Benefits of an irrigation water rental market in a saline stream‐aquifer system

The hydrologic and economic effects of a water market are evaluated for an irrigated, stream‐aquifer system. In the hypothetical rental market, surface water is traded annually among farmers, while ground water is used to augment irrigation supplies. Market simulations account for changes in the value of groundwater and surface water due to salinity differences. Results show that the market increases long‐term profit for all participants, reduces the risk of loss due to drought, and decreases average short‐term groundwater salinity. The market becomes active during dry years, when farmers without groundwater rights buy surface water from farmers with groundwater rights, who increase pumping to replace sold surface water. Under the rental market the distribution of additional profits partially depends on the pumping costs and higher salinity associated with increased groundwater use. Farmers reduce risk without sacrificing profit, by utilizing higher rates of groundwater pumping to mitigate drought damage. Increased withdrawals may diminish irrigation supplies for downstream users.