In Australia, water use is tightly regulated and tracked using meters. Credit:Erin Jonasson Some, like mandated monitoring and conservation, were among the emergency measures imposed by Governor Jerry Brown this month that included an order for cities and towns to reduce consumption by 25 per cent. The state will probably have to do more. Largely exempt from the new curbs is agriculture, which accounts for 80 per cent of water consumption. California generated $US46.4 billion ($60.21 billion) of farm sales in 2013, including milk, nuts, fruit and vegetables. While most growers' government water allocations have been cut to zero, many retain access to water rights and are drilling more wells on their land, straining aquifers as surface supplies get more scarce. The system is different in Australia, where land and water rights are separated and tightly controlled. The country employs a market-based system created three decades ago that allows traders, farmers and government entities to buy and sell $1.5 billion of water annually through exchanges and brokers.

Most of the trading is in the Murray-Darling Basin, an area twice the size of California that produces a third of Australia's food, almost all of its rice and cotton, and 45 per cent of its dairy output. "We've developed some globally unique ways of managing our water resources" to provide greater efficiency of use, Tom Rooney, co-founder of water broker Waterfind in Adelaide, said. A drought in Australia from 2002 to 2010 reduced water supplies by 70 per cent but the nation's productive capacity declined just 13 per cent, Mr Rooney said. The effects of the prolonged dry spell were limited by more efficient irrigation, while trading of water and water rights helped allocate limited supplies better, he said. Water extraction is regulated, with meters tracking how much is taken to safeguard sustainability, said Kim Morison, a managing director at Brisbane-based Blue Sky Alternative Investments, which manages more than $1 billion, including a fund that holds tradeable water rights. "We are well ahead of the curve," Mr Morison said. "We have much more of a focus on water as the lifeblood of our communities and environment."

The nation's regulated trading helps create incentives to conserve water. Australians apply treated wastewater to gardens and golf courses and mostly use dual-flush toilets, which are more efficient. A 2007 campaign in Brisbane sought to cut water use to 140 litres per person a day, using timers that limit showers. Mandated reporting of use data also allows the government to track every drop. "That's not the way California's system works now," said Thomas Howard, executive director of the water control board, adding that the current crisis was certain to bring changes. The state consumes 10 per cent of US supply, more than New York, Texas and Nevada combined. The Pacific Institute, an Oakland-based environmental researcher, said in a 2010 report farmers still irrigated more than half the state's crops by flooding rather than more efficient drip systems. The institute urged conservation measures, including high-efficiency toilets and washing machines, to cut California's urban water use. Americans don't properly value water like other goods, and changing the system to reduce waste and encourage more efficient use could take decades, said Robert Glennon, a University of Arizona professor and author of Unquenchable: America's Water Crisis and What to Do About It.

The biggest challenge would be to separate water rights from land ownership, Wes Strickland, a water attorney for Jackson Walker in Texas, said. Such rights were linked to property, and when owners sold them, the transactions were mostly decentralised and didn't require state approval, Andy Sawyer, assistant chief counsel for the water board, said. The worsening drought is forcing California policy makers to consider all kinds of changes, especially after the winter snowpack in the Sierra Nevada mountains yielded the lowest water level in 65 years of record keeping. The state relies on melting snow to replenish streams and reservoirs. Farmer-drilled wells have eroded aquifers, which might take decades to recover. "What causes change more than anything is crisis," the water control board's Mr Howard said. "I do see us making progress and moving toward the ideal system." Even before state officials met the Australian delegation, changes were under way. In November, voters approved Governor Brown's $US7.5 billion bond to preserve water quality and increase storage and delivery to drought-stricken cities and farms. The state water board said farmers would probably have supplies curbed in key watersheds. The water board, which is expected to vote on May 5 on rules for the governor's ordered restrictions, recommends investing in technology that measures current data on water supply and demand, which Australia has made a central part of its system. Jackson Walker's Mr Strickland, who favours a registry of water rights, said better data collection would be a good first step for California towards better management of the resource.

"A drought hurts everyone," Mr Rooney said. "It hurts irrigators. It hurts the environment. It hurts the whole ecosystem. Australia's got a great story to tell in relation to how it's been able to be smarter with its water management." Bloomberg