Incentive-based water management tools are designed to motivate water users and managers to change the way they use water to encourage sustainability and best practices, not only for the intended conservation goals, but also for the financial benefit to the water user/manager.
General examples of these solutions include water quality or water quantity market schemes, payments for watershed services, and subsidies for certain technologies or water management techniques, such as cost share programs.
These options can provide more flexibility and innovation than narrow regulatory approaches or large water infrastructure projects. Farmers, water managers, environmental engineers, corporations, policy makers, non-governmental agencies and other stakeholders may prefer solutions that are adaptable to local conditions, compared to traditional government mandates or large infrastructure projects, which are usually costly.
Incentive-based solutions can provide valuable information to support better decision-making in drought management policies and practices, as well as improve agricultural management. Water markets are one of the most prominent examples of incentive-based water management tools.
For example, there is growing interest in putting stronger limits on groundwater use and implementing groundwater markets in different areas, including California and other agricultural producing states, as the pressures on water resources are rising. When carefully designed, they can be used to provide flexibility and lower drought risk in agricultural areas. In a typical water market, water rights to a defined amount of water for a specified time in a specified location, for a specified use, can be transferred to another water user in exchange for an agreed-upon financial compensation. It’s a mechanism that facilitates water reallocation from lower value to higher value uses to overcome drought conditions and support crop yields without compromising water needs for urban and environmental needs.
Nebraska is unique with its system of 23 Natural Resources Districts, which are responsible for developing water management and allocation policies for their local watershed areas. This approach results in differing rules and structure for water markets and groundwater transfers across the state but ensures that the policies are well suited for local needs.
Sharing information on how water markets and other incentive-based tools are being used in Nebraska can be very helpful for other parts of the world facing similar challenges to water management amid drought and competing interests. DWFI researchers have collected information about Nebraska’s water management practices and incentives, which is readily available on the institute’s website and on this video interview.
Renata Rimšaitė collaborated on an assessment which measured the economic impact of the irrigation industry in the United States in 2020.
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As a result of their technical visit to Nebraska in May, the government of Mato Grosso, Brazil, will sign a technical collaboration agreement with the Daugherty Water for Food Global Institute.