How to Fix the Delta

Much of California's water supply passes through the Sacramento-San Joaquin River Delta before flowing to San Francisco or getting pumped to the Central Valley and Southern California for agricultural and urban use. This pumping is not sustainable, however, because it leaves too little water for the local and downstream ecosystems -- threatening fish and wildlife species.

Everyone (urban, enviro, farmers) claims rights to that water. Since there is not enough to go around, they all sue each other. These lawsuits have been happening for over 25 years and are not going anywhere. (Yesterday's post on how bureaucrats will not solve the problem.)

Here's how I would "fix" the Delta:

1. Assign property rights to all those who claim them. Some claims are spurious, but many are valid. Rights are awarded in order of seniority.
2. Establish minimum environmental flows for the Delta
3. Allocate "rights" to water above the minimum according to property rights, e.g., if "excess water" is found to equal 80 percent of rights, holders of the weakest (most recent) 20 percent of rights get no allocation.
4. Allow all holders of rights to sell to all comers -- urban, agricultural or environmental -- in auctions.

This market solution is obvious to anyone conversant with economics and auction theory. Can it be used? Of course! Will it be used? Perhaps. Why wouldn't it? Because one group or another thinks it has the political and legal power to defeat others and get their way. Bold and unrealistic.

Bottom Line: The easiest way to "fix" a dispute over a private good* (e.g., water) is by using markets to reconcile claims.

* The economic definition of a private good is a good that no two people can use simultaneously and a good from which others can be excluded from using. Although some may argue that Delta water is a common pool good (nobody can be excluded from use), I don't think anyone can pull substantial amount of water without others noticing...

WaterSense Homes?

More bureaucratic interventions or a helpful push towards sustainable living?

These draft guidelines from the EPA are meant to reduce home water consumption by 20 percent.

Although I appreciate the utility of "guideline" technical specifications -- something that home buyers and sellers can focus on -- I am slightly worried that "one-size fits all" specifications are not going to maximize water savings, i.e., conservation measures that work well in some places but not in others.

Further, these specifications are unlikely to result in retro-active refitting of homes (where most residential water is used :), so they miss about 99 percent of the market.

OTOH, I can see that industry would like these specifications, because they allow "cookie-cutter" implementation that doesn't require much planning or thought. Hmmm...

I prefer the economists' solution -- raise prices and then let people figure out the best ways to save water.

Bottom Line: Bureaucrats can regulate but don't count on them for "planned innovation."

Deforestation Update

[Ahmed Djoghlaf, executive director of the United Nations Convention on Biological Diversity told a news conference in Manila on 20 June 2008] the world was losing around 13 million hectares [32 million acres] of its forest cover every year, about the size of 36 football fields a minute.

About 95 countries have totally lost their forests, he said. In Southeast Asia, forest fires destroyed about 10 million hectares [25 million acres] between 1997 and 2006.

More trees were being felled due to shifting agricultural practices, illegal lumber trade and large-scale mining, he said. [Reuters]

Why is this? Because cut trees are more valuable than standing trees, e.g.,

Thirty years of satellite imagery of Papua New Guinea's rainforests has revealed destruction on such a rapid scale that by 2021 most accessible forest will be destroyed or degraded, a study released on Monday [02 June 2008] said.

Papua New Guinea has the world's third largest tropical rainforest, after the Amazon and the Congo, and its government is seeking compensation for conserving its forests as carbon-traps to help reduce global greenhouse gases...

Government officials may claim that they wish rich countries to pay them for conserving their forests, but if they are allowing multinational timber companies to take everything that's accessible, all that will be left will be lands that are physically inaccessible to exploitation and would never have been logged anyway... [Reuters]

Bottom Line: If environmentalists humans want those trees to be there in the future, they have to establish secure property rights over trees and then pay for their preservation (prior post).

Drip versus Flood

I'm neither farmer nor hydrologist, but I thought drip irrigation was always better than flood irrigation for growing crops. (See also yesterday's post on not-so-wasteful "wasteful" water management.) But that's not the case according to this email:

I find that the garden I do use drip on, I have to water a lot of more often and I don't think the plants seem as strong. Right now from the stage of planting seeds, I am watering every 10 days and from this stage on I can get away with irrigating every 21 days and go into 30 or more days in August and September) without watering (although I am growing in clayey loam). On drip I need to water once a week, and that is with row covers, which hold in moisture and create a cooler environment. Part of my theory is that the plants tend to be deep rooted with flood irrigation and thus more drought tolerant, while drip irrigation encourages shallow root systems.

[snip]

I think soil type plays a significant role in the efficiency or lack of drip. For instance because I grow in clay/clay loam soil percolation is slow, and even on the drip, I need to apply water 24 hrs for deep soil percolation to occur and even then I don't get the same kind of root depth as on flood. (The flood irrigated fields cannot have too steep a slope or the water will move across too quickly and not enough downward flow to the root zone will occur.)

Also soil cultivation is very difficult with drip and for my heavy clay it is critical for plant health to be able to get in cultivate aerating the soil and preventing soil compaction.

Weed control is also more difficult because it makes it difficult for mechanized weeding and so requires tremendous hand weeding, manual labor.

Then there is the issue of salt accumulation. And when dealing with high TDS water, drip lines quickly clog and sometimes have to be replaced within a season.

Gophers also love to munch into a drip tape, don't know if that's by accident or what. I don't get gopher activity in the flood irrigated fields, I think because of mechanized cultivation and the fact that they get flooded out.

Bottom Line: It's all about cost and benefit. When water is cheaper, it's not too important to conserve it, but expensive water doesn't necessarily mean that the "best" irrigation method is the one that uses the least water. (Although drip-irrigated rice uses less water, it also has a lower yield.)

Acequias -- Community Irrigation

Irrigated agriculture has existed for thousands of years, and interesting institutional solutions have sprung up to deal with location- and community-specific water conditions.

In areas colonized by the Spanish, these organizations are called acequias (NM acequias association), and we can learn about sustainability from observing how they managed scarce water over the centuries, and how they are dealing with modern problems of water transfers, oil drilling, legal jurisdiction, etc.

I particularly like this description of the unintended consequences of "efficient" canal lining:

When the water is pulled out of the river and placed in canals within a mile (usually much less) along the valley floor and run through flood irrigated fields it is never really leaving the system, just being channeled and any excess is returned to the river via drains and groundwater recharge. This channeling mimics the flood plain of the river.... Also I think there is some evidence to support the idea that the lined ditches are not much more water efficient.*

I grew up on an acequia (ditch) that had all the characteristics of a small stream. It was lined the native Rio Grande cottonwood with native plants and foodstuffs, including onions, wild marijuana, berries, etc...you could even catch trout in it. A little microclimate existed along the ditch and as kids we spent our spare time in the cool, shady strip along the ditch.

When I was a kid up until my teens every spring people along the acequias in the valleys worked to clean the acequias readying them for the seasons water. Men and young boys dug them out and cleaned them and women along the way kept them the men fed and watered. It was a kind of social event and I remember the boys in high school talking about it and looking forward to it. It was also an opportunity for the girls to see what guys were good workers, you got to see them working with their shirts off, the guys would work in competition to impress the girls, you got to take them water or food that maybe you made (a chance to show off your cooking abilities)... it was a cultural ritual every spring in the north where the acequias still exist.

Then sometime when I was in college somebody decided it would be more water efficient and perhaps labor efficient to cement line the acequia. Within a few years all the cottonwoods died and eventually fell down, the plants along died and the acequia is little more than a dry, hot parched cement channel running through the valley with zero aesthetic appeal and probably significant evapotranspiration occurring with no significant natural habitat or wildlife corridors. And so died a cultural tradition on that acequia.

Bottom Line: Just because its old doesn't mean it's not useful.

* Canal lining concentrates water in one area by reducing seepage to other areas. The areas that capture more water through lining are better off, but the system as a whole may not be. This result shows up in the controversial lining of the All-American Canal, which hurts the Mexicans and environment but supplies cities near San Diego with "extra" water.

Can More Bureaucrats Save the Delta?

This article describes a good way to NOT fix it:

The report also recommends creating another government entity to oversee the delta, an idea that drew skepticism from Quinn. He said water contractors were concerned they might have less say over how much water they receive, even though they will be paying for most of the delta's improvements.

The new entity would decide how and when water would be exported to farmers and cities in Southern California and the San Francisco Bay area.

The idea of taking water-export decisions away from the state Department of Water Resources was supported by the grassroots group Restore the Delta, which includes delta residents, business leaders, farmers, fishermen and environmentalists.

This power grab by enviros will only lead to confusion and more deadlock (as if that were possible).

Bottom Line: Bureaucrats cannot fix shortages. Markets can.

Modeling Climate Change

Check out this excellent booklet [PDF] from MSRI.* The first half is the science of climate change; the second half discusses the mathematics of modeling CC. It's written for the lay audience. Why?

both mathematicians and climate experts will need to communicate with the public, with elected officials, and with the media in a way that emphasizes the robust aspects as well as the uncertainties of climate predictions. They should be frank and forthright about the complexity of the climate system and the limitations inherent in any approximation of it. To the extent possible, they should educate the public to the fact that even the best model will produce a range of possibilities, not a single “forecast for the future.” They should prepare the public to understand that the range of possibilities may change as the models improve and as we get new data about the Earth system. This will not mean that scientists are changing their minds or contradicting themselves; it is part of the normal process of science. The very real uncertainties in the projections of the future should not be allowed to obscure the fact that climate change is occurring and cannot be ignored any longer.

Bottom Line: We should all have some notion of how CC modeling works, if only to put our trust in it.

* Mathematical Sciences Research Institute. I used to work there :)

How to Reduce Water Demand

Start charging people for the water use:

Connor said he's found that pocketbook issues, not broader water concerns, tend to drive homeowners to start looking for ways to save water.

"It's the fear of the water meter," he said.

Water meters tend to encourage conservation. In the Citrus Heights Water District, for instance, where metered billing went into effect Jan. 1, water consumption has dropped 8.5 percent through May compared with the five-year average, according to district officials.

Bottom Line: We waste food at all-you-can eat places the same way we waste water at all-you-can drink water districts. First, charge for water use; second, charge more.

Sustainability Means Modesty

With respect to natural resources, consider this:

Roger Fouquet´s (2008) book Heat, Power and Light looks at the link between energy efficiency and consumption over more than 500 years.

The book shows that in the long run, efficiency gains associated with new technologies, tend to be gobbled-up by rising consumption - due to the declining price of energy services, and economic growth. Hence there appears to be a "race" between technology development and resource scarcity. Generally, the argument is that solutions will always appear - but this assumes that there is no limit to human ingenuity. Is this assumption maybe overly optimistic?

Although we are getting more bang for our buck from resources, our absolute level of consumption is still rising. This is not an issue for while the expansion (or reservoir) of resource supplies outpaces demand, but it is a problem when those resources (which include a healthy environment) start hitting their limits.

Bottom Line: Live well, live modestly.

Farming Salt and Fire

This story describes all the problems that Westlands farmers [Fresno county, California] are encountering: deeper wells, $1,000/AF water prices, a contracting local economy, high salt concentration on the soil, subsiding land, etc.

Bottom Line: Sounds like farming in Westlands is not profitable. Sounds like it is time to do something else. Cheap water led them there; expensive water will make them go away.

Hattip to AG

Paper or Plastic?

In this post, Kevin Dick comments:

Hmmm. Then I think we disagree on the role of economics in determining "waste".

First, assume that appropriate laws/regulations force the price of a bottle of water to fully internalize all costs. Second, assume that the water inside the bottle is exactly the same as what comes out of the tap (though I assure you, some tap water tastes pretty bad).

Some people may still be willing to pay the price here in Palo Alto (where the tap water tastes pretty good BTW). Maybe it really is more convenient for them. Maybe they think it raises their status in their local primate dominance hierarchy. Maybe some deep psychological need makes them feel happier when they drink from a fresh bottle.

Who are you or I to say those preferences are "wrong" if they're willing to pay the price? They are balancing the pricing signal from the market with their own utility function. IMHO, anything beyond that moves from the domain of economics to ideology.

While I agree with Kevin (I originally misinterpreted his "fully internalizes all costs" to mean "is now" price when he meant "would be" price.), and I acknowledge the problem of ideological pricing, I want to point out an important assumption: functioning markets.

Consider "buying the right to pollute" with one's fully-priced Fiji water. If the price is paid but the bottle still ends up in the Bay, does that mean that the "fully-internalized" price really is? It's my fear of such a market failure that leads me to use paper (not plastic), since the damage from a breakdown in the "plastic bag recovery market" appears higher to me.*

So -- if fully internalized means that the bottle is fully removed from the environment, we are set. This problem, btw, is the same as I pointed out with the carbon offset market. If I pay, but offsets do not occur (or would have occurred anyway), then my payment does not accomplish the advertised goal.

Bottom Line: Price is not a perfect signal (but it's often better than anything else), and it's even less-perfect in thin, new or opaque markets. "Getting prices right" involves more than paying retail.

* I am at heart a market fundamentalist, so take these caveats as a friendly suggestion to make something quite good even better. Government involvement (e.g., plastic bag fees or bans) is not automatically a good idea.

There Is No Water Shortage

That's the title of a piece I am working on for a big name magazine. (I am waiting to hear that it's going to press before I get all excited about announcing it.)

It's also the observation that Professor McKenzie makes about the "shortage" of water in Southern California. Listen to him discuss prices here.

My favorite line: "People say that the water shortage results from low rainfall in Southern California. That's funny -- it doesn't rain Mercedes, but we don't seem to have a shortage of Mercedes."

Playing with Our Future

via NYT:

The White House in December refused to accept the Environmental Protection Agency’s conclusion that greenhouse gases are pollutants that must be controlled, telling agency officials that an e-mail message containing the document would not be opened, senior E.P.A. officials said last week.

The document, which ended up in e-mail limbo, without official status, was the E.P.A.’s answer to a 2007 Supreme Court ruling that required it to determine whether greenhouse gases represent a danger to health or the environment, the officials said.

Is there an adult in the house?

Bottom Line: This pathetic attempt (among many) to bury or ignore environmental issues is only making things worse. A real leader (Republicrat or Demican) would pursue the People's interest instead of hoping that it will go away.

Sustainable Flooding

EDF complains (rightly) of bad flood-control policies and offers suggestions that mix science (don't build levees in floodplains) and economics (buy out people living in the wrong places; end national insurance coverage of building in floodplains).

I'm ready to go much farther than that, i.e., end all government support for flood insurance and levee maintenance. Second, require insurance of all property owners. Rates in safe areas will be close to zero; rates in dangerous areas will climb quickly. People will move to places that are safe (unless they are rich enough to be foolish). Since levees are expensive, flooding will be diverted to the least-valuable property. (The same policy makes sense on coasts.*)

Sure, this represents a "taking" from those people who live in subsidized areas, but they were the recipients of a "giving." What one hand can give, another can take away, and we are back to fair and square, zero net losses.

Bottom Line: Don't subsidize stupidity.

* Need more evidence? How about this from this report:

Coastal marine ecosystems have declined progressively in recent decades due to the growth of human populations and their demands on the marine environment and resources...

Shorelines have hardened, channels and harbors have been dredged, soil has been dumped, submerged and emergent land moved, and patterns of water flow modified.

Climate change is starting to add further stress, leading some scientists to predict the total disappearance of coral reefs in some parts of the world...

How NOT to Raise Prices

Down near San Diego, they are [NOT] considering radical price increases:

Currently, residential customers are billed $2.07 per thousand gallons ---- referred to as a "unit" ---- for the first 10,000 gallons of water they use every month, then $2.39 for every unit above 10,000.

Under the proposed changes, the first 10,000 gallons would be billed at $2.17 per unit if customers use less than 12,000 gallons that month.

If customers use more than 12,000 gallons in a month, they'll pay $2.48 per unit for the first 30,000 gallons, then $2.73 a unit for anything over 30,000 gallons in a month.

[snip]

She also said the new rate structure is a conservation measure designed to reward customers who keep their water usage below the 12,000-gallon mark each month, and to encourage those using more than 30,000 to cut back.

"We're really trying to encourage conservation," Eilers said.

She said the district knows that raising rates does not always translate into conservation, so the district will also be voting on a water conservation plan that includes penalties for wasting water under severe drought conditions when it meets on Monday.

First, consider the dramatic trivial price increase ($2.07 to $2.17 is five percent). Second, compare $2.17/1,000 gallons to the price of a bottle water (about $2 for one liter, I believe). Third, consider the "penalty" rate for water guzzlers -- a 15 percent bump. Fourth, 15,000 gallons/month now costs $32.65; under the new scheme, it would cost $37.20.

Bottom Line: Get serious! These price increases will NOT lead to water conservation. The reason that they do not lead to conservation is because they are laughable. Forget the water cops -- 100-200 percent price increases will lead to conservation!

Bottled Water in Canada

This survey is typical in one way but interesting in another:

In general, wealthier, higher-income households were more likely to get their H20 from bottles. While less than a quarter of households taking in $40,000 a year or less used water bottles in the home, a third of households in the $91,000 and up bracket had turned away from the tap.

[snip]

Of all the education types, households with a member with a university degree were the least likely bottled-water drinkers, with three out of four using tap water as the preference. This contrast to the higher income bracket was "very interesting," said Rothwell.

Bottom Line: Bottled water customers are rich enough to afford it (and dumb enough to choose it). Hmmm...

Hattip to JW.

Another Bureaucracy?

How to solve exacerbate water problems:

Key players within the global water community, including governments, non-governmental organizations, multinational corporations, and others, agree that collaboration and a unified approach is our only hope to solving the issue of freshwater sustainability. What we need is a truly global way to unite and guide everyone with a stake in the use and stewardship of Earth's freshwater resources. The practical challenge is to harness different efforts and viewpoints within a cohesive, consensus-oriented approach that will quickly gain global recognition and support.

Having begun along parallel but separate pathways, we [The Nature Conservancy, the Pacific Institute, and the Water Stewardship Initiative] are now working together as the Alliance for Water Stewardship to define core principles and structures needed to develop an inclusive global freshwater stewardship scheme. We envision a process of delineating the voluntary standards that will bear the weight of significant global consensus in driving responsible freshwater stewardship.

Bottom Line: We don't need more alliances. We need market forces. Do you see an international donut alliance? No. Why? Because donuts are allocated by markets, around the world. Save us from bureaucracy, NGO-speak, summits and guiding principles....

Mayoral Water

Straight from Grist:

The U.S. Conference of Mayors passed a resolution Monday to phase out city spending on bottled water. "Cities are sending the wrong message about the quality of public water when we spend taxpayer dollars on water in disposable containers from a private corporation," said San Francisco Mayor Gavin Newsom, adding, "The fact is, our tap water is more highly regulated than what's in the bottle." Millions of barrels of oil go into plastic-bottle manufacturing, and cities spend some $70 million annually on bottle disposal.

Though the new resolution is not binding, it received strong support, and more than 60 mayors across the country have already canceled bottled-water contracts.

The American Beverage Association is entirely unamused by the trend. "We believe that common sense will prevail when mayors return to their communities," says the ABA's Kevin Keane, "as most recognize more pressing challenges are facing their communities than concerns about a healthy water beverage."

Did you get that last bit? "more pressing challenges... than concerns about a healthy water beverage." Does this mean that there are more important things to worry about than having healthy water or that there are more important things to worry about than reducing city purchases of bottled water?

Bottom Line: Bottled "healthy water beverages" are a waste of money and resources that harm the environment. Just as well that those mayors have decided against providing such "beverages" to employees for free. People should at least pay if they are going to destroy the environment!

Sweet Everglades

The Wall Street Journal reports that:

The state of Florida, stepping up its efforts to restore the Everglades wetlands, offered to purchase 300 square miles of land now used for sugar-cane production for $1.75 billion from U.S. Sugar Corp., effectively moving to shut down the largest grower of the crop in the U.S.

For those of you who do not know, US sugar producers are not only coddled behind some of the most protectionist farm supports in the country, but they also occupy coastal land that should be left as wetlands and buffer zones for storm surges. (Also see this NYT story.)

This deal makes sense because the land is worth more as an environmental zone than as a sugar plantation. (Of course, the government may still screw up, e.g., leasing the land for oil drilling...)

Bottom Line: This is great news. The sugar farmers get paid to shut down their uneconomical, environmentally-destructive business, and the government makes progress in restoring the Everglades.

Hattip to DS

Trade and Emissions

The Economist reports that fears of "offshoring pollution" and industrial shutdown from carbon restrictions are overblown:

Energy makes up less than 1% of the cost of making cars, furniture or computers. Even some energy-intensive industries, such as power generation, should not be much affected. Since they have no foreign competition, they could pass on extra costs to their customers.

Only a few industries—metals, paper, chemicals, cement and the like—are both global and profligate enough to be at risk. These accounted for just over 3% of America's output in 2005 and less than 2% of its jobs.

[snip]

A study sponsored by Resources for the Future, an American think-tank, has tried to describe how American industry would meet a carbon price, albeit one of just $10 a ton—much less than the European price of over €25 ($39). Based on economic modelling, it concludes that industrial output would fall by less than 1%. The hardest-hit industry would be metals, but even that would shrink by only 1.5%. Better yet, the damage could be offset by granting energy-intensive firms enough free permits to cover just 15% of their emissions.

Another study under way at the Pew Centre on Global Climate Change, another think-tank, sizes up a $15 carbon price using data on the past effects of rising energy prices on industry. It concludes that output would fall by 2% or less in 80% of cases. Paper and glass would face a bigger contraction, of 5%. Still, even the most vulnerable industries would not suffer the Armageddon that lobbying groups are predicting.

That is important, since it suggests that the politicians are over-reacting, and that their remedies may actually make matters worse. A carbon tariff, for example, would be hard to implement. Customs officials would either have to assess the emissions embedded in imports, an impossibly complicated task, or make arbitrary assumptions, a recipe for a trade war. Moreover, it would do nothing to protect exports of energy-intensive goods from cheap competition.

Bottom Line: Domestic permits and tariffs on foreign goods are too complicated, and carbon taxes are not. Carbon taxes should be introduced at a low level and increased gradually to give domestic industry time to adjust, foreign governments time to implement their own taxes, and everyone the opportunity to work towards the "optimal" tax. Taxes require the least control, calibration and intervention -- characteristics that will allow markets to reduce GHG gas emissions at the least cost.

Failing at Conservation

Sacramento-area residents without water meters use 50 percent more water than people in Los Angeles (who do have meters). This "waste" is a problem because it contradicts a conservation agreement made several years ago:

only one of the capital region's urban water agencies reported progress on all 16 conservation goals they promised to meet in a 2000 agreement. None completed every task, and collectively they fulfilled only about half the goals they agreed to meet by the end of 2006.

Environmentalists agreed not to fight planned Sacramento and American river diversions if agencies promised to conserve.

The promises included water audits of homes and businesses, landscape standards for commercial development, water meters and low-flow toilets, public education and other programs.

Specific conservation target numbers were not included, and no penalties were put in place.

Gee, voluntary goals with no penalties result in no progress, and people use more water when they do not have to pay for it. Surprise, surprise.

Meanwhile, San Francisco has raised its water prices (a bit), but residents only pay more if they use more water than in the prior year. This idea makes no sense (it does not penalize water wasters or reward water misers) except in the way it makes life easy for water managers. A sensible scheme (setting a quota based on number of occupants) would require that they start counting.

Bottom Line: Without price penalties, people will waste water, and their allotment of cheap water should be not be based on prior use but human existence.

Ocean Uh-oh...

via Yubanet:

New research suggests that ocean temperature and associated sea level increases between 1961 and 2003 were 50 percent larger than estimated in the 2007 Intergovernmental Panel on Climate Change report.

Higher temperatures mean water will expand more, leading to higher sea-levels and faster-flooding of low-lying areas.

Bottom Line: If you live near the sea, I suggest that you get your galoshes and life-rafts ready for bigger storm surges, greater erosion, etc.

SD Water Manager Fails

Ken Weinberg, director of water resources for the agency that delivers water to the San Diego region answered these questions:

This weekend, you’re taking a walk on the beach. And there’s a little lamp there. You rub it, and a genie comes out and says: Ken! I’ll give you three wishes about the world of water in California. So you can’t wish for world peace or anything. What are your three wishes?

Let’s see. A peripheral canal-type of solution in the delta. Large-scale seawater desalination. And efficient irrigation. Those are the three things, the key pieces to getting some certainty in long-term reliability in our supply in San Diego County.

We’ve talked about that a lot, the idea of outdoor water conservation. It has clearly been identified. And the solution is there. How do you get people to make that long-term behavioral change?

You have to make it easier for them to do it, you have to show them how and have the help out there. Those are the pieces we’re trying to put in place. We’ve been successful in indoor water conservation -- toilets, showerheads, washing machines. To make landscape conservation work, people need to know you can do things that still are aesthetically pleasing and have low water use. There’s a regulatory component we want to work on with land-use agencies so developments are doing things in an efficient way.

Almost a year ago, the water authority called on residents to save 20 gallons of water a day. Have they?

It depends on the month we look at. It’s really tough. When we looked at January, February, we were saving water. But we also had cool, wet weather. What we saw in March and April, the temperatures started to climb, and we started to eat into that amount we were saving. The rubber is going to hit the road in July, August, September. That’s when we’re going to know whether people are stepping up and using less water.

Notice how he walks around the elephant in the room -- and perhaps doesn't even realize it's there. All the "conserve conserve conserve" rhetoric will mean nothing if water is too cheap.

Bottom Line: There is no water crisis, there is a water management crisis. Raise prices!

Ecosystem/Biodiversity Conservation

Paul Ferraro wants to hear your ideas on the most important economics-related research questions on ecosystem/biodiversity conservation.

I ask because I am the lone economist (as far as I can tell from the draft participant list) that has been invited to participate in a workshop at University of Cambridge to identify the 100 key global questions in ecosystem/biodiversity conservation. The list will be published in Conservation Biology and may influence global research on conservation issues. Thus I’d like to make sure that key economic questions are on that list.

I have been charged with soliciting feedback from economists familiar with biodiversity issues, and I have contacted about three dozen economists so far, but I realized that almost all of them are academics in high-income nations. I don't have broad connections to economists working in low and middle-income nations, but think their feedback would be valuable.

If you or their question(s), or a variant thereof are used, your name and organization will be cited in the supplementary material as the source for the question. Not exactly a citation, but at least some recognition. The deadline for submissions is July 1.

I recognize this is short notice. There is no need to put a lot of time into crafting a well phrased question. One question is fine, but people are welcomed to send me more.

Thanks in advance.

Best wishes,
Paul

p.s., examples, precise and imprecise, of some questions posed related to economics:

• Under what conditions does poverty reduction reduce deforestation and other anthropogenic ecosystem pressures?
  
• Is the net effect of urbanization positive or negative for ecosystem conservation?
  
• Is widespread global economic growth incompatible with maintenance or expansion of ecosystems with full complements of native species and ecosystem functions?
  
• How much nature is enough?

My question: "How do property rights and/or institutions directly affect primary resources (wood, water, fish) and indirectly affect biodiversity?"

Leave your ideas here.

Water for Peace?

Via waterwired, we see some imaginative ideas for redistributing water in the Middle East. The plan relies on some dodgy ideas (piping water from Turkey to Syria, Israel, Jordan and Palestine), and some hopeful politics (withdrawing from the Golan, etc.).

I think these ideas are simultaneously short-sighted and too ambitious. Political negotiation will probably lead to an agreement that strays from economic or ecological reality. (SE Turkey's water projects are already a boondoggle that have failed to bring prosperity to poor people -- mostly Kurds -- in the region.)

Bottom Line: Rather than rely on command and control water infrastructure projects, I suggest that the Middle East secure peace through trade -- of water, agricultural goods, people, etc. -- since trade allows people to use their imagination to seek profit by working with others.

Water Subsidies to Ag

NH says:

The problems regarding pricing are compounded by the subsidies, especially for agriculture in the west. I have seen one [1997] study [JSTOR] showing that water subsidies for irrigation alone amounted to $4.4 billion per year. Do you know of any more recent studies?

Note that subsidies are either direct (delivering FREE water below cost of DELIVERY) or indirect (selling water that could be used elsewhere, i.e., WATER itself is valuable). Both result in the same problem -- misallocation of water.

Bottom Line: End water subsides and allow market forces to divert water left after an initial, human rights allocation. With price, water will end up at the highest and best use, and Society will be better off.

ps/I recommend the paper [non-JSTOR PDF] for its thorough discussion of water issues and reams of statistics such as these:

• Vaux (1991) predicts that global warming will reduce California snowpack by 20-40%, result in early runoff and increased scarcity in summers. He was basically 15 years ahead of everyone else.
• The energy requirement for delivering irrigation water for corn is 1.5 times all the other energy required to grow corn.
• Americans use 400 liters/capita/day (LCD) for household uses but average per-capita withdrawals (for agriculture, energy production, etc.) is 5,100 LCD. The figure for China is 1,100 LCD.
• The total subsidy for infrastructure that moves and distributes water is $980/ha-yr ($390/ac-yr). This figure does not include the indirect subsidies of giving agriculture preferential (and free) access to water.
• Farmers in Mexico pay 11% of the cost of their water; farmers in Pakistan and Indonesia pay 13% of that cost. No wonder they grow low-value crops.

Florida

This article reviews the impacts of global warming on the environment in Florida and the actions that Floridians are (not) taking to "fix" things. It's hard to tell which state will suffer the most from global warming, but Florida has to be near the top of that list.

Religious Environmentalists

The Sierra Club looked for one group in each state:

"This report demonstrates that the call to care for the earth comes no matter what one's faith background is," said Lyndsay Moseley, of the Sierra Club's Environmental Partnerships Program. "We are inspired by the faith community's leadership in working to protect the planet, and this report is our way of saying "thank you" to the many people of faith working on creation care initiatives across the country."

For example...

• The Catholic Dioceses of Pueblo and Colorado Springs, Colo., whose Bishops spoke out in defense of a polluted creek.
  
  
• St. Mark's Presbyterian Church, a Tucson, Ariz., congregation engaging in and teaching about water stewardship and conservation.
  
  
• The Islamic Environmental Group of Wisconsin, which is engaged in helping mosques and Muslim families reduce their carbon footprint.

Bottom Line: Religion and environmentalism share several common features -- concern for one's role in a larger existence, a desire to "do the right thing" and a willingness to sacrifice one's own interest for the greater good. They also (occasionally) share a dangerous notion that they are true believers among the heathen, which is not conducive to progress.

George Carlin, RIP

George Carlin has died. In this video, he takes apart the environmentalists, i.e., "And the greatest arrogance of all: save the planet. What? Are these fucking people kidding me? Save the planet, we don't even know how to take care of ourselves yet." [Transcript]



Thanks for being with us for a little while, George.

Drought in the Southeast

Water Crunch has a cool animation that allows you to see how SE US states have moved from no drought to drought over the past year or so. Check it out.

DC Follies

I came to DC to take a "vacation" after finishing the PhD. I wanted to learn how life works in our nation's capitol. Here's one story.

I met someone who worked for a conservative republican.

"Oh, what type," I asked.

"Fiscally and socially conservative."

"Right -- does s/he support smaller government, then?"

"Oh yes."

[Conversation continues...]

"I'd love to meet your science staffer to discuss water issues."

"You don't want to meet him. All he cares about is writing reports that justify more jobs for the federal project in the district."

"Wait, I thought you said that your boss is a fiscal conservative."

"Oh yes, s/he's against more spending -- except in the district."

"Well, how does that work? Doesn't s/he vote more money for others' projects to get more jobs in the district? You know, logolling."

"What's logrolling?"

Bottom Line: In the immortal words of Bruce Yandle: "I hate all subsidies except those that come to me." DC is about divvying up the pork. In the process of robbing Peter to pay Paul, a lot of that money supports the DC crowd.

There is No Energy Shortage

Listen to this excellent podcast where Russ Roberts and Don Boudreaux, professors at GMU* discuss and dismiss the idea that we are "running out" of energy. They spend a lot of time on the humans' ability to adapt to changing supplies of resources and conditions.

---

Digression: This podcast gives me a good opportunity to clarify the difference between natural resource and environmental economics and the position I take in each. (Blogs do make you clarify things!)

Water, oil, fish, timber and other natural resources are used as inputs to our lives. If they are allocated by market forces, their price will rise when demand exceeds supply. If property rights are imperfect, it's more likely that they will be overexploited (e.g., fish in the open sea, water in an unadjudicated aquifer), and the resource will be wasted. (This is where I add the interesting notion that a monopolist is most likely to preserve a resource, because a monopolist (or cartel like OPEC) is interested in high prices.)

The outputs of our activities end up in the environment, which includes water, air, land, etc. If the environment is which we live is spoiled, we suffer. The most important concepts in environmental economics are externalities, i.e., the spillover effects of an activity into another area of life. Pollution is considered an externality.

Note that water has resource (we use it) and environmental (we live with it) characteristics.

---

Roberts and Boudreaux tend to dismiss the current hysteria for action on global warming. First, because of skepticism; second, because they fear that the government will make a mistake. (This stand echoes recent debates in this blog.) Although I agree with their fear of government mistakes and special-interest grabs in environmental legislation, I favor ending stupid ideas (subsidies for coal) and advocate a carbon tax/rebate, which is transparent and cannot be diverted into "carbon pork" spending.

Bottom Line: We do not have resource problems, we have resource pricing problems.

* I am a visiting scholar at the Mercatus Center, which is affiliated with GMU.

Drought Busters Fail

Water managers usually respond to drought by calling for voluntary conservation. When that fails (as it always does), they impose mandatory rationing and send out water cops:

To enforce the stiffer rules and penalties, the DWP will expand its "Drought Busters" team to 20 employees. These inspectors respond to called-in complaints and cruise the city in search of water wasters.

Since the Drought Busters were brought back in October, they have responded to 1,200 reports of water waste. So far they have issued warnings and guidance on conservation.

But some residents question whether inspections and fines are necessary - especially when the DWP inspectors make around $65,000 a year.

Besides being a waste of money, these water cops are just about the worst way to get people to save money.

Consider gas. Do you see any "gas conservation cops" out there, giving tickets for idling, low tires, driving to the store too often, driving an SUV, etc.? No. Why? Because high prices lead people to conserve.

Bottom Line: If you want people to use less water, raise the price. Honest -- it works!

Paranoia

A lot of people are concerned about having clean water. For example:

this lady warned me not to eat ANY vegetable that had been grown with river water. She apparently had seen a report on CNN that warned Americans to stop eating vegetables grown with river water anywhere in the US, didn't matter what river it was? What's that about?

I consider water quality to be a dark art best left to the scientists, but many companies are out there trying to make one source of water look dangerous so you will buy their source of water.* This unethical conduct in the name of business profits bothers me.

Bottom Line: Credence goods (you have to believe they are good/bad for you) are especially vulnerable to manipulation. Water is one of them and there are many con artists willing to take advantage of you.

* I drink tap water in most places but not in developing countries. Most river water has traveled through someone's toilet (e.g., San Diego's water has been through 12 municipal water systems), but that water is treated to be potable.

Water as a Human Right

I ran across this post and how the US/Canada opposed the inclusion of water as a "human right" for fear that it would reduce the effectiveness of NAFTA. Weird.

There's plenty of water if "human rights" are limited to x liters/day, but not if everyone has a "right" to unlimited water.

Bottom Line: Yes, we have to charge for water, even if it's immoral.

Does Water Demand Slope Down?

WH sent me this inquiry:

I don't have is really concrete examples of communities in the US or elsewhere that have demonstrated how the proper pricing directly impacts usage. I've certainly seen plenty of examples of conservation rates being applied and maybe correlated to reductions in consumption but these are generally used in conjunction with other conservation initiatives and it can be hard to parse apart how much of water use reductions result from pricing versus sprinkling ordinances, high efficiency toilet rebates etc. If you could point me in the right direction I'd be grateful.

In section 3.13 of my dissertation, I discuss how 100% wholesale price penalties were effective in reducing demand from retail water agencies. I did not control for the simultaneous effects of (in)formal conservation, which requires econometrics. These papers do control for those effect, isolating and measuring price-elasticity, i.e., the percent reduction in water use that follows a one-percent price increase:

Nataraj, S. (2006). "Residential Water Demand: Estimating the Price Elasticity of Water Demand in Santa Cruz" Working Paper.

Mansur, E. T. & Olmstead, S. M. (2007). "The Value of Scarce Water: Measuring the Inefficiency of Municipal Regulations" Working Paper.

Does anyone have other examples from the academic or popular press?

Note that water managers held that price elasticity was zero (i.e, people do not respond to higher prices) until the early 1990s. Now they believe that it ranges from -0.3 for indoor use to -1.5 for outdoor use. Elasticities for farmers are even higher.

Bottom Line: Higher prices will reduce water use.

Make Water at Home!

"The XZIEX Machine creates clean, fresh water out of thin air by extracting water from the humidity found naturally." In other words, it's a de-humidifier. But wait -- is it economical? The FAQ says "Depending on local electricity costs, a gallon of XZIEX™ water costs about 10 cents to produce." Note that desalination costs about $1/m^3, i.e., about 0.4 cents/gallon. The XZIEX is thus 25 times more expensive than desal water and infinitely more expensive than natural water. Of course, you don't need pipes to bring XZIEX-water to your house, so this product will appeal to people in places that have no water on the ground, lots of water in the air, and cheap energy. (I think that place appeared in the last Star Wars.)

Bottom Line: This SUV-in-disguise deserves to die. Better to buy Fiji water -- at least you are helping photogenic people in a far-away place...

Amish Toilets

According to this story, a group of Amish are refusing to install municipally-approved toilets.

Andy Swartzentruber's troubles began in October 2006 when residents complained anonymously that the schoolhouse and outhouses were erected on his property without permits. Residents said they worried about potential water contamination.

An inspection found plastic buckets collecting waste in the outhouses, and Swartzentruber told sewage officials the waste was disposed of by being dumped onto his fields, according to sewage agency documents.

I am not a big fan of state regulation per se, but pollution can be an issue. The amish should be able to "have it their way" as long as they can show that their sewage is not ending up in someone's well-water.

Maybe they should invest in composting toilets?

Bottom Line: The government can play a useful role in regulating pollution, but there are other ways to solve pollution problems. Let's hope that the Toilet Wars end in peace.

Climate Variability

via Washington Post:

As greenhouse-gas emissions rise, North America is likely to experience more droughts and excessive heat in some regions even as intense downpours and hurricanes pound others more often, according to a report issued yesterday by the U.S. Climate Change Science Program.

Bottom Line: Global warming is not about warmer days but greater variation in climactic conditions. We're in for a roller-coaster ride.

The Water Industry

Mike in Yahoo groups writes:

We don't have health care, we have a health care industry, we don't have water management we have a water management industry, we don't have communication, we have a communication industry. The whole of Mankind needs certain vital things that we all use and need such as these few, and we need them readily available, but when the remedy to these needs are put behind a toll booth we all pay about 30% more and receive about the same degradation in service. Utilities are such as these, we all need and use, why would we need an industry between us and a vital service? It would be different if the contracted service was a premium, but it's not, these "providers" have us over the proverbial barrel in many ways.

This is an interesting perspective with which I have a few quibbles:

1. Many problems (of cost and provision) in these areas are BECAUSE of government regulation, interference and distortions. The "industry" that surrounds water, health care and communication (and the military!) has something in common -- the government. Note that we do not worry about cost controls and poor quality in the computer, alcohol or car industries -- that's because they are mostly lightly regulated.
2. WRT water, I'd say that many problems can be traced back to average cost accounting, which is required of many water providers (public or private). Because of this (and the way that it serves marginal demand at less than marginal cost), we get over-expansion and scarce supplies. When water is "privatized", the first action (raising prices, cutting back service) is frequently blamed on the private company when the real source is the government.
3. Health care is worse, for similar reasons. Communications are not a human right.

Bottom Line: Business has to work in a regulated environment, and those regulations can cause (or support) harm just as much as they can prevent it. More regulation is not automatically good.

Water Balloons!

Can we solve water shortages and avoid expensive infrastructure by using ships to haul "trains" of water bags from the Pacific Northwest to parched SoCal? Check out Spragg Bags.

Pro: Short-term solution (e.g., Delta levees break and SoCal water disrupted) that is probably better than tanker shipments and desalination.

Con: Encourages living in dry areas instead of wet areas. Not economic if price increases reduce demand below cost of bagg shipping.

Bottom Line: Technology may not solve an economic problem.

Where to Do What?

In the past week, I have had several conversations with people about global warming (GW) and the dangers it poses to people in the developed and developing worlds.

Some of them have cited the Copenhagen Consensus [CC is a self-titled ranking of development priorities] as a reason to pay less attention to GW and more attention to things like microneutrients, free trade, etc.; see related posts here and here.

Putting aside the major problem of getting aid organizations to deviate from their self-centered agendas, I think that the CC is a great idea for helping developing countries. They do not care about GW -- they are more interested in potable water.

What I recommend (à la Ricardo) is that developing countries tackle the CC and developed countries work on GW. Developed countries are, after all, responsible for the current level of global warming and have the means (technology, money, science, awareness) to deal with it.

Bottom Line: Apply comparative advantage to government actions. Developed countries can take the lead on GW and developing countries can worry about HIV/AIDS, malaria, etc.

Forbes on Water

...a special report that I haven't read yet.

Market Power

The world's most powerful useless president gets owned in today's WSJ:

[China's] government, which controls domestic fuel prices, raised its base price for gasoline by 17% and diesel by 18%, a move that global oil traders quickly concluded could diminish the country's voracious appetite for fuel. Benchmark crude oil on the New York Mercantile Exchange fell $4.75 a barrel, or 3.5%, to $131.93.

The move, Beijing's second price increase since November and its biggest in four years, did what the U.S. has failed to do with its efforts to exert pressure on producers.

Bottom Line: Prices matter.

The Morality of Prices

In a timely manner, Michael at Knowledge Problem discusses the morality of raising prices in an emergency, which is directly related to "Evil Market Forces," below. This is the comment I left:

I didn't think of the "taking advantage" view, which is now immediately obvious. I think we (economists) can present the argument in this way:

1. Things are screwed up and we're running out of x.
   
2. Since we can't give everyone the same amount of x (the "fair" outcome), we need to ration it.
   
3. Price is the fastest way to ration x. Other ways may be possible, but we don't have time to argue.
   
4. So we go with price rationing/gouging.

Interesting, to me, that this argument is precisely the one I use wrt allocating scarce water resources -- except I DO give everyone a small, initial allocation before using price to ration the rest.

Addendum: Tyler Cowen advocates "radical privitization" to solve water problems in the developing world. I think the idea fails -- a private monopoly need not be better than a public one.

Addendum 2: I read the piece. Tyler's idea is better than the status quo (incompetent and corrupt public monopolies). It also makes sense that a private monopoly can extend the network farther by being more efficient and being able to price discriminate (ironically that will mean lower prices for the poor, e.g., as we get with pay-as-you-go cell phones). I still think it's a political non-starter, but it could be implemented by requiring a low/zero charge for the first allocation of water.

Addendum 3: We have to assume profit maximizing private corporations, and that can be a big assumption.

Educating Water Managers

This short academic paper [PDF] by Daniel Loucks (professor of civil engineering at Cornell) gives a good view of how water managers (usually engineers) are made. It also, unintentionally, highlights how those managers are myopic to issues of economics and human behavior.

To give you an idea of what these "future water resource managers" are learning, note that "manage(r/ment)" and "plan(ner/ing)" appear 52 and 21 times, respectively, in the 4 page piece. The words "price" and "market" do not appear in the text. This is how command and control water managers are made.

Here are some more (snarky? perceptive?) comments on the text:

Currently the world’s water resource systems are not able to provide everyone reliable potable water at reasonable costs. Why is this? Because prices set on cost lead to demand that exceeds supply. (He also displaces responsibility for this from water managers to "the world’s water resource systems" -- who is it/they?)

This has prompted the well-known concept called the hydro-illogical cycle illustrating the lack of interest in planning for floods during periods of drought, or in planning for droughts when experiencing a flood. I like this observation. How to solve the problem? Do not plan or manage -- set up a system that automatically adjusts to hydrological conditions, i.e., a market. (Ever notice how umbrella salesmen are all around when it starts to rain?)

Engineers, economists, and ecologists especially need to appreciate each other’s approaches to problem solving. Yes, I like this. Unfortunately, this idea is buried in an avalanche of plan, design, manage, etc. terms that only an engineer could love.

Bottom Line: People are not passive widgets in a schematic diagram. They regularly move around it, tear it up and add new connections. Water managers need to take more classes in economics, politics, psychology, sociology and ecology. If not, we will continue to see hydro-illogical policies and outcomes.

via WaterSISWEB

Evil Market Forces

I suggested that market forces could help resolve conflicting claims among urban, agricultural and environmental interests to an enviro person. This is their response:

Using market forces, transfers, means to me privatizing it. According to the public trust doctrine, water belongs to everyone and it is the duty of the state to allocate it to benefit the public. The giant agribusiness interests in the San Joaquin Valley have been working hard for many years to blur the ownership rights in order to market their water to the cities, at enormous profit. It is easier and more profitable to market their water than to grow crops. Water has belonged to us all. Historically we have not paid for water, but for the facilities, O & M, needed to get it to us. Big Ag wants to change all the rules and have persuaded some, even in the environmental community, that transfers and market forces should rule.

So, no, they are not interested in using market forces since it's not right to charge for it.

NB: In this post I defend the allocation of some free water. I'm not being inconsistent. I think that everyone has a right to some free water, but the rest (marginal water) should be allocated by market forces.

Bottom Line: This perspective is hopeless. Whenever the supply of something is less than the demand for that thing (land, bananas, BMWs, blood, etc.), the price of that thing will rise -- one way or another -- until demand and supply are equal. Those who want to avoid market forces will pay the price in waiting, lawsuits, fighting, bribes, etc.

Starvation

Ethiopia is in trouble, again:

The land is green but hailstorms, rains that came too late, then rains that fell too heavily, as well as infestations of insects, have left Goru Gutu starving. As you head deeper into the hills, the animals get thinner, the children more listless. The food in the market is too expensive, and there are no informal sales on the roadside. No one is eating. Where wheat and maize should have been growing in the terraces that slice back and forth along the slopes, there is nothing.

The article goes on to point out that the Ethiopian government bears much of the blame for exacerbating the damage from weather conditions thorough its crude controls on commerce and politics. Starvation is not inevitable -- according to Sen's Law,* famine and democracy do not coexist.

Bottom Line: When the rains fail, food gets scarce. When the government fails, people starve.

* I decided to call it that, but it may as well be a law.

Didn't Use It, Lost It?

An irrigation district decided that

If a parcel of land hadn't been irrigated during that time, the district counted it as still having no water.

The district's policy is that growers can transfer water from one grower to another, but only if the land had been irrigated at some time during the past four years.

Sansoni also said the MID is running groundwater pumps 24 hours a day, and that is affecting the deep wells on which some farmers rely.

Growers also are worried about the fact that last year, the MID cut off water to farmers early, then turned around and sold water to the U.S. Bureau of Reclamation.

There are legitimate concerns that "zombie" farmers will sell water to others and further stress groundwater, but I am wondering if those zombie farmers have just lost their water rights. Can they start pumping (but not transferring) "their" water to reestablish a claim? If so, how long before they can transfer their water?

Bottom Line: As water grows more scarce, there are going to be big fights over the exact nature of water rights. Lawyers, tally-ho!

Arizona Boondoggle

Coyote Blog has an awesome post on a proposed water park between Tucson and Phoenix. How to run a water park in the desert? Ask the government for free water -- "to create jobs". What's next -- the Arizona swamp experience?

Can a BS Make a Difference?

SD asks:

Basically, I just got my Bachelor’s degree, and I know what I want to do in life. The problem is, I am not sure of the best way to get there. Would you be interested in giving me a few pointers? I am really interested in the development of environmentally-friendly public policy, sustainability, and want to work to reverse some of the damage that we as humans have inflicted on the environment. I know I need to get an advanced degree to do this, though. I majored in Politics, but have a good understanding of science. So now, I am looking into water law, environmental law, and sustainable business practice degrees. I honestly have no idea which degree would best suit what I want to do though. If you have time, would you be willing to tell me about your experience, or even give me some suggestions of where to look and what to look for? Thank you so much! It would be a great help.

Here's what I said (brief version):

1. More education is neither necessary NOR sufficient to "fix" things.
2. There's plenty of great information on water, the environment, policy, etc. You need not go to school for 3-8 more years to add to that pile.
3. Not many people understand that information or how to implement it.
4. Go, use your job [paid gov't intern] and connections to learn how things work, where the problems are (just ask people, they'll tell you), and who is in favor/opposed to fixing them
5. Then work with all parties. Start with "stupid" policies.*

Bottom Line: Use your talents and connections and passion to be part of the solution. There's no single, right way.

Addendum: This advice applies to BA and BS holders :)

* Decreasing block pricing in water gives a unit discount to those who use more. Makes sense if you want to sell as much water as possible, but not if water is a scarce. See also ethanol, tax law, farm bill, bureau of reclamation, katrina, ad nauseum.

Drill!

From the NYT:

White House press secretary [and noted liar], Dana Perino, said Mr. Bush would urge Congress to “pass legislation lifting the Congressional ban on safe, environmentally friendly offshore oil drilling,” adding, “The president believes Congress shouldn’t waste any more time.”

I'm glad that Ms. Perino and Mr. Bush are trying to get the Congress to move on safe and friendly drilling. I was worried that the Congress would start another war in the Middle East, fail to resolve the situation in Israel, and continue to antagonize Iran. Luckily, the Prez is ready to step in with his wisdom. Better yet, he's got lots of friends in Texas who are going to make piles of money with nice and clean drilling, unlike those Exxon bastards who spilled oil in Alaska.

Bottom Line: Offshore drilling is a dumb idea that will not lower prices by much (remember ethanol), but it will bring ecological damage nice towers to US coasts AND benefit US corporate donors citizens. The fish must be excited.

Water Down Under

In my mind, Australia and Israel are on the cutting edge of water-stressed areas. Both places face terrible conditions that were often made worse by water-stupid policies (e.g., cheap water for agriculture). Read this post to get an idea of recent events in Australia. Quiggin's bottom line:

But, if the repeated failures of the autumn rains, and the higher frequency of drought represent a permanent climate change, it seems likely we will have to accept both substantial ecological damage and reduced agricultural output.

Bottom Line: These areas offer a glimpse into the future. We will arrive there if we continue under stupid policies and business as usual.

HT to DS

Great Lakes Compact Signed

RS sent me an interesting analysis of the GLC. All I know is that it is meant to restrict exports of water, but I asked RS to tell me about management of water to areas that are inside the "local zone". RS says:

The Great Lakes Compact essentially allows governors to veto any plan to divert Great Lakes water to other regions of the country unless all of the governors in the region agree. The compact was signed in 2005 by chief executives of eight Great Lakes states -- Illinois, Indiana, Michigan, Minnesota, New York, Ohio, Pennsylvania and Wisconsin, as well as two Canadian provinces.

While the compact would generally set principles for controlling new and increased taking of water for business and other use, it leaves it to the individual states to establish the rules under which they would hold up their ends of the bargain.

The water restrictions wouldn't kick in unless someone diverts at least 100,000 gallons a day.

The compact was proposed by Great Lakes governors in December of 2005, under the direction of former Ohio Gov. Bob Taft, as an historic water-usage agreement among the eight Great Lakes states. Its purpose, simply, is to show the region can be a responsible steward of Great Lakes water before the federal government takes control of the resource - which, of course, could still happen.

The Compact as written contains page after page of language that lacks definition, as outlined by our highly respected Legislative Council. The significant amount of language lacking definition in the Compact indicates this issue almost certainly will wind up in federal courts for years and years to come.

Looks like water wars to me.

Bottom Line: Vague and grands gestures will lead to grand and vague arguments. Is the GLC just lipstick on a pig?

Texas Pump 'em

Businessweek covers T. Boone Pickens' plan to export water from the Texas Panhandle to Dallas. Pickens, a famous oilman, appears to think that pumping water will be as lucrative as pumping oil. His plan to sell 200,000 acre-feet a year to Dallas at $825/AF depends on a few things:

• Getting the right of way to ship water across 250 miles, and 650 tracts of property. Interesting details of how Pickens manipulated the rules on special-district formation to get the rights to eminent domain.
• Pumping faster than his neighbors: Texas has the worst ground water rights I've ever heard of ("If I can pump it, it's mine"), and Pickens will be competing with neighbors to draw down the local aquifer. (He claims to be ok with a 1.2% drawdown on a 0.1% recharge.)
• Dallas being willing to buy some pretty expensive water. There may be competition from farmers who are closer to the city (prior post).

Bottom Line: Pickens is onto something, and he'll make a killing -- unless Dallas reforms its water pricing and/or ag-urban water markets are allowed to work. Watch this one.

Politics and the Weather

Do you ever notice that floods, food poisonings, terrorist attacks, celebrity deaths lead to a rash of hasty legislation on the matter? The same thing happens with investments -- where people invest in "last year's wonder" or decide to become conservative after a stock market crash or aggressive in a boom.

The trouble with these hasty actions is that mistakes made in the heat of the moment often take years or decades to emerge and/or reverse.

Bottom Line: Urgent is not the same as important, and we should be careful when taking urgent actions on important matters.

Hayek, Knowledge and Prices

gormk says:

I still think .... that you rely too much on your Hayekian pragmatism. And this is reflected in the diversity of "challenges" that you have received recently on your popular blog!

First, it's great to have all the comments and debates on these topics. Water touches people in many ways, and opinions and experiences are bound to vary.

Let me elaborate on Hayek, who is famous for knowledge problem and spontaneous order.

My idea of the knowledge problem (I am no Hayek scholar) is: I know what I know but not what you (or many others) know. For me to organize society (i.e., as a government) to some "optimal" level, I need to know what you know, but that information is hard for you to convey to me credibly ("yes, I need money for my babies") and hard for me to assemble/reconcile ("baby subsidy here versus there"). Hayek said that planned economies would collapse under the weight of the knowledge problem, and he expressed his ideas in one of the most important papers ever published in economics (many economists would agree), The Use of Knowledge in Society.

After expressing the knowledge problem, Hayek gave a solution: Prices act as a means of coordinating behavior such that no central authority need know or direct action. Thus, a market system will deliver a "spontaneous order" wherein the bread is in the shop when you want it and your salary will reflect the value of your skills and knowledge to everyone around you. (Adam Smith pointed out this result in the 18th century.) Contrast this order with "government order" that people often find frustrating.

Hayek gave us an excellent description of how the world works and how to improve it through more decentralization, markets, price signals, etc. That's why I recommend markets (under private or public management) to "solve" many water problems.

Bottom Line: Hayek tells us to be humble about what we know, to trust in the decisions of others, and facilitate the negotiation and cooperation of many through voluntary mechanisms. What's not to like?

Public versus Private

MS asks some useful questions

The short version I got from you as a solution to this is to give people a free supply for personal use but then charge at cost. But then I've thought:

1. If you privatize water supplies, how do you ensure that they give people a free supply?
2. If the water is supplied publicly how do you avoid water being given away below cost due to public choice pressures?

In principle if there are property rights in water resources, then there is no water crisis, except insofar as water might become pricey for the poor.

Therefore the idea of a "water crisis" must be due to poorly defined property rights and/or water being distributed by means of governments subject to public choice pressures.

Then we are back to the solution as define property rights and privatize water supply - but then how do you ensure the poor get a free supply for personal use?

Am I missing any key conceptual elements here?

My "solution" to his conundrum is to give rights for a "basic" allocation to everyone (i.e., the poor will get water) and price remaining water via sustainable cost (30 year budgets) or -- better -- auctions.

Bottom Line: Property rights matter, and the institutions around them will define how well they work.

FLOW Wars...

Here's a press release for a new documentary:

FLOW, which speaks to one of the most important political and environmental issues of the 21st Century - the world water crisis.

The issue at hand? The world’s fresh water supply continues to dwindle at an alarming rate as demand outpaces its availability. Water is not only quickly becoming one of the biggest environmental issues of the year, but also the social, political and economic impacts of water scarcity are rapidly becoming a destabilizing force, with water-related conflicts and battlegrounds emerging across the globe, including Southern Europe, Africa, Canada, France and India. In fact, estimates have shown the state of California to have only about 20 years of water supply left....the film introduces many of the governmental and corporate culprits behind the water grab, while begging the question ‘CAN ANYONE REALLY OWN WATER?’

I don't even want to know where the PR got the 20 years idea, but it sure sounds serious. Gee, maybe I should trade my Prius for a solar water distiller (and a few shotguns).

The PR gets worse:

With an unflinching focus on politics, pollution, human rights, and the emergence of a domineering world water cartel, FLOW gives viewers a look at the people and institutions providing practical solutions to the water crisis and those developing new technologies, which are fast becoming blueprints for a successful global and economic turnaround.

Water cartel? Solving things with technology? Economic turnaround from new water technology?

I am not even going to demolish themes combining anti-WTO hysteria with pro-hemp feel-good. Please go ahead.

Calling Out the Governor

This op/ed (rightly) calls shenanigans on the Schwarzenegger's Dam Plan and offers a number of solutions that reflect California's uniquely screwed-up institutions. He forgets to mention price, which makes me cry.

Useless Gestures

I just got this nice email:

As a result of the drought declaration by Governor Arnold Schwarzenegger, many Californians will soon likely face mandatory conservation orders. In fact, many water districts and cities have already asked for voluntary measures.

I have compiled some water conservation suggestions that I hope you will find useful. Some are remarkably simple, and many will help you save money while saving water. The most important fact is that the sooner you begin saving water, the better. Acting now will provide more savings in the long run.

I hope you will visit the water conservation page on my Senate website by using this link to learn more about water conservation and how to get started.

Because of global climate change, our weather is changing each year. While we can hope for wetter years in the future, it is important that we begin to plan for dryer years. I hope that you will start saving water today.

Sincerely,

Barbara Boxer
United States Senator

It's a pity that she didn't say something like:

Hi Citizen,

We seem to be mismanaging water at the federal, state and local level. Since this is making your life less-enjoyable, we have decided to reform water laws, regulations and institutions to reflect the fact that water is a precious resource.

You should expect that water's going to get more expensive for those who waste it and that water will no longer be wasted in ways that reflect outdated policies. Don't worry, however -- we are going to make sure that every citizen gets his or her share of water and that industrial and agricultural interests are able to buy the reliability that they need to prosper and thrive in our Golden State.

We are not going to suggest water saving methods to you because we know that you understand how a faucet works. Instead, we will spend your tax dollars on reforming government to serve citizens instead of private interests.

We've got your back!

Barbara and the Crewe.

The Time to Act?

Bob has done a good job of debating all comers in this post, but I think he's using an invalid method of argumentation that deserves a post of its own, i.e., he says:

David answered: Everything's possible and a function of risk and uncertainty. Given that uncertainty is playing a big role, I'd prefer to act and regret it than not act at all -- ie, the precautionary principle.

Well, then really what you're saying is no, you will never regret your current support for climate legislation, regardless of how the future unfolds.

Given that your current position is literally non-falsifiable, I don't think there's much point in us continuing this discussion.

Perhaps it is not worth making falsifiable statements about what will be true in 10-20 years when the action must be taken now. As you mention in your second comment, I have decided I am pro-(smart)-intervention now. Fine.

When would you make up your mind to do anything except nothing?

Let me use another analogy: Would you prefer to save for retirement over the next x years or just assume that you will be dead in x years, so it doesn't matter? I prefer to save: Even though I may be dead, I may not be and then I'd like to have some retirement income.

Bottom Line: Falsifiable statements (and argumentation that hinges on their empirical testing) are only useful when the answer arrives in a timely fashion. The scientific consensus is that global warming/climate change is happening and will get worse. Rather than hope that the consensus is wrong, it's a good idea to adopt and adapt policies that will reduce change and mitigate the harm from it.

The Economist Blows It

This week's Buttonwood missed the target with its analysis of a tax and rebate scheme for global warming. By getting tangled in means-testing and marginal tax rates, they failed to suggest a simple system of high carbon tax combined with a per capita rebate. Here's what I said:

The key feature is that the carbon tax be steep on the margin, that the rebate be per capita (no means testing or "poor" qualification), i.e., a block transfer. That combination will move behavior away from carbon-inducing activities; compensation as a % of income will be highest for the poor. (Gov't "schemes" to spend the taxes will almost always go wrong...)

and here's a two-page piece [PDF] that gives an excellent summary of the benefits of a tax over cap and trade (easier to implement) and 100% rebate over government choosing where to put the money (less corruption). Great job, Professor Hansen!

Don't Take My Water!

In a case that reminded me of this one, a farmer has won a lawsuit against the federal government for violating his fifth amendment right to be protected from taking his water rights without compensation.

The farmer sued after the government required that he maintain irrigation ditches on federal land with hand tools. When those ditches clogged up, the flow of water to his land -- a water right to his ranch that (apparently) predated federal control of the area -- fell, damaging his operations.

Unfortunately, the rancher died two years ago, unable to see then end of a case that took 25 years to reach the U.S. Court of Federal Claims.

Bottom Line: The government may regret giving out rights, but regret does not give it the repeal those rights without compensation.

Thanks to DS for the tip.

Environmental Skepticism

[This post is a good follow-up on this, this and this.]

The Organisation of Denial: Conservative Think Tanks and Environmental Scepticism [PDF] has got some interesting things to say:*

Environmental scepticism denies the seriousness of environmental problems, and self-professed 'sceptics' claim to be unbiased analysts combating 'junk science'. This study quantitatively analyses 141 English-language environmentally sceptical books published between 1972 and 2005. We find that over 92 per cent of these books, most published in the US since 1992, are linked to conservative think tanks (CTTs). Further, we analyse CTTs involved with environmental issues and find that 90 per cent of them espouse environmental scepticism. We conclude that scepticism is a tactic of an elite-driven counter-movement designed to combat environmentalism, and that the successful use of this tactic has contributed to the weakening of US commitment to environmental protection.

The authors' basic premise is that environmental skeptics are blocking scientific evidence because such evidence would help eager governments (and push reluctant governments to) impose regulations that would affect business and social conduct, i.e., [p 354]:

environmental scepticism consists of four key themes. First, environmental scepticism is defined by its denial of the seriousness of environmental problems and dismissal of scientific evidence documenting these problems. This primary theme sets environmental scepticism apart from earlier environmental opposition movements like the US ‘wise use movement’ and ‘sage brush rebellion’. Second, environmental scepticism draws upon the first theme to question the importance of environmentally protective policies. Third, environmental scepticism endorses an anti-regulatory/anti-corporate liability position that flows from the first two claims. Lastly, environmental sceptics often cast environmental protection as threatening Western progress.

They accomplish that goal by arguing that a consensus on global warming does not exist, e.g., [p. 356]:

CTTs were able to create a situation in which major media outlets portrayed climate science as an evenly divided debate between sceptics and non-sceptics employing what McCright and Dunlap term the ‘duelling scientists’ version of the balancing norm. The result is that US media have given disproportionate attention to the views of a small number of global warming sceptics, and as a consequence have been significantly more likely than media in other industrial nations to portray global warming as a controversial issue characterised by scientific uncertainty

But, "fair and balanced" is not the only technique. Some CTTs actively oppose the release of "hostile" information, e.g., "the Competitive Enterprise Institute sued the federal government twice to suppress the release of the US National Assessment of Climate Change, a comprehensive report begun under the Clinton Administration" [p. 357].

These games piss me off. Climate change (and other environmental issues) are already complicated enough, and we need all the data, opinion and argument we can get. Trying to stop that debate for fear of the potential results is not only scandalous and despicable, but also betrays the missions of so many CTTs -- to contribute to the liberty and prosperity of humanity.

The one way that you do not contribute to liberty is by taking it away, or as Mr. Franklin put it: "They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety."

Bottom Line: The CTTs have deluded themselves into believing that their means (the use of Soviet prop/agit methods) were acceptable in pursuit of their ends (smaller government). Instead, their actions border on treason.**

Thanks to DS for the tip

* I have cut out literature references from these excerpts.

** This whole topic reminds me of the Bush/Cheney/Neocon decision to invade Iraq (for any reason). I support those who accuse them of treason.

Public versus Private Water

This announcement (via TreeHugger) of a new site that will

track the "remunicipalisation" of cities, regions and entire countries around the world, providing case studies from places which have already returned to public control and information on campaigns in places around the world where private companies are failing to deliver.

Is there a similar site tracking the privitization of water services? CATO's pro-privitization stuff is here.

Interesting! Montara (a town of 5,000 south of San Francisco where my friend lived for years) remunicicipalised its system from Cal-Am for $17.5 million.

Bottom Line: Both public and private water services can fail. The problem is not "ownership" or profits (private make profits, but public can be lazy), the problem is transparency and oversight of a monopoly.

What's Water Worth?

I saw this not-so-good article float by and ignored it but then saw this better post:

1) we really don't value water the way we should; and

2) we haven't reexamined the ways we allocate water - as he says, we're still treating it the same way we did when the West was rural and the main industries were ranching and farming.

He also said some other, good stuff. Take a look.

I replied that the two things are related and can be solved at once. Water will be treated at its "correct" value if it's sold in a competitive market, and the right way to run a market -- once everyone's rights are clear -- is to put all the water into a single pot and then have people bid for it.* Anyone can buy their own water back (no net gain or loss), but everyone knows the value (opportunity cost) of the water they are buying.

Bottom Line: We don't know how valuable water is because we don't trade it very often.

* I have said that a human right component should be set aside. That right will be owned by cities and put into the pot.

Toxic Communism

If you think command and control economies are kind to the environment, read this:

From 1974 to 1996, Soviet and Czech technicians carried out what they called “chemical mining” for uranium below the town of Straz pod Ralskem. Over the life of the mine, more than 4.3m tonnes of sulphuric acid and other toxic chemicals were pumped deep underground to leach out the uranium. The acid mix was pumped back up and the uranium separated out.

Acid mining is used in the West too, and with the right local geology need not be dangerous, says Ludvik Kaspar, a young engineer from Diamo, a state mining and mine cleanup firm which now runs the site. Unfortunately, he says, this is a terrible place for the method, and communist-era miners botched their work. They injected more acid than they pumped out, so the solution flowed sideways, away from the mine. In theory, a thick layer of rock kept the toxic stew away from an important aquifer, closer to the surface, that provides the region with drinking water. But the miners perforated that protective layer with 15,000 injection wells, causing massive contamination.

The US has its own environmental disasters (e.g., Hanford nuclear site), and "national security" is often an excuse to pollute, but the Soviets (and other dictatorships such as the Chinese, North Koreans, Burmese, etc.) could pollute with less fear from civil society.

Bottom Line: Citizens with power will protect the environment more than governments with power. It's easy to see why -- they live in it.