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Whether the farmer is paid for the unused water, trades for the water or given a gold star for his book is beside the point. The point is to give an incentive to not use all the water allowed; otherwise you are trying to count on the goodness of people to not hord or waste water. It is the same problem with government budgets, if you don't use all the money budgeted this year then you risk getting your budget reduced next year. Get rid of the use it or lose it and change it to use only what is needed.