Water Trading - Scope, Benefits and Options

The objectives of the work are to:

• address the extent to which current water trading levels reflect underlying economic fundamentals versus identifiable barriers and the potential scope for water trading in the medium and longer term;

• identify potential lessons from the experiences of water trading in overseas water markets and assess how these could be applied to England and Wales;

• assess the existing and potential barriers to water trading and identify their relative importance – this should include considering whether concentrating water trading on raw water rather than extending to treated water acts as a barrier to trade;

• related to the above, identify and evaluate the options for mitigating or removing barriers, including assessing how to remove barriers to trading treated water;develop options for the use of incentives and institutional arrangements to enable / encourage water trading and to assess the merits of these different approaches;

• reflecting the above, provide a quantification of the costs and benefits of increased water trading, drawing primarily on existing sources (note, we are not expecting substantive primary research or analysis to inform this. Rather, we expect the consultant to make use of existing evidence and, where appropriate, make adjustments to reflect latest data and their emerging findings arising from this study); and

• finally, drawing the above together, provide recommendations as to the implications for the need for price and service regulation of the affected parts of the value chain to ensure that customers are protected.