Roosevelt Dam.

March 16, 2023

AZ Business Magazine

How free-market reforms can help secure Arizona’s water future

Arizona is in the middle of one of the worst droughts in its history. Water supplies throughout the state are dwindling. The state is facing drastic cuts to its Colorado River allocations, posing a major threat to its water supplies. So, how can we secure Arizona’s water future?


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But as detailed in a new report from Bryan Leonard, assistant professor at Arizona State University’s School of Sustainability, and Tate Watkins, research fellow at The Property and Environment Research Center (PERC), delivering better water conservation does not require a dramatic expansion of the role of government. The Goldwater Institute released the report in conjunction with PERC, the national leader in market solutions for conservation.

“It’s crucial that policymakers take immediate action to prepare for the possibility of a hotter and drier future,” Leonard says. “Promoting more efficient use of water will yield reforms that allow markets to function better.”

“With water supplies dwindling and Arizona’s population expected to continue rising in the next two decades, the time is now to address the state’s looming water crisis,” adds Victor Riches, President and CEO of the Goldwater Institute. “But bigger government isn’t the answer. By implementing free-market reforms, lawmakers can improve Arizona’s water policy to help secure our state’s future.”

Arizona has long been a leader in water conservation, but today’s drought is creating new challenges. Policymakers are considering several strategies to augment the state’s water supplies, such as water reuse and desalination, while also plugging leaks in existing water supply “buckets.” In addition, a variety of legal barriers prevents water from being allocated efficiently, including a lack of clarity over water rights in large parts of the state. And groundwater remains an open-access resource in much of the state, draining aquifers that many agricultural communities depend on.

This report offers recommendations in four specific policy areas that that would improve Arizona’s water policy to ensure the state continues to thrive amid its drier future:

The report recommends the following to secure Arizona’s water future:

1. Improve legal and policy institutions so the markets for surface water flourish, including by helping water-rights owners secure their property rights and establishing a state water trust;

2. Clarify rights to groundwater and innovatively use markets to ensure the sustainability of groundwater basins;

3. Explore strategies to augment water supplies while weighing costs and benefits, such as removing regulatory barriers and exploring creative interstate opportunities to collaborate on increasing water supply; and

4. Support voluntary water conservation in urban areas, including by promoting incentive-based xeriscaping programs and championing indoor water reuse.

The water policy reforms suggested here have the potential to help improve water allocation and enhance water supplies, enabling Arizona’s continued growth and economic success well into the future.

Read the full report here.