Water trading could be key to tackling future droughts
Water could one day be effectively traded, but more work is needed to ensure growers don’t lose out in future droughts such as the one seen earlier this year, according the early results presented at the RASE Soil and Water Live Event.
It has been theoretically possible to trade licences for 10 years, however the few trades taking place (50 in eight years) suggests the current system is flawed and a new model is needed.
With the current climate in the UK becoming more erratic and producing extreme weather such as droughts, making the most of the water farmers have and allowing access to water when it is needed most has become vital.
To address these concerns, Anglian Water, together with Cambridge University, has been researching the feasibility of developing an effective water-trading system.
The first approach investigated was an improved “pair wise” model of water trading that works in a similar way to a dating website, said Anglian Water regulation director Jean Spencer. Growers found this approach much easier to understand and it produced quicker trading, as a result of pre-approved trades.
“The visibility of who farmers were trading with was also welcomed by those involved in the research.”
The second approach was a common pool (likened to eBay), in which abstraction rights were based on what was available. Users knew the amount of water they had already, thus the amount they needed to buy or could sell.
Mrs Spencer said that the findings from the second approach were less positive.
“The common pool required a fundamental change of mindset and was much more complex. The lack of familiarity may result in a shortage of water for farmers because they didn’t bid properly and weren’t sure exactly how much to bid.”
Mrs Spencer added that one issue was the dominance of the larger abstractors, such as water companies. “One possible solution to this was introducing a method ‘ring fencing’ supplies for agricultural abstractors. This would restrict water for agricultural use only and so protect farmers’ abstraction rights.”
Concerns were raised over ring fencing, however, with fears of it skewing the market and removing resilience from the trading system. It was also suggested it could restrict farmers’ ability to buy, store and sell water on the open market when conditions allowed.
One positive finding was that water trading could make water “work harder” and trading water at short notice was generally seen a positive development. “However, it is unlikely that there is a one-size-fits-all approach,” said Mrs Spencer.
The NFU’s national specialist on water resources, Paul Hammett, believes there could be different trading rules in different catchments, meeting the needs of the catchment and users.
“We need a ‘fit-for-purpose’ abstraction regime that fairly allocates water among competing needs. Trading can play an important part in achieving this,” said Mr Hammett.
“In the long term, do trading prospects present farming with an opportunity or a threat? Farmers may have to re-evaluate water as a marketable commodity as well as an essential input,” he said.
