Policy paper

10. Water resources planning and abstraction licensing: National Framework for Water Resources 2025

Published 17 June 2025

Applies to England and Wales

10.1 How we allocate water rights

Rights to abstract or impound water in England are granted by the Environment Agency through its licensing system, which is applicable to all abstracting sectors. In considering whether to issue a licence, the Environment Agency must ensure that existing water rights and lawful uses remain protected and that the water environment is not adversely affected.

The detail of the abstraction licensing process is covered in our managing water abstraction publication. In summary, there are several questions that inform decisions on licence applications and the ongoing allocation of water rights, which are summarised in Figure 28 below and are described in the text that follows it.

Figure 28: High-level summary of how water abstraction rights are allocated

For abstraction licence application decisions

The need for the water must be justified. There needs to be robust evidence on the quantities required, their timing and location. Water resources planning helps to determine this ‘justification of need’.

There must be sufficient water available for the abstraction. Water availability is assessed on a catchment basis (or aquifer unit) and is summarised in the Environment Agency’s abstraction licensing strategies. Environmental needs are included in these assessments to ensure that flow and level requirements are safeguarded.

Water rights and lawful uses must remain protected. The Environment Agency is not allowed to grant new or amended abstraction licences which will adversely affect the water rights of existing abstractors (unless there is a ‘derogation’ agreement with the existing abstractors). The licensing system is designed to put that protection in place so that abstractions do not interfere with each other.

The water environment must remain protected. In addition to allocating an environmental flow need in determining water availability, the applicant will need to demonstrate that any environmental impacts are acceptable and that water-dependent nature conservation sites remain protected.

For renewals of licences, we will also consider whether there has been proper and efficient use of water resources.

For existing abstraction rights

We check to see that abstraction remains environmentally sustainable. In some places, historical licences may have been issued without proper conditions to protect the environment and there are catchments which are over-licensed going beyond the amount of water that is sustainable and reliably available. In these cases, we have a programme of work to ensure we restore sustainable abstraction which may result in the reallocation of water rights.

As we see climate change reveal itself, there is likely to be an overall reduction in water availability, with significant changes rainfall patterns and the reliability of river flows. We will continue to review sustainable abstraction, with the potential that we may reallocate water rights if needed to protect the environment.

We also need to ensure that there is proper use of water resources. This includes considering whether it is right for licence holders to hold onto water rights if they are not being used, or if they are not fully being used. We therefore have a programme assessing the non-use of abstraction licences and we may make decisions to use our powers to recover water rights where it is appropriate to do so. This will help:

• ensure that any sustainability reductions on other abstractors are minimised
• remove the risk of deterioration of the environment
• in places where this results in a surplus of water available for abstraction, free up water to be reallocated to other users

During prolonged dry weather and drought

Sometimes we need to temporarily supplement water resources and reallocate water rights. We do this by:

• using strategic schemes, such as the Ely-Ouse-Essex transfer to move water to support abstractions and the environment. Many of these are vital to securing the resilience of strategic public water supply abstractions and support many abstractions across different sectors of use
• considering the need for drought restrictions such as irrigation restrictions (alongside normal hands-off flow and level conditions in some licences), to protect the water environment during periods where there has been an exceptional shortage of rainfall
• considering applications for drought permits, which may temporarily relax licence conditions when there is a need, for example, to sustain public water supplies during drought

10.2 The role of water resources planning in the allocation of water rights

Water resources planning across all sectors of use helps to answer the ‘justification of need’ question in decision-making around the allocation of water rights (Figure 28). It involves a rigorous assessment of the current and future supplies and demands and whether there is a future supply deficit which needs to be addressed. It also considers whether water is being used properly and efficiently and whether there are any adjustments that need to be made to ensure abstraction is environmentally sustainable or take account of a changing climate. The water resources planning approach looks to identify best value solutions.

For public water supplies, the approach is well-established and has a statutory footing with a link to water company business plans and affordability.

For other sectors of use, there are various stages of maturity in water resources planning.

This National Framework seeks to support development and implementation of the approach in those sectors and to evolve the role of Regional Water Resources Groups in brigading the planning activities, so they form one cohesive plan.

10.3 Reserving water abstraction rights

As water becomes more scarce, there will be an increasing number of potential abstractors who will end up competing for the same resource. As a result, the Environment Agency may need to decide to whom available water should be allocated.

The Environment Agency’s role of allocating water from the environment is undertaken through the abstraction licensing system. The abstraction licensing system is not designed to reserve future water allocations unless someone holds an abstraction licence. If a developer of infrastructure needs certainty and confidence that the water will be available for strategic schemes, we would encourage the potential water user to apply early to ensure that water rights are secured.

When determining competing needs, the Environment Agency will seek to grant a licence to the application which is of the greatest public interest. This is in line with our sustainable development objectives and to have regard to the costs and benefits of exercising our powers.

We will look at the effects on the environment and the overall desirability of any proposal in the public interest and consider against all other actual or potential proposals to use the available water resources.

The Environment Agency’s role is to make decisions about the appropriate use of the water for the benefit of existing and future generations. We will aim to decide so that there is sustainable use of directly abstracted water both now and in the future.  We will make our decisions by assessing, amongst other things, whether the need has been justified (for example within a published water company Water Resources Management Plan), whether the water is being used efficiently, the socio and economic value and wider consideration such as government policy and environmental obligations.

When determining licence applications, we need to identify other proposals that may be competing. Competing proposals will be offered the opportunity to split or share the available water. If sharing or splitting not possible then we’ll need to decide which proposal to license.

Given the need for large amounts of water for Strategic Resource Options for public water supplies and for energy production, we will encourage sectors to work with regional groups, and plan effectively to meet future water needs. This should make it easier to look for opportunities to share water and be more efficient with the water available. There may be opportunities for water to be licensed for short to medium term use before any strategic need comes online.

The Environment Agency plans to consult further on the approach to reserving water abstraction rights during 2025.

10.4 Water rights trading and water rights sharing

10.4.1 Water rights trading

A water rights trade is the transfer of an abstraction right from one person to another. It is not the physical movement of the water. An owner of an abstraction licence may agree to sell the water right to a buyer, subject to a number of conditions and checks made by the Environment Agency. A water rights trade can be agreed on a permanent or temporary basis.

Where all the water on a licence is traded permanently, the Environment Agency will grant a new or varied licence to the buyer and the seller will need to revoke their licence. Where some of the water on a licence is traded permanently, the Environment Agency will grant a new or varied licence to the buyer and the seller will need to reduce their licence.

Where all the water on a licence is traded temporarily, the Environment Agency will grant a new or varied licence to the buyer and the seller will not be able to abstract under their own licence for the period of the trade.  Where some of the water on a licence is traded temporarily, the Environment Agency will grant a new or varied licence to the buyer and the seller will have to reduce their licence for the period of the trade.

Eligibility to trade

The buyer and seller’s water sources must be hydrologically connected – trades are therefore generally restricted to the same catchment or groundwater management unit.

Trades between groundwater management units (GWMU) in the same aquifer will depend on local circumstances and how the GWMU boundaries have been defined – these trades are likely to be complex and need more detailed assessment, potentially involving groundwater modelling.

There may be some scope for trading between groundwater and surface water depending on the interaction between them and how any abstraction impacts have been considered.

Transfer and temporary licences cannot be traded.

Safeguarding the environment and protected rights

The Environment Agency must not grant a licence or a licence variation that damages the environment, increases the risk of environmental deterioration or derogates protected rights.

The Environment Agency may not be able to allow trades of unused capacity on licences where a water body is at risk of deterioration or there is risk that a ‘designated site’ could be damaged.  The Environment Agency will maintain a seller’s protected right for the period of any temporary trade.

Licence conditions

The Environment Agency will aim to allow buyers to abstract under the same terms as the seller’s licence but there may be cases where it is not possible to do so. For example:

• there is less water available at the buyer’s abstraction point
• the abstraction purpose changes, with less water being returned to the environment, or at a different point or time, resulting in an unacceptable impact on the environment or existing abstractors
• the effects of the abstraction at the buyer’s location are different to those at the seller’s location

The Environment Agency may need to recover water for the environment as part of trade in line with the need to meet its environmental obligations – particularly to prevent deterioration in water body status. The Environment Agency may adjust the quantity of water traded to take account of differing loss factors arising from a change of purpose.

Justification of need

The Environment Agency will not view the offer to buy water alone as justification of need. The Environment Agency expects buyers to be able to justify their need for water in the usual way.  Where a trade relates to competition in the water industry the Environment Agency expects that a prospective supplier who intends to buy an abstraction right must be able to provide evidence of their intent to proceed with a proposal rather than it being purely speculative.  Such evidence could take the form of a scheme being an option in a water company’s water resources management plan.  The Environment Agency may impose a self-destruct condition on any new or varied licence arising from a water rights trade if it thinks that there is any uncertainty over whether the proposal will happen.

Environment Agency’s role in the water rights trading process

The Environment Agency’s primary role is to make decisions on any licence applications arising from water rights trades.

The Environment Agency will:

• provide information on abstraction licences which will help potential buyers identify where trading may be feasible – our water rights trading data on the Defra Data Services Platform will help to do this
• provide pre-application advice to buyers and sellers on how water rights trades need to be licensed and any likely environmental or other constraints
• aim to make decisions on licence applications arising from water rights trades quickly where trades are straight forward and are of low environmental risk

The Environment Agency will not:

• act as a broker between individual buyers or sellers
• take part in in any financial or other negotiations
• operate water rights trading ‘platforms’ or other brokering services which seek to match buyers and sellers – there is potential though for Regional Water Resources Groups or Water Abstractor Groups to help facilitate proposals for trades

Trading rules

The Environment Agency will continue to evolve its licensing policy around water rights trading to improve access to water while safeguarding the environment and existing abstractors. For example, we will investigate the desirability of establishing trading rules based on environmental risk with a view to speeding up decisions on licence applications arising from trades. It may be possible to pre-identify locations or types of proposal which need a lower level of scrutiny, for example, where like-for-like trades are proposed on the same reach of a level-dependent water body where there are no existing environmental issues. We will work with stakeholders to explore this further.

10.4.2  Water rights sharing

Licence holders who want to trade regularly on a short-term basis may be better served by pooling their licensed resource or building the trades into their licences so that they can take place without the need to obtain approval from the Environment Agency each time.

For example, a group of farmers in Lincolnshire have one licence which covers all of the abstraction points which provide water for irrigation to approximately 12 farms. They have set up a company which holds the licence, pays subsistence charges, provides abstraction records and which is legally responsible for compliance. The farmers have separate legal and financial arrangements which allow them to allocate water between themselves (within the authorised licensed quantities) on a seasonal or annual basis. This provides maximum flexibility for the abstractors and enables quick decision making.

The Environment Agency will work with abstractors who want to do this.

10.5  Dynamic catchment management

We want to move more towards near real-time management of water resources. We want to enable better access to water when it is there, and to better protect the environment when it is not.

There needs to be significant investment in monitoring so that it enables a more granular understanding of abstractions from, and discharges to, the water environment.

Abstraction licences need to be flexible enough to allow for water to be taken when it is there, particularly at higher flows.

In the short term, we want licence holders to review their water needs and to look at whether any variations to licences would help improve access to water, for example, by applying to change a licence with a ‘winter only’ condition to a licence allowing abstraction all year (within the same overall quantity limits). This would enable them to improve access to water during high flow events which are forecast to increase as climate change brings fewer rainfall events but with a greater intensity.

In the longer term, we will look at how abstraction licensing policies may incentivise this change and how dynamic catchment management may be incorporated into the licensing system.

Data needs to be made more accessible, and information communicated more effectively so that abstractors can make informed choices around when to abstract water.

The Environment Agency has invested in its water resources licensing digital service so that it has a feature which enables e-alerts to be provided to licence holders (and their operators) to:

• prepare for hands-off-flow conditions being activated
• inform them when they have been activated
• advise them when they have been lifted

We want to continue to invest in the water resources licensing digital service so that it can show recent actual river and groundwater levels compared against licence conditions and, in time, provide forecasts.

Regional groups could consider and investigate if there is potential for using and applying technology so that under certain flow regimes abstractors can be more efficient at capturing water available. Pilot schemes for all abstractions in a catchment to be on telemetry could help maximise the water available.

Next: 11. Expectations of Regional Water Resources Groups