Sustainable Development, Water Rights, and Beer: How the Free Market Can Solve Water Conflict

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In the dry western United States, water rights are one of the biggest impediments to sustainable economic development, and often the cause of major conflicts between industries, companies and states. In addition, the archaic laws that protect water rights holders make it virtually impossible for streams and rivers to flow as they have for millenia, often turning them into parched wastelands.

The ecosystem damages are hard to quantify but easy to recognize: a dry stream bed where there once was life. Huge forest fires raging across the west. Here’s a gripping case study that showcases how the free market can find a solution to one of the most vexing economic and environmental challenges facing the U.S.

According to Rob Harmon, author of Voluntary Carbon Markets: A Business Guide to What They Are and How They Work, there are 4,000 miles of dewatered streams in Montana alone. The problem, says Harmon, is that “the system itself creates a disincentive to conserve, because if you don’t use your water rights, you lose them.” The senior water rights holders, especially, have to use all of their water, regardless of whether they need it for their agricultural interests.

After 140 years of conflict, countless incidences of lawsuits and litigation, and more than a century of dry streams, Harmon and his colleagues came up with an idea: why not create an incentive for the water rights holders to return their water to the streams, while still allowing them to retain their water rights? The answer, of course, was beer.

Hotels, tea companies, brewers, and high tech companies in other places in the Southwest have started to pay water rights holders to return their water to the streams, assuring their own supplies and access, while also giving them great PR for reducing their own water footprints.

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