April 28, 2025

New Report Provides an Overview of Texas Water Markets

A new report was published that provides an overview of water markets in Texas. The report was sponsored by a non-profit named Texas 2036 to promote data-informed policy decisions in the state.

The report provides some opinions on the benefits of water markets, what drives their creation, and the hurdles that Texans face in trying to increase water market activity. The report focuses on the Lower Rio Grande and the Edwards Aquifer as case studies in Texas water markets.

The report reaffirms several characteristics that have been observed in water markets across the Western U.S., such as:

1. The driving force of reallocating water from agricultural to municipal uses,
2. The dominance of water leasing compared to sales, and
3. The prevalence of compensated conservation programs as a component of the market.

The report also provided a new observation that market activity has actually resulted in an overall reduction in local water use. This makes sense given that most market activity moves water to the municipal sector, and municipalities often plan their water portfolios for dry-year reliability, leaving some portion of municipal water holdings unused in most years. Overall, the report listed multiple factors that hinder new water market creation and trading activity. But a recent Water Market Insider in 2022 focused on Texas predicts that surface water market activity is likely to increase given observed trends in trading activity and future predictions of water demand.