Designing water markets for climate change adaptation

Water markets have the potential to lessen some costs of climate change. However, they need to be designed to address the unique institutional and physical features of water. In this Perspective, we discuss the role water markets could play in adapting to climate change and outline opportunities for moving forward. We draw on the environmental economics literature to highlight past challenges with water markets and environmental markets more generally, and identify opportunities for water-specific market design. We argue that water markets will serve to improve adaptation if they are designed with these key features in mind.