Project Abstract
Decades of intensive irrigated agriculture, expanding urban populations, and poorly defined property rights in the Pajaro Groundwater Basin have resulted in extensive groundwater overdraft and seawater intrusion. The groundwater in the basin is an open access resource from which any landowner may extract, which leads to a tragedy of the commons situation.
The Pajaro Valley Water Management Agency (PVWMA) was created by the State of California with a mandate to efficiently and economically manage groundwater supplies and reduce long-term overdraft in the Pajaro Basin. PVWMA is currently facing serious challenges in meeting these goals and finding ways to fund its operations and future projects. If PVWMA fails to find the means to fund itself, the basin will likely undergo adjudication, a long, expensive process that is not favored by local stakeholders.
This project will explore the feasibility of two market-based management strategies to address the problems in the Pajaro Basin: one which fits within the basin’s current legal structure, and one under a hypothetical future adjudicated basin. For the first strategy under current conditions, PWS will design an innovative "Tier and Trade" system to operate in conjunction with PVWMA's proposed tiered pricing structure for groundwater pumping. In this system, groundwater users could buy and sell "coupons" for pumping groundwater at a given price tier. For the hypothetical adjudicated basin, PWS will design a cap-and-trade system that will enable users to trade groundwater use rights.
