Water markets and water rebounds: China's water rights trading policy

Water markets aim to achieve water conservation and efficient allocation through market transactions. However, the presence of water rebounds may counteract this effect. Water markets and water rebounds have a complex interaction that has not been adequately explored in current studies. This study fills this research gap by developing an analytical framework connecting water markets and water rebounds and scrutinizing the causal linkage between them and the potential mechanisms involved within the context of China's water rights trading (WRT) policy. The findings have the potential to significantly impact water management strategies. We argue that water markets and water rebound mitigation—which is frequently linked with the capacity of water markets to improve water quality—are causally related. Furthermore, deploying water markets may also slow technological progress, resulting in reduced water efficiency and hence, an indirect mitigation of water rebounds. Lastly, the impact of water markets on water rebounds varies according to water availability and socioeconomic levels.