(3) Water Valuation

The development of water markets in parts of the Colorado River Basin has revealed the value of water in its competing uses, particularly between agriculture and urban uses. The Colorado-Big Thompson is home to the most active water market in the basin where shares of agricultural water are being leased or purchased by cities in the state of Colorado. In 2010, shares of water in the Colorado-Big Thompson project sold for approximately US\$6,900/mL (approximately US\$6.89/m3, 2010 prices, [110]). More recent prices have been reported to be well over three times this amount, approaching US\$24,300/mL [111] (2018 prices). Outside of the Colorado-Big Thompson, water markets are thin and constrained by high transaction costs and concerns about third-party effects [112]. As a consequence, the price of water established by markets or administrative decisions remains a poor reflection of the value of water in its competing uses, particularly for non-market benefits.

The non-market valuation of water in the Colorado River Basin has aimed to capture the economic value of water used for instream flows, recreational purposes and other types of ecosystem services. A 2014 report applied an ecosystem services framework to estimate the total economic value of the Colorado River, indicating economic benefits from US\$56.6 to US\$466.5 billion per year with an underlying asset value between US\$1.5 and US\$11.5 trillion [113]. The cultural values have proven difficult to integrate into decision-making, as illustrated by efforts to address lingering controversies over indigenous water justice and historical exclusion of indigenous groups from water planning and allocation [114].
