Rey, DoloresGarrido, AlbertoShafiee, Mahmood2016-06-302016-06-302015-12-31Rey, D., Garrido, A., Shafiee, M. (2015) An innovative option contract for allocating water in Inter-Basin Transfers: the case of the Tagus-Segura Transfer in Spain, Water Resources Management, Vol. 30, Iss. 3, pp.1165-11820920-4741http://dspace.lib.cranfield.ac.uk/handle/1826/10053The Tagus-Segura Transfer (TST), the largest water infrastructure in Spain, connects the Tagus basin’s headwaters and the Segura basin, one of the most water-stressed areas in Europe. The need to increase the minimum environmental flows in the Tagus River and to meet new urban demands has lead to the redefinition of the TST’s management rules, what will cause a reduction of transferable volumes to the Segura basin. After evaluating the effects of this change in the whole Tagus-Segura system, focusing on the availability of irrigation water in the Segura, the environmental flows in the Tagus and the economic impacts on both basins; we propose an innovative two-tranche option contract that could reduce the negative impacts of the modification of the Transfer’s management rule, and represents an institutional innovation with respect to previous inter-basin water trading. We evaluate this contract with respect to spot and non-market scenarios. Results show that the proposed contract would reduce the impact of a change in the transfer’s management rule on water availability in the recipient area.enThe final publication is available at Springer via http://dx.doi.org/10.1007/s11269-015-1219-0Attribution-Non-Commercial-No Derivatives 3.0 Unported (CC BY-NC-ND 3.0). You are free to: Share — copy and redistribute the material in any medium or format. The licensor cannot revoke these freedoms as long as you follow the license terms. Under the following terms: Attribution — You must give appropriate credit, provide a link to the license, and indicate if changes were made. You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use. Information: Non-Commercial — You may not use the material for commercial purposes. No Derivatives — If you remix, transform, or build upon the material, you may not distribute the modified material. No additional restrictions — You may not apply legal terms or technological measures that legally restrict others from doing anything the license permits.Option contractSupply risksTagus-Segura TransferWater marketsArticle