Cranfield University
Scheme: Standard Research
Starts: 03 October 2011 Ends: 02 October 2015 Value (£): 611,830
EPSRC Research Topic Classifications:
Water Engineering
EPSRC Industrial Sector Classifications:
Related Grants:
Panel History:  
Summary on Grant Application Form
Water scarcity is widespread and increasing worldwide. Many areas of the UK are increasingly short of water resources. Yet typically only half the available water is abstracted even in dry summers, and much of that is for low value uses. Climate change, population growth and increased water demand require a dynamic reallocation of the water resources that the present water allocation and licensing system in England and Wales cannot provide. More flexibility in transferring and sharing water resources would decrease water scarcity by encouraging the development of the most economical new supply options, and would increase the benefit obtained from the existing water, by encouraging transfers to higher value uses. The potential of water abstraction licence trading to bring about more efficient allocation of water, the development of new resources and environmental improvements in areas of water scarcity has been recognised by government, but so far regulatory problems and environmental constraints have limited progress.

Water markets already exist elsewhere (e.g. Australia, Western USA, Chile) but have often had negative impacts on vulnerable groups and ecosystems. Within England and Wales, trading of water rights has been encouraged by government since 2003, but only about 60 trades have occurred. More flexibility is now being promoted, as a solution to water scarcity and allocation (e.g. OFWAT, 2010). However, it is imperative that the impacts of different market rules and regulation are better undestood.

The objectives of our project are to :

- inform the current move towards water markets;

- show how active markets could transform the current water management system;

- value the available water spatially and dynamically, revealing its opportunity cost;

- identify the economic benefits of trading water licenses at basin scale;

- research the opportunities for novel engineering options for increasing supplies, such as distributed reservoirs, enhanced aquifer recharge, and rainwater harvesting, and how/whether they might be funded by downstream buyers;

- investigate the rules and restrictions necessary to protect the environment and avoid unwanted consequences;

- investigate options for incorporating Payment for Ecosystem Services (PES), to enhance environmental benefit.

The project team brings together a strong set on complementary research skills in water management, from four universities active in water management research, Cranfield, Leeds and Herriot-Watt Universities and University College London.

The project will first review the experiences of water trading systems in other countries, and the experiences of trades that have already occurred in the UK. Alternative methods of sharing water resources, eg through pooling licenses, will also be reviewed.

The core of this project is the development and use of a market simulator, modelling how water suppliers and users behave under various market structures. The novelty in developing the Market Simulator is to study the potential operation of markets and trading at catchment and abstraction licence level. The model will be applied to selected water-scarce catchments in East Anglia, using a weekly time step. Meetings with regulators and water managers will be used to ground and focus the modelling.

Three PhD research projects will supply data for the model and subsequently use the model to investigate specific aspects of the problem. They will look respectively at: the potential for engineering options in the UK; land management options in an international context; and quantification and valuation of ecosystem goods and services for multiple purposes. Co-supervision of the students and regular team meetings and workshops will help reinforce integration of the academic team and the students.

Key Findings
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Potential use in non-academic contexts
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Date Materialised
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Project URL: http://www.twstt.org.uk/
Further Information:  
Organisation Website: http://www.cranfield.ac.uk