Flashback: 21--27 May

A year later and still worth a read...

Public trust vs markets -- markets can save the environment at lower cost. On a related note, well-meaning destruction discusses how environmentalists who reject markets (ITQs for fish) endanger the vary fish they want to protect.

Israeli water technology -- part 1 -- lots of great technology won't lead to good outcomes if you have bad water policies (subsidies to farmers) or take water from your neighbors (Palestinians). Related: Poll results -- transnational waters discusses the potential for conflict or cooperation over mutual water resources. Nationalist aggression impedes cooperation.

Friday party!

Crazy weird, via DW:

Can we end hydraulic mining?

I wrote this op/ed for the LA Times. It was rejected because "the column is too broad and some parts not explained enough for a mainstream readership... you don't have to 'dumb it down' but next time, it might work better to pick a narrow issue in the news and focus just on that." I disagree, since ALL the narrow issues in California (and elsewhere) are distorted by these factors. What do you think?

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I grew up in San Francisco and Los Angeles in the 1970s, spending time in each city as I shuttled between divorced parents. In San Francisco, I used the garden hose for hydraulic mining in my back yard -- blasting away soil as I searched for treasure. In Los Angeles, I played in the lawn sprinkler on hot days -- shooting water into the air for hours at a time.

I remember the 1980 vote over the Peripheral Canal, which was NOT a good thing. Years later, I created the ``Peripheral Canal" entry in Wikipedia. Many people had forgotten the North-South acrimony over the division of water. Not me.

In fact, it seems like we are seeing more conflict than ever. And why it that?

Money.

Imperial Irrigation District doesn't want to pay to restore the Salton Sea its farmers have polluted. Farmers don't want to pay the Bureau of Reclamation the costs of building the Central Valley Project. The Los Angeles Department of Water and Power is trying to minimize its spending on stabilizing the dusty remains of Owens Lake. Environmentalists don't want to pay for their dream of restoring Hetch Hetchy. Citizens of Sacramento and Fresno don't want to pay for the water they use. The list goes on, but every example shares a common trait: a desire to pay costs with other people's money and get water from other people's supply.

Californians have a long tradition of getting something for nothing where water is concerned. Hydraulic miners in the Gold Rush could claim as much water as they could shoot from streams onto hill sides. Suburbanites got cheaper water because urban neighbors had already paid for infrastructure. Farmers shifted dam costs to taxpayers who paid for "public interest" flood control and recreation.

Those cheap water tricks worked pretty well while water was abundant, but growing demand eventually overwhelmed natural supplies. Scarcity has become the new normal: we now get less water for more money, time, lawsuits, and other forms of full employment for politicians, engineers, lawyers, lobbyists, bureaucrats and economists. (Remember CalFed? It cost $5 billion and didn't fix the Delta.)

It's time to recognize that times have changed. Santa Claus is not going to remove half the State's population, restore dry rivers, fill irrigation canals, or replenish groundwater. We have to set up a system that allocates our scarce water with minimum friction and maximum social benefits. I suggest the following:

First, every water diverter/extractor should pay an extraction fee in proportion to local water stress. That means a high fee in arid and heavily-populated Southern California and a low fee in sparsely-populated, wet Northern California. The fee will encourage users to find ways to use less water. Such fees have driven Israeli farmers to radically improve their water efficiency.

Second, use fee revenue to pay for monitoring and management of surface- and groundwater supplies. Many states and countries have transparent and uncontroversial systems for maintaining their water sustainability.

Third, reorganize water rights to protect minimum environmental flows, retire paper rights, and facilitate water exchanges within local watersheds or -- with appropriate protections -- across watersheds. Australia has been largely successful in making these changes over the past ten years. Such trade will ensure that adequate water flows to urban taps, California's best farmers stay in business, important environments can thrive, and businesses get the reliability they need.

Finally, either require that state and federal infrastructure users pay their remaining debts or bankrupt and shut down those systems. Debt overhang encourages managers to continue to run their inefficient systems under the mistaken hope that users will eventually pay. That's a forlorn hope -- under current rules -- for the Central Valley Project. The State Water Project is in better fiscal condition but subsidies from Southern California cities to Central Valley farmers encourage wasteful use of scarce water supplies.

Bottom Line: These actions will restore reality to California's water system by restraining demand to sustainable supplies, ensuring that users pay for the water and infrastructure they use, and facilitating the transfer of water from historical users whose claims depend on decisions made by their great-great-granddaddies to contemporary users who can put California's water to its highest and best use.

The US is to NL as MX is to the US

Many people in the US ask me what life in the Netherlands is like. It's definitely about bikes and canals, and not about hookers and pot, but those examples don't capture the underlying feeling, culture or institutions.

So that's why was pleased to realize (while visiting Washington DC) that the difference between Dutch and American life is similar to the difference between American and Mexican life.

On corruption, the Dutch are better than Americans who are better than Mexicans. Compare them on crime: the high murder rate -- related to US drug policy -- in Mexico or crazy theft in the US vs. Dutch peace (Germany is similar; their police fired 85 bullets in 2011). From a different perspective, you can look at the murder rate per 100,000 people: 0.87 in the Netherlands, 4.8 in the US and 18 in Mexico.

On women, the Dutch are better than Americans who are better than Mexicans. Compare Dutch women (happiest in the world) to abortion and birth control debates in the US to the playboy girl who "facilitated" debate among Mexican presidential candidates.

On a more quantified level, consider these countries' Inequality-adjusted scores on the human development index (an index that balances economic output with quality of life): Netherlands at 0.85, the US at 0.77, and Mexico at 0.58.

But there are also some good -- or interesting sides -- to visiting or living in a less-developed country. Among them are more adventures, more open people, better shopping opportunities, and so on. These advantages are what attract me to visit and explore different countries, but they are not necessarily good for quality of life, i.e., quality of health, social systems, environment, economic value for money, and so on.

Bottom Line: The NL is more developed than the US, which is more developed than Mexico, but it's always useful to compare, understand and borrow good ideas from others when trying to improve our lives and the policies that affect them.

Thanks cyanobacteria!

I bet you didn't know that cyanobacteria are not just responsible for the algae blooms that choke waters and kill life, but also for the oxygen we breathe? Well, they are, so keep an eye on this little sucker, the original photosynthesizer that's outlived us by several billion years.

(Oh, and it's also the source of natural blue-color dye :)

H/T to CD, for her birthday :)

Water pricing and metering

I wrote this for a website two years ago, but it was never posted. Sound right?

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"Water is a gift from God." ---Argentine State's Attorney

"Yes, but he forgot to lay the pipes." ---Olivier Barbaroux of Vivendi

If you drink water from your own well or divert it from a neighboring river, then you can stop reading.

Everyone else should read on.

We pay for our water because we need to cover the cost of getting that water to our taps.

Those costs are fixed and variable.

Fixed costs are the costs of building dams, aqueducts, treatment plants and pipes. They are the salaries of the people who install and maintain equipment, answer the phones and make sure that you are paying your bill. For most water agencies, 70-80 percent of total costs are fixed. That means that they do not go up or down with the volume of water sold.

Variable costs do fluctuate with delivery volumes. There are costs from the energy it takes to run pumps and machines, the chemicals that go into water treatment and the costs of some staff.

The interesting thing is that there is not often a cost of water. That's because many water agencies have the right to divert water from a river or lake or pump it from underground. San Francisco doesn't pay a penny for the water it gets from Hetch Hetchy reservoir. It has the right to export that water from the Sierra Nevada because it has an agreement with the Department of the Interior.

So these costs need to get paid.

Our water bills used to be simple. We paid a flat charge, per month or quarter, and used as much water as we wanted. The goal was cost recovery, not water conservation. There was plenty of water, and revenue paid for fixed and variable costs.

Meters made an appearance when water conservation started to matter, and we wanted to do two things: Charge people for what they used and encourage people to use less.

Water meters always reduce water use.

People also like them because heavy water users (water hogs) use more.

Meters also made it possible to charge people in two parts: a fixed charge per meter and variable charge for the volume of water used.

There are three ways to charge for water volume:

1. Uniform pricing charges people the same price per unit, regardless of how many units they use. This pricing is similar to the price we pay for gasoline.
   
   
2. Decreasing block rates mean that people pay less per unit, the more units they use. This =pricing is similar to the price we pay for cellular phone plans. Buy more minutes, pay less per minute.
   
   
3. Increasing block rates mean that people pay more per unit, the more units they use. Ironically, we do not see this kind of pricing outside regulated (water, gas, electric) utilities.

There's lots of economic theory behind these pricing regimes, but the basic idea is to encourage use with decreasing block rates and discourage it with decreasing block rates. Those incentives generally work, but they can be weakened by:

• Blocks that are "too wide," so that people do not face a higher or lower price point when they are deciding how much to use.
• Blocks that do not "step far," so that the change in price is too small to notice.

Now here's the tricky part. In systems without meters, the flat monthly charge would cover both fixed and variable costs. When meters were introduced, it was easier to match fixed costs to fixed revenues, and variable costs to variable revenues. That would ensure that the utility would break even as consumption (or costs) rose and fell.

Note that municipal water agencies decide how much they want to charge. Investor owned private companies have their prices regulated by a Public [sic] Utilities Commission that's part of the state government.

Unfortunately, lots of people wanted to use variable prices to influence water use. That meant that the share of variable revenue had to rise, so that, for example, a utility may get 80 percent of its revenue from variable charges.

It's not hard to see that these weights would lead to mismatches between costs and revenues.

Let's say that a family pays $100 per month for water: $20 fixed and $80 variable. If they use 50 percent less water, then their bill falls to $20 + $40 = $60. Unfortunately, the utilities costs fall by $10, from $80 fixed and $20 variable to $10 variable. So the utility has a revenue shortage and then -- often -- asks for price increases. This often annoys customers, since they end up facing higher prices after using less.

But this is the water business, and nothing is ever as straightforward as it seems.

I suggest that you get your water bill and try to understand what you are paying for, why it is that amount and how those costs may change -- or not -- with your behavior.

I'll be tweeting at EU's Greenweek

I'm getting tired of hearing too many silly ideas at the conferences, so time for retribution.

Follow #greenweek or look to @aguanomics...

A libertarian constitution

In order to form a more perfect union, I propose this:

Article 1: Don't do shit if you don't want to, not because it's wrong.

Article 2: Harming someone is not allowed because that person gets to decide what they want to do or have done to them (see Article 1).

Article 3: Damaging collective goods is not allowed because everyone gets to decide what they want to do or have done to them (see Article 2).

Did I miss anything?

Monday funnies

I wonder what happened next to the sitting guys... (where is this?)

Conservation subsidies and agricultural water use

Macarena Dagnino-Johns wrote this guest post based on her article analyzing the effectiveness of subsidies for water conservation programs in the Rio Grande Basin in NM.*

Water conservation programs are under debate in areas where water is scarce, irrigation is significant, and food security is compelling. Subsidies for drip irrigation increase farm income, raise the value of food production, and reduce the amount of water applied to crops. However, our research findings in the Rio Grande Basin in New Mexico produced the unexpected result in that water conservation subsidies that promote conversion to drip irrigation can increase the demand for water depleted by crops. Our analysis showed that where water rights exist and water rights administrators need to guard against increased depletion of the water source in the face of growing subsidies for drip irrigation.

We used a model that analyzed five drip irrigation subsidies (a capital subsidy for converting from surface to drip irrigation that varied from 0% to 100% in 25% increments) in two water supply scenarios. For each run, income-maximizing water applications and water depletions were allocated among crops and irrigation technologies.

The results show that the shadow price will vary considerably according to the water conservation subsidy level and water supply scenario. A higher conservation subsidy raises the scarcity value of water. A lower water supply scenario also raises the shadow price of water. For example, when there are under base (full) water supply conditions, the shadow price of water is zero with no drip irrigation subsidy. However, that value gradually increases US$37.57 per 1000 m3 as the drip irrigation subsidy grows to 100%.

The substitution of drip for surface irrigation in the face of a rising drip subsidy increases crop yields, raises profitability of farming, and raises crop water depletion (ET) per unit of land irrigated. This growing economic value of depletable water with a rising drip irrigation subsidy occurs because water administration in New Mexico protects water rights by guarding against increased river depletions with alternative policies... water rights in New Mexico are based on the right to consume water, not the right to apply it.

Our findings suggest the need for continued work on the definition and implementation of the term "water conservation" since water conservation subsidies do not provide farmers with economic incentives to reduce water depletions and therefore are unlikely to make new water available for alternative uses.

Drip irrigation is important for many reasons, including greater water productivity, higher crop yields, and increased food security, but it cannot be relied on to save water depletions when considered from a basin scale.

What actions could be taken by water administrators to guard against increased water depletions in the face of growing drip irrigation subsidies? The right to an upper bound on ET associated with a water right could be posted in a central place available for all irrigation water rights holders and all water stakeholders to see. With greater crop ET induced by a subsidy to increase irrigation efficiency, farmers would be allowed to take any action to respond to the greater profitability of drip irrigation as long as total crop water ET did not increase.

Bottom Line: Water conservation programs should also observe crop water and land use patterns that can be altered in the face of a drip irrigation subsidy and maximize farm income while protecting existing formal or informal water rights holders.

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* The article -- “Economics of Agricultural Water Conservation: Empirical Analysis and Policy Implications in the Rio Grande Basin, NM, USA” -- is available here.

Macarena Johns worked at Unesco-IHE as a researcher/lecturer and assistant program coordinator for the MSc program in Water Management. She holds an MA in Agriculture and a BSc degree in Geography. Her main interests include agricultural policy, food security and irrigation water management systems. During her time at Unesco-IHE, she actively engaged international organizations and multiple partners in the coordination of projects and teamwork related to the MENA region and WWF 6. She also instructed on-line modules in "Integrated River Basin Management, (IRBM)” with focus on strategies for the optimal use of land and water resources. After the World Water Forum 6, she is looking for a job as a researcher assistant or as a project officer in human geography, land grabbing, rural development, or similar.

Flashback: 14--20 May

A year later and still worth a read...

Free stickers aren't free -- the opportunity costs of "green" subsides.

Can we blame Goldman Sachs? One year later and no sign that they caused jumps in food prices (they certainly benefited from them).

On a related note, I offer this opinion on players in the financial crisis, some perceptive words that I said to a friend in a moment of pique:

Yes, we know that the guys from Goldman Sachs are certified cunts; the Germans are just tight.

My solution? Same as a few years ago:* Declare bankruptcy, pay 20-30 cents on the dollar/euro, and let sustainable finance get to work -- with more experience on what happens to foolish lenders.

Realpolitik means killing your own people -- still happening in Syria :(Economics is often called The dismal science by those who oppose its insights. The name was given to an economist who opposed slavery.

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* Read this, this and this.