A Place for Water Markets: Performance and Challenges

The 2006 United Nations Human Development Report paints a dismal picture of global water scarcity and the increasing pressures on agricultural water supplies. While it acknowledges that demand‐side policies are more effective than supply‐side approaches, it remains skeptical of water markets as a means of managing scarce water supplies. This contrasts sharply with the successful implementation of water markets within the United States and other countries. To clarify the debate, this article evaluates the performance of established water markets. It also considers different challenges posed by water markets in developed and developing countries and discusses how countries can overcome these challenges.