A strategic environmental water rights market for Colorado River reallocation
2025-06-20
The Colorado River system is among the world’s most overallocated basins, struggling to supply water to the southwestern United States and Mexico. Consequently, 90% of the basin’s native fish species are endangered, threatened or extinct. Driven by a 24-year megadrought, the United States allocated over US$4 billion for drought mitigation, including water market transactions that pay farms, cities and industries to divert less water across the US Southwest. We developed a model of how strategic water markets can restore imperilled fish habitat, integrating hydrology, ecology, economics and water rights within the river’s headwater state of Colorado. While least-cost water-use reductions improve over one-third of restorable river habitat, strategically spending 8% more nearly triples habitat improvement. Ten transactions attain 26% of that improvement for 1% of the cost. Water markets that do not legally protect conserved water are 29% less cost-effective than markets that do. Overall, strategic investing and legal reforms yield outsized ecological benefits.