This report provides an overview of the policy context for water marketing and the related practice of
groundwater banking and summarizes recent trends in both areas. The water market enables the temporary,
long-term, or permanent transfer of the rights to use water in exchange for compensation. The ability to
transfer these rights adds flexibility to the state's water supply -- helping to address temporary drought
conditions and to accommodate longer-term changes in the pattern of demand. Groundwater banking
involves the deliberate storage of surface water in aquifers during relatively wet years, for use in dry years.
Both tools are part of a modern water management portfolio that will enable California to manage its water
resources sustainably, benefitting both the economy and the environment. Given the physical, financial, and
environmental limits on expanding overall water supplies in California and the prospect of supply
reductions caused by a warming climate, both tools are likely to become increasingly important.
Although state and federal policies have supported the development of water marketing and groundwater
banking, no official publications track their evolution in California. Since the early 2000s, PPIC has tracked
these trends in an effort to fill this information gap. This report provides an update of the 2002 PPIC report
California's Water Market, By the Numbers, with an expanded analysis of statewide water market trends from
1982-2011 and new information on groundwater banking in Kern County and Southern California.