Water harvesting reservoirs with internal water reallocation: a case study in Emilia Romagna, Italy

The existence of formal water markets in the European context is limited to the Spanish case, despite its rationale being deeply rooted in the economic literature. In Italy, formal water markets are widely criticized and they are not supported by the national legislation. However, due to some specificity, a form of water reallocation exists in a number of rainwater harvesting reservoirs in the North of Italy. The aims of the analysis are the description of such an institutional arrangement and the economic assessment of the reallocation mechanism, including the distribution of its gains. We formulate a semi-empirical mathematical programming model to study the outcomes of different institutional scenarios. The results suggest that the reallocation increases the gross margins of the area, and that the distribution of the gains are in favour of water buyers. Despite its inefficiencies, the institutional arrangement present in the area adds flexibility to a system that is likely to face major changes in the next decades.