In the United States, yields from four major crops will drop by as much as 40 percent on average by the end of the century due to a warming climate, according to a recent study in the Journal of Science.

Many regions of the country will increasingly rely on expanded irrigation to produce the same crops at similar levels, and America’s farmers already account for 80 percent of our consumptive water use. To make good use of scarce water resources in a climate-stressed future, it will be critical to ensure that water flows to the highest-value applications.

Economists and other researchers continue to point to markets as the most effective means for solving these kinds of problems. However, markets are failing in many states, due to a web of poorly defined and unevenly enforced property rights that have given rise to misaligned incentives and uncertainty.

New evidence from Idaho suggests that clarifying these rights could have big payoffs. Clarifying property rights in Idaho led to a 140 percent increase in water rights trading.

Buyers of water in Idaho were able to extract $34 per acre more value from their land than the respective sellers. This effect, combined with an expansion of crop acreage, increased agricultural production by $250 million annually following the reforms.

The Idaho water rights situation is not a unique one. In fact, many Western states like California have similar property rights problems.

“The best available research indicates that climate change will present a significant challenge to American agriculture, in turn placing added stress on water supplies,” said Sam Ori, executive director of the Energy Policy Institute at University of Chicago. “Markets are our best bet to allocate that increasingly scarce resource and minimize the costs of climate adaptation.”