Enhancing instream flow benefits in an era of water marketing

Growing populations in the western United States demand water not only for residential use and to support urban development but also for recreation, water quality enhancement, improvement of fish and wildlife habitat and to preserve the aesthetics of riparian areas. Instream flows contribute substantial economic benefits, and emerging pressure to reserve water instream comes at a time when markets are evolving to reallocate water among offstream uses such as agriculture, industry and municipal expansion. This article examines current instream flow policies in the western states and outlines the economic values generated by stream flows. The author argues that instream values are high enough to compete in the market for water rights with offstream uses when important recreation sites and wildlife species are involved. The paper suggests how western state policies might be altered to accommodate instream flow protection within the context of water marketing, with the objective of improving the efficiency of water allocation among instream and consumptive uses.