Debate on the Value of Water

The Economist is having an online debate from TODAY until October 10.

Proposition: "Water, as a scarce resource, should be properly market priced."

I was the third to vote (guess which way I voted?!)

Readers can read the pro and con opening statements, comment and debate with the all-star line-up of speakers.

Sep 30: Opening statements and comments and voting open to the public
Oct 1: Michael W. Hanemann (University of California) -- my adviser!
Oct 2: Anup Jacob (Virgin Green Fund)
Oct 6: Colin Chartres (International Water Management Institute)
Oct 6: Peter Gleick (Pacific Institute)
Oct 7: Peter L. Cook (National Association of Water Companies)
Oct 8: Closing statements
Oct 9: Ashok Gadgil (Lawrence Berkeley National Laboratory)
Oct 10: Winner announced

Excerpt from the Pro Statement by Stephen J. Hoffmann (WaterTech Capital & Palisades Water Index Associates):

The pricing of water must go beyond the mechanical and political aspects to the basic factors that affect the relationships between producers and consumers, and that are implicit in the rate structure. The principle of sustainability is critically dependent upon efficiency in water use. And efficiency cannot be achieved without the proper signals included in market prices. Market value is equivalent to water rates based on economic principles of water-resource pricing.

Excerpt from the Con Statement by Vandana Shiva (Research Foundation for Science, Technology & Natural Resource Policy):

The commodification of water shifts the focus from the water cycle on to water markets – diverse species, ecosystems and water systems adapted to millions of years of evolution are replaced by instantaneous relationships between “sellers” and “buyers” negotiating a commodity transaction which determines how water will be used, where it will flow, and where and to whom it will stop flowing. It is assumed that water will flow from “low value” to “high value” use. This increase in “value” (which refers to price) is supposed to magically overcome water scarcity and allocate water equitably.

Bottom Line: Let the debate begin!

Carbon Trading (or not)

The Germans have thrown a big spanner in the EU's carbon trading scheme by asking that free permits be given to "key" industries. (Permits used to be free; governments are planning to auction future permits.) Other EU countries have rushed to ask for their share of free.

Meanwhile, Australia will push ahead on cap and trade, and ten North-eastern states have started to auction carbon permits. Although oversupply has meant low prices, the principle of paying to emit carbon (and system to allocate permits) has been established. Permits sold for $3.07/ton at their first auction [PDF].

Although the developed world is responsible for most emissions, the developing world is going to suffer from them. Bangladesh has announced its plan to cope, which is about 95% short of where they need to be. Read this Economist article on other efforts to adapt to change that's already happening. It may be a good idea to funnel money from all these carbon permit sales (or -- better yet -- a carbon tax [many prior posts]) to those countries too poor to adapt to the harm richer countries are inflicting on them. (Read this post on why China and the US have opposite positions on the distribution of these funds.)

Bottom Line: A variety of responses (and counter-responses) to carbon trading regimes reflects their growing importance. It also makes it clear that global cooperation on carbon emissions is going to be necessary and will be tough.

Addendum: Belgium has bought 2 million tons of emissions permits from Hungary. Price undisclosed.

Truth or Funding?

The author of this paper [PDF] argues that debates over climate change are not reaching resolution because there's money to be made by extending the debate, i.e.,

For a variety of inter-related cultural, organizational, and political reasons, progress in climate science and the actual solution of scientific problems in this field have moved at a much slower rate than would normally be possible... the heavy influence of politics has served to amplify the role of the other factors...[that are] amplified by the need for government funding. When an issue becomes a vital part of a political agenda, as is the case with climate, then the politically desired position becomes a goal rather than a consequence of scientific research...

We will show how political bodies act to control scientific institutions, how scientists adjust both data and even theory to accommodate politically correct positions, and how opposition to these positions is disposed of.

Bottom Line: Politicians are accused of taking bribes to change policies. That poison has spread to (willing) academics and administrators who prefer to talk from one grant to another.

hattip to RW

Ag Water Sales

Now we're talking!

The Woodbridge Irrigation District is helping residents in Alameda and Contra Costa counties with their critical water needs by selling them a little more than 6,000 acre-feet of water.

[snip]

The deal calls for Woodbridge to sell at least 6,000 acre-feet for $1.2 million. EBMUD will receive as much as 9,000 acre-feet, based on how much water Woodbridge has available. The additional cost is $200 per acre-foot.

Win-win is alright by me!

In related news, a San Joaquin irrigation district sold water at $20/AF to neighboring districts and $100/AF to Stockton. The sale was interesting because of the price disparity and the desire of the buyer to keep water in county, i.e., "the board had numerous offers to buy the water from up and down the state but opted to keep it within San Joaquin County" means there had to be some better offers. (Such behavior by the Board of a publicly-traded company would have resulted in lawsuits and stockholder revolt.) The seller was a contractor on the CVP (a Reclamation/subsidized project), so there may have been restrictions on sale. We are still quite a ways from a competitive market, but something is better than nothing!

To get an idea of supply/demand, check out this Sept 22 report on California's water supply [PDF].

Bottom Line: We don't have a water shortage, we have too few water trades. More please.

hattip to MC Hammer

Think Globally Do Nothing Locally?

The Economist publishes a good piece on aluminum smelting:

If the aluminium is not made in Iceland, the theory runs, it will be made somewhere else, using much grubbier energy. Smelting has grown rapidly in China in recent years, for example, fuelled by coal-fired power. Were it not for Iceland, China would presumably be making even more aluminium. Iceland, in other words, should sacrifice its own landscape for the good of the planet.

Bottom Line: If you want to protect the global environment, you may have to sacrifice your own. If you're not ok with that (NIMBY!), either you don't care about the environment or are a hypocrite.

Delta Pissing Match

It's Delta Day at aguanomics (four posts!) The Rest of the World will have to wait.

---

Someone sent me the letter from James E. O' Banion of the San Joaquin River Water Authority [PDF] to Peter Gleick of the Pacific Institute, who responded with his own letter [PDF]. (Everyone and his brother are cc'd on these...)

Banion was complaining about PI's report on water conservation options at the Sacramento Delta -- a report that I have criticized, and over which Gleick and I have argued.

So -- among other things -- Banion says this [click to enlarge]:










...and Gleick -- among other things -- says this [click to enlarge]:


Bottom Line: I don't know about you, but Gleick's overweening condescension is pretty hard to tolerate. Even if he was right (and he isn't), he is not making any friends by acting this way. And it's good to be friends with the people who stand between you and a deal you want. [Researchers have found that people who trade more often are more cooperative in solving social dilemmas.]

hattip to MC Hammer

Delta Debates

The California State Grange will hold a Water Symposium on the California Delta at 1:30pm on October 15. The Symposium will be held as part of the annual State Grange convention taking place in Sacramento at the Holiday Inn North, 5321 Date Avenue.

Speakers come from various groups (except enviros). It's not clear if admission is free, but the Grange invites everyone to attend. Call (916) 454-5805 for information.

hattip to DS

Anti-Peripheral Propaganda

A blog opposing the Peripheral Canal is written by a guy who opposed it in 1982. Although I support the PC ("this time is different") and see many errors of fact in the initial post, I did get interested in this bit:

Today, the MWD and the Westlands Water District are busy buying up land around the Sacramento River at the Yolo Bypass, just above Sacramento. Officials of the two water districts say it is to protect their access to water from the Sacramento-San Joaquin Delta. They are also seeking to partnership with other landowners in the area. Although they are not buying on the sly, it is definitely 1913 water war déjà vu.

The blogger is implying that MWD and WWD are buying land to get water rights (a là LA's pre-1913 purchases in Owens Valley, which he mischaracterizes). When I covered WWD's purchase of Northern California wetlands, I had no such impression, so I'd be interested to hear what you all think.

Bottom Line: Land without water is useless, so moving water to/from land is controversial.

California's Agricultural Water Efficiency

A reader asks:

Do you know of a statistic or set of statistics that says that, equalized I guess for climate and crop type, California agriculture uses water more efficiently than anywhere else in the world?

I could swear that I've seen something like that somewhere.

It tends to deflate the enviro crusade a little, I think, if it's true, because it shows that (assuming demand is constant) California may in fact be the best place to grow the water-intensive crops, and not vice-versa.

Note that water is only one input of many (labor, capital, seeds, etc.), so I'd expect that water-use efficiency will be low in places where water is cheap (Imperial Valley) and high where it's expensive (Israel). California ag will only improve water efficiency efficient when water is expensive, and ag water prices will rise when farmers are selling water to urban and environmental buyers.

Bottom Line: When water is scarce (and price reflects scarcity), we will be more efficient in the ways we use it.

Dumping Drugs in Water

Why do 46 million Americans* have detectable drugs in their water? Maybe because hospitals dump 250 million pounds of drugs down the toilet each year. Why do they do that? Because it's so expensive to dispose of them through "official" channels. Consider this comment from a prior post:

A rural county in northern WI recently collected old prescriptions to get them out of potential circulation. To safely dispose of those drugs, they had to (a) find a medical incinerator, (b) find a trucker who could legally take them, and (c) find a sheriff's deputy to ride along since the prescriptions included narcotics. The nearest medical incinerator was in Missouri.

Some states (e.g., Colorado) allow people to return old prescriptions to pharmacies.

In case you are not nervous enough, there's been a lot of news recently on how the EPA is NOT going to regulate levels of perchlorate in water. According to Aquadoc and others, this decision is probably linked to the source of perchlorate (rocket fuel) and pressure from the White House to leave the Pentagon out of the "guilty of poisoning Americans" category reserved for Axis of Evil types. Given the history of shenanigans from the Pentagon and this White House, I'd not be surprised if we see a "sudden, unexpected" increase in two-headed babies. (BTW -- did you remember to vote on the poll question?)

Bottom Line: It's our water, and we need to pressure water managers to make sure it's safe.

* 46 million is low because that's the number of people exposed to water systems that have been tested. Many systems are not tested, and tests do not look for all drugs.

Oil Is Now Like Water

Because prices are not rising fast enough, there are gas shortages: Retailers facing supply problems after Hurricane Ike have been slow to raise prices (gouging!), so they've just run their tanks dry. Read all about it at Knowledge Problem.

Baseline Stats

A new report quantifies San Diego's carbon emissions:

Passenger vehicles account for almost half of the carbon dioxide San Diegans create. Their driving habits emit carbon dioxide at a rate nearly 50 percent higher than the rest of the state.

[snip]

Flights out of Lindbergh Field created 5 percent of the region's carbon dioxide. Electricity generation produced a quarter; burning natural gas in home heating and stoves produced 9 percent. While per-capita emissions have been steady since 1990, the population has grown and driven emissions up. (San Diegans on average emit half the carbon dioxide that their counterparts do across the nation, the researchers found.)

Local climate and energy experts said the inventory's established baselines for emissions will be vital for measuring progress as California launches carbon-reduction efforts called for by Assembly Bill 32, the landmark state legislation that mandates a return to 1990 atmospheric carbon-dioxide levels by 2020.

Note that SD's "one-half of the national average" statistic is probably due to the good weather down there (less A/C and heating). There's a high correlation between paradise and sustainability :)

Bottom Line: You can't reduce what's not measured, but now SD knows what it has to reduce: driving.

hattip to DW

From over the Pond

BP, an American student in the UK, asked me a few questions:

In reading some of your entries, I learn that you advocate increasing the price of water. Does this apply to both tap water and bottled water?

No -- tap water is supplied by the local monopoly, Bottled water is supplied by competing firms. Bottled costs 1000x more than tap per unit, so I've no worries about bottled water being underpriced.

OTOH, I'm not against a bottle tax to pay for recovering/recycling bottles that would otherwise end up in the bin.

Would you argue that this is the best approach to improving water sustainability and lessening waste?

Yes for tap; yes for bottles -- different solutions for different problems, of course.

Finally, is there any advice you can offer on how I can go about raising awareness on the dangers of excessive water use?

Showers too long, etc? I'd not use the word "excessive" since water use is a personal choice -- and not a moral issue (to me) when water is priced "correctly"

Bottom Line: Our choices on water management and uses depend more on the way we get and use the water than on the water's physical characteristics.

Silly Legislation

Two California congressmen are trying to pass a federal law (the misnamed "California Drought Alleviation Act", or CDAA) that will allow the Dept of Interior (the oil guys!) to ignore the Endangered Species Act and turn on pumps that will divert water to agriculture in California.

Despite their "save urban households" rhetoric, the gents hoist their own petards when they note that 83 percent of the pumped water will go to agriculture. I left this comment:

I like food, but I am not persuaded that we should turn on the pumps to pump more water to ag or build more dams. Ag WILL have to reduce water demand BECAUSE of growing demand from enviro and urban uses.

Recognize this and then get to work letting farmers, enviros and cities reconcile their demand through markets -- not dams and lawsuits.

BTW -- CA law allows for seizure of water for human health, etc. The CDAA is NOT about cities -- it's about farmers. Admit it.

Speaking of dumb laws, the State Assembly has passed AB2275, a law that requires that bottled water companies report how much water they are withdrawing. AB2275 is a waste of time and sop to the anti-bottled water zealots. I'd wager that total bottled water withdrawals are less than 0.2% of total water diversions in the state (ag/urban/industrial). Let's pay attention to bigger issues, e.g., adjudicating groundwater, facilitating water markets, building a peripheral canal, etc.

Bottom Line: I hope that these guys get some campaign contributions from constituents, since these laws do nothing for the people of California.

Different Views

This post summarizes 16 stories on water in recent months. It's an interesting way of seeing how water means many things to many people. Be sure to click through on any given image to read the detailed story behind it.

BTW, this post is a decent answer to my GIO question, "how do different people feel about water?" 23 GIO questions to go!

Tearing Up Contracts

Nobody considered the fish when farmers, cities and governments wrote contracts for water delivery. Now the fish are getting a seat at the table, and someone's going to get hurt:

U.S. District Court Judge Oliver Wanger heard arguments late last week over whether to require the Central Valley Project to rewrite the contracts because each was based off a flawed ruling that the water promised to both farmers and urban dwellers would not harm the endangered fish.

If CVP contracts are re-written, other water rights are likely to be affected (because farmers often buy water from different sources), and water will be reshuffled across California. OTOH, the "new" contracts will probably just recognize a status quo of "fish flows" that has prevailed over the past few years.

Westlands Water District, an "agricultural area" that did not exist before water imports, is terrified:

The farmers in the Westlands district typically pump between 150,000 and 200,000 acre feet of water out of the ground each year. This year the total will be more like a half-million acre feet.

That is not sustainable and the farmers know it. This is why when California gets a wet year and the farmers get more than the typical portion of their contract, they pump it into the ground to recharge the aquifer.

Wolff noted that Westlands farmers have already let 250,000 acres go fallow because of the drought. She said to ask them to take those acres out of production permanently is asking too much.

"We're already short on the contracts," Wolff said. "Now they're saying they're going to decrease it even more? That would have huge implications."

Yeah, like Westlands going out of business, which would close the loop on a place that probably should not have gone into business.

Bottom Line: Slowly, water rights are being reallocated from uses of lower to higher social value. Markets would make things a lot simpler, but the bureaucratic method still prevails, and Westlands should remember that "he who lives by the sword will die by the sword."

Six Months of Aguanomics

I've been blogging at aguanomics for about six months now, and things are going great guns.* I want to take a few moments to summarize the why, what and where.

First, as you can see by the photo on the left, I have had a long history with water. I came to the topic as an academic because I was interested in the complicated interplay between market and bureaucracy, moral and commodity with respect to water. (Read What is Aguanomics?)

Second, I wanted to promote a dialogue on issues that I researched for years. My dissertation was about water management in Southern California, but I discovered many things there that applied elsewhere. I wanted to engage and extend the debate to those areas, in an attempt to improve the situation.

Third, I wanted to act as a "public intellectual," to advance the debate on issues with a goal of maximizing social welfare. My goal is not typical in the blogger world, where people are sometimes so attached to their partisan opinion that they fail to consider alternative perspectives. Although I am vulnerable to my own bias (and ego), I try to approach topics not from a perspective of right or true, but useful or helpful. Although I may seem to back both sides at times, that's only because a topic is too complicated to be seen in black and white. (Read more on my politics.)

Fourth, I wanted to get a "community" of people to discuss these issues. (Why else open posts for comments!) There are many views in this world, and most are right in some way. My job (and your job) is to engage in the debate to [stealing from The Economist] "take part in a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress."

In all of these areas, I've made massive progress, getting the word out to diverse audiences and getting them to participate in the debate (more more!).

My main concern at the moment is that I (we) see more "aguanomic" policies and actions implemented in California, the States and abroad. Can we work on that?

As far as metrics are concerned, consider these: Over 800 posts, about 400 people on RSS and email subscription, about 250 unique visitors/day, and a ranking of about 80/260 among economics blogs and in the top 65,000 worldwide (wow -- lots of blogs!).

BTW, here are a few hints to improve your aguanomics experience:

• Subscribe to aguanomics through RSS or email (see sidebar).
  
• Find all posts on an issue using a keyword search (see box at upper left).
  
• Recurring themes are covered in sticky posts (see sidebar).
  
• You can always send me questions or items of interest via email.

Bottom Line: This is great fun -- let's keep it rolling!

* My prior blog, "Sex, Drugs and Water Utilities" had posts on water. But, for some reason, people failed to see the connection [highly regulated industries] and shied away. By dropping sex and drugs, I've been able to concentrate on water topics, which are pretty sexy (and sometimes make you reach for drugs...)

California's Drought Will Continue

I just saw this report:

The National Weather Service's Climate Prediction Center's... charts show that, from Southern California to Central California, the drought will persist or intensify. In Northern California, the drought will persist but could ease slightly.

Maybe they were paying attention to our poll that wrapped up the same day, a poll in which 70% of respondents said California would have a dry winter

On a related note, read about permanent drought here, which reminds me of that wise saying, "nobody ever says the Sahara is in drought."

Bottom Line: Aguanomics readers are SO SMART -- they can either predict the weather or read newspaper articles before I do :)

Global Innovation Outlook

This past Tuesday, I was in Atlanta for an IBM-sponsored "Deep Dive" to look at water issues.* I was one of about 20 people who participated. We came from all areas (finance, engineering, food processing, government, academic, etc.) and discussed the present and future challenges facing fresh water. These dives will take place worldwide.

I had a wonderful time offering my "aguanomic" perspective (institutions matter, raise prices, government dominates water, etc.) to people more accustomed to looking at ROI, pump efficiency, revenue per liter, etc.

In future posts, I will discuss a number of "open questions" we wrote down at the end of the meeting. In the future, there will be various reports: verbatim and summary. In the meantime, those of you who want to get a good overview should check out the GIO blog entry on this past event. The blog will be updated with other material, and I'll try to link/comment when it is.

Bottom Line: Comparative advantage means that you are relatively better at something than someone else. By definition, that also means that they are relatively better at the other thing(s). Comparative advantage makes gains from trade possible and profitable. We all profited by trading ideas in Atlanta.

* It was almost a coincidence that Atlanta was also in "drought," i.e., they got only 30 inches when 50 is normal. Read more here and here. Many people wonder why IBM sponsored the event. The selfish reason is that IBM uses these for business planning and lobbying clients; the selfless reason is that sees this as a good way to contribute. That's why GIO pushes out a lot of information.

Army Corps Smartens Up

The US Army Corps of Engineers ("we never saw a dam we didn't like") is seeking public comment on its general principles. This bit caught my eye:

Section 9 includes a proposal to use a higher economic standard to justify recommending projects, project features, and increments of work whose primary purpose is to achieve economic benefits. A benefit-cost ratio (BCR) of 1.5, rather than the current 1.0 BCR threshold in the 1983 P&G, is proposed. The higher BCR would result in projects that are more likely to provide a positive net economic return on the federal and local investment. The proposed new standard would exclude projects, project features, and increments of work that provide a low return to the nation.

Given the number of times that BCR ended up being FAR below 1.0, this "margin of safety" makes LOTS of sense. My only question is whether the USACE will be able to find ANY projects with 1.5 -- they've paved over much of the country. Maybe they can use BCRs to undo their prior work -- as they are (with mixed success) in the Everglades.

Written comments on the proposed principles should be submitted by October 15 to Mr. Larry J. Prather, Assistant Director of Civil Works, at the following:

• Mail: HQUSACE, Attn: P&G Revision, CECW–ZA, 441 G Street, NW, Washington, DC 20314–1000
  
• FAX: 202-761-5649
  
• E-mail: larry.j.prather@usace.army.mil

Bottom Line: I'm glad to see that the Corps has decided to update outdated 1983 principles. Too many watersheds have suffered.

Environmental Services

Grist has a long post on this:

The federal Farm Bill that was passed and signed into law in June contains a little noted provision directing the USDA to establish a framework that would facilitate participation of farmers and landowners in emerging environmental services markets.

While I support the idea in principle (and certainly a better way to spend tax $$ than on crop subsidies), I worry about implementation, fraud and the generalized problem of subsidies (i.e., coercing people to do stuff...) This new program could be the start of a nightmare or something good.

Bottom Line: Every dollar going into environmental services should come out of crop support payments.

Leaking Money

A few weeks ago, I mentioned how one local utility was trying to find (and stop) leaky pipes. I concluded with "When water is scarce, it pays to patch the leaks in the pipes."

This story describes one Israeli company that wants to make a lot of money on finding and plugging leaks:

Miya’s primary aim will be to fix leaks in underground pipes, which the company estimates to be responsible for the loss of a third of the world’s drinking water. Recouping that water using pressure technologies, focused leakage detection and selective pipe repair, they claim could provide an additional 130 million people with fresh drinking water.

[snip]

Despite Miya’s humanitarian goals, Arison firmly emphasized the company’s for-profit intentions. “Our aim in reducing water loss in general, and in establishing Miya in particular, is to generate high financial yields,” she said. “By efficiently exploiting the supply of drinkable water, we are implementing our concept of sustainability.”

Leak detection is a tricky business suitable for a specialized business, so these guys will probably succeed -- if public companies decide to bypass their own employees in favor of the "experts".

Bottom Line: Leaky pipes are the great unknown of urban water supplies, and they have been ignored (push more water through and/or treat more heavily*) for a long time. Not any more.

* Stuff also leaks IN

Poll Results -- California Precipitation

Hey! There's a new poll on the right (vote for the kids!). Here are the results from last week's poll:

California's Winter Will Be? Selection Votes Drier than Usual 70% 26 Average 16% 6 Wetter than Usual 14% 5 37 votes total

Looks like most people are expecting a dry winter. I wonder if Mayor Sanders ("we don't need to reduce our water consumption now if we get rain this winter.") is listening...

And in an update in the Sept 10-17 poll, this report says that there have been 10 hurricanes to date. Experts predict that we may have 18 by Nov 30 -- the "end" of the Atlantic hurricane season.

Wow -- I said there were four at the start of the poll, I missed something. According to wikipedia, ten had been named by Sept 10. If I recalibrate your answers around 10 as start (instead of 4), that means that 23% of you said 10-13, 49% said 14-17, 23% said 18-21, and 5% said 22+ named storms. Wait and see...

Bottom Line: Looking into the future is much better when you do it with others: If you're right, you take credit; if you're wrong, you blame them :)

Congressional Corruption

A congressman lit a fire that damaged national forest land. When asked to pay a fine (after 4 years of delay), he put pressure on the Forest Service -- an agency he oversess on a Congressional committee -- to reduce the fine. They did.

Bottom Line: The Rule of Law does not, apparently, apply to Congressmen. Too bad for us.

Grandfathered Stupidity

Imperial Irrigation District -- not known for "excellence in water management" -- has managed to set a new record in dumb ideas:

New businesses are feeling a pinch as the Imperial Irrigation District deals with a water supply-demand imbalance — namely that there isn’t any water for them.

While reviewing applications for new businesses, Andy Horne, county deputy CEO for natural resources development, said the county looks closely at whether it can provide enough water before approving new businesses.

But, under the IID’s proposed water regulation guidelines, businesses’ water usage will be determined based on past usage — something new businesses don’t have.

Farmers use 96 percent of IID's water. They are allowed to trade it among themselves, but businesses are fined if they use more than "their share."

Bottom Line: End the misery. Implement a real market for water at IID.

What Doesn't Stay in Vegas

The "Clean Water Coalition" (Vegas and others) has received approval to discharge its effluent (treated sewage) directly into Lake Mead, bypassing the Las Vegas Wash (a wetlands that exists due to Vegas's various water outflows).

People living next to Lake Havesu (the reservoir behind Parker Dam that's downriver from Lake Mead, a reservoir behind Hoover Dam) are upset at the prospect of lower water quality. In particular, they are worried about chemicals that persist after and result from chemical treatment of sewage. Unfortunately, they cannot stop their upriver neighbor from doing what it wants.

[Vegas is not alone. San Diego is applying for yet another waiver to avoid secondary treatment of sewage it discharges into the Pacific. San Diego's exemption is the largest in the country.]

Bottom Line: Vegas should guarantee that water quality will not decline as it changes its discharge practices.

hattip to DW

Water Hogs

I was contacted by Sally, yet another inventor with a brilliant idea. Rainwater HOG is a modular rainwater rescue tank that can be installed horizontally or vertically, as a thermal mass or drinking water supply.

The trouble (according to Sally) is that water in the US (as opposed to Australia, where she comes from) is too cheap, which makes it hard for her to sell her capital-intensive water conservation technology.

I told her that I am doing my best to raise water prices. I also mentioned that rainwater "capture" is illegal in some places in the States. She had heard about Colorado but not about other states.

"Is it illegal to "divert" rainwater in other states?" She asked. I don't know. Readers! Do you know?

Bottom Line: This great idea will not get off the ground while water is too cheap to conserve.

Cooling Slapdown

"The Myth of the 1970s Global Cooling Scientific Consensus" [PDF] is in the current Bulletin of the American Meteorological Society. Fleck is a co-author on the piece, which should piss off the people who claim that scientists have been flip flopping on global warming.

Misplaced Emphasis

JT sent me this interesting email:

In two years, the Los Angeles Times published two letters about water. One was from a contractor pointing out that building regulations require builders to install wasteful appliances, and the other was mine endorsing their position on paper water. They did one piece on water in California that was quite comprehensive and accurate. The writer mentioned agricultural waste and pricing at the end of the piece. I sent him email congratulating him for getting everything right. His response was thankful and it made it clear he was overwhelmed by the subject. The Times simply does not want to write about the water problem, and I have no idea why?

Why indeed? I asked JT to confirm the two letters in two years "fact," and he admitted that he may have missed one.

Taking JT's observation for granted, I had to ask myself why the LA Times might not be publishing letters on water. (I know that the Times has published a number of articles on water policy.) One reason might be that LA has always had a better water supply than other parts of Southern California, i.e., "we don't have a problem." Another may be that the LA Times, a newspaper controlled by the Chandler family for many years, does not want citizens discussing water issues -- since they may reduce the demand for new housing.

As Jake said in Chinatown:

Have you ever heard the expression "Let sleeping dogs lie"? Sometimes you're better off not knowing.

Bottom Line: Here at conspiracy central, we see ghosts. (Of course, some people were accused of seeing ghosts at Fannie, Freedie and AIG. Go figure.)

Drugs in Water Update

I blogged in March and April about drugs in the water supply. In an update to those stories, the Associated Press reports that the tap water of at least 46 million (not 41 million) Americans are contaminated with some variety of drugs.*

The trouble with the 46 million number is that it is the result of cities that have tested for drugs in their water supply. Many (including NYC) have not tested for drugs. Even worse, tests do not look for every sort of drug -- just the ones that are regulated and/or detectable at low cost.

Note that bottled water will not "solve" these problems: Many brands come from municipal supplies, while others ("spring water") come from untested and unregulated supplies that may not be "spring fresh".

Bottom Line: We can't fix problems with water quality until we know the quality of water we are dealing with. Put the pressure on.

hattip to AD

* Although drugs can be measured, that doesn't mean that they are at harmful levels, but try explaining that to the mother of a newborn.

Sachs and Bono Blog on MDGs

Read it here. Sachs, unsurprisingly, wishes there was more money for aid -- and less for bankers.

Addendum: International Political Economic Zone gives a thorough commentary.

Disobedient Children

uh, I mean San Diegans...

Mayor Sanders berated his citizens for "only" cutting water consumption by 5.7% when his goal was 10 percent. Try harder, he says, or we get mandatory rationing...

Bottom Line: How about raising prices? People will use less, and the Mayor can save his breath for more important things -- like chatting with developers.

hattip to DW

Sustainable Fisheries

Many fisheries are overexploited because access to the common pool resource is not restricted. Fishermen, in a race to catch what's available, put in tremendous effort to get some share of the fish ahead of others, and the result is a tragedy of the commons, i.e., everyone is poorer.

Economists have known for many years (at least since Gordon's 1954 article [PDF]) that privatization is one solution to common pool problems.* Privatization -- by giving each fishermen exclusive access to an area or a fixed quota of fish from an area -- will allow the owner to manage the resource in a sustainable (and profitable) manner and reduce over-exploitation.

The tradable version of these rights are called Individual Transferable Quotas (ITQs), and they have been used in New Zealand, Iceland and some US fisheries since the 1980s.

For economists, ITQs are a no-brainer, solving a known problem with known tools, and the empirical evidence has confirmed that ITQs can bring fisheries back from the brink.** Others were more skeptical -- claiming that ITQs were special solutions for special circumstances.

New research knocks skeptics down a few notches. Here's the NY Times version, but I prefer the Economist's version:

Christopher Costello and Steven Gaines of the University of California and John Lynham of the University of Hawaii assembled a database of the world’s commercial fisheries, their catches and whether or not they were managed with ITQs... they found that ITQs halted the collapse of fisheries (and according to one analysis even reversed the trend). The overall finding was that fisheries that were managed with ITQs were half as likely to collapse as those that were not.

...The new data show that before their conversion, fisheries with ITQs were on exactly the same path to oblivion as those without.

Note that these principles also apply to farmers racing each other to pump from aquifers.

Bottom Line: Property rights matter, and those who work with resources should embrace them, lest they overwork themselves on the way to destroying those resources. (There's a lot of space for improvement -- only 121 of over 10,000 fisheries are managed with ITQs.)

* Another solution is for those who have access to the common pool to agree on community institutions that will limit exploitation. This solution is strongly associated with Elinor Ostrom.

** My favorite example (related by Jim Wilen, a really amazing UC Davis professor and expert on fisheries) is of the Alaska halibut fishery. Before ITQs were introduced, the "season" lasted three days, during which fishermen took great risks to catch whatever they could. When they returned to dock, the price of fish crashed as supply overwhelmed demand. After ITQs were introduced, fishermen could choose when and where to catch halibut. They put in less effort (the season lasted for months), got higher prices, and benefited from a healthier fishery. Now (according to the above-cited articles) they want to reduce total catches to make their ITQs even more valuable.

Hydrolic Empires

During the Olympics, Beijing had enough water. Now (suddenly!) there is a "grim shortage," and government officials have ordered the transfer of 300 million cubic meters from Hebei, which is already suffering a severe drought. (Beijing's annual consumption is 3.5 billion cubic meters.)

Bottom Line: Good news: Beijing will get the water. Bad news: Hebei loses it without warning. Typical news: Totalitarian governments do what they want.

Corporate Water

[A topical post, as I am in Atlanta for an IBM-sponsored discussion of fresh water issues. Report to follow.]

This Alternet rant against privatization of Akron's sewer network is a good example of a conclusion in search of supporting evidence. In it, the author* tries to link the present idea to past "failures" of privatization. Let's take a long look at this "analysis":

1. The deal: Sell Akron's wastewater business for $250 million. $75 million will pay off debt, and the rest will fund educational scholarships.** The buyer will then operate the system, do maintenance and recover its investment through revenues.
   
2. The dodgy parts: The mayor tried to "fast track" approval for the deal before citizen groups could oppose it. (The sewer workers union opposed it for obvious reasons.) Now the deal has been put to voters, who can choose between pro- and anti-privatization measures.
   
3. The desperate: Instead of analyzing the deal at hand (this article is MUCH better), the author tries to make all privatization deals look bad ("water profiteers", "risky", etc.). I want to spend more time on this part -- looking at the "failed" Atlanta privatization in particular -- because the lessons learned probably apply to the Akron deal, but in a way the original author may not have intended.

Before we get to Atlanta, let's look at the Mayor's idea. Because federal subsidies for wastewater have lapsed, cities are facing the true cost of upkeep and improvements. Many of them do not have the financial resources to make all the improvements desired, so they turn to deeper pockets -- private firms that can pay for improvements NOW in exchange for future revenues.***

Those who oppose this "logic" on ideological grounds ("Just say no to Privateers!") are often also culpable for current problems: They may oppose rate increases ("our utility shouldn't charge money!") and/or fail to push for operational efficiency ("public workers serve the Public!"). Private utilities, relatively speaking, face more scrutiny on operations and rate increases.

So, we have those in favor and those against, and both groups are trying to support their position by citing earlier successes and failures.

Let's consider one of the main cases cited by anti-privatization forces, the "failed" privatization in Atlanta. Here are the bare facts:

• United Water (a division of Suez Environnement) began managing the water supply in 1999.
• People complained of rate increases, brown water, slow service, etc.
• The City and US Water agreed to void the contract in 2003.

This last bit is the most interesting: The City did not force UW to stay in the contract (unpopular), and UW did not argue with the City wanting to end the contract (unprofitable). Both parties preferred to walk away.

According to Reason (a pro-privatization source), UW was doing a bang-up job meeting contract provisions, goals, etc., but the task was far greater than UW had bargained for. In fact, UW had won the bidding to run Atlanta's water system at a price that was far too low (the Winner's Curse). The brown water (from repairing pipes and mains), slow service, etc. reflected an organization in a hasty panic to meet goals and deadlines beyond its reckoning.

This scenario -- common in the "privatization failure" literature -- boils down to the new manager trying to restore a system that has decayed after years of underinvestment and deferred maintenance due to rates being held down. The manager's job is to try to bring the system up to snuff under agreed rate schedules, with the hope that revenue comes in faster than costs go out. Private managers have often lost that race when they discovered more problems -- and made less money -- than they expected.

Stepping back a bit, let me emphasize that I do not favor either private or public. Each model suffers problems: Public water works can be overstaffed, secretive, and underfunded; private water works can charge "too much", finagle contract terms, lay off extra workers, etc. In both cases, communities need to get involved, watch and make sure that "their" water is well managed.

Bottom Line: The People need to watch their water (both coming and going) if they are going to get quality service at an affordable price. If they do not, the monopoly (public or private) will serve itself first and "the community" later.

* Jon Keesecker is a senior organizer with the Take Back the Tap campaign at Food & Water Watch. He works with grassroots community groups across the U.S. to prevent the privatization of public water resources. He is also editor of the newsletter Currents. Previously, Jon worked as a community organizer on water issues with Sweetwater Alliance in Michigan and Massachusetts Community Water Watch. He has a B.A. in Philosophy from Central Michigan University.

** Yeah, it's "for the kids" -- whatever.

*** Publicly-traded firms (and their financiers) are a bit under the weather these days; don't be surprised if this whole deal blows up.

Biased Research

Read this excellent "confession" [pdf] of an activist who had ignored -- for many years -- corporate-funded research (bias!) while accepting research funded by government and non-profits (integrity!). Not any more:

I’ve woken up to the reality that genuinely “neutral” sources of research funding are almost entirely mythical. The reality is that government and non-profit funding is severely limited in some areas and is itself controlled by people who have social, political and public policy agendas of their own.

Bottom Line: The best way to arrive at "truth" is to struggle with and reconcile many opinions until you feel comfortable understanding how they all fit together.

Global Water Crisis

Frank R. Rijsberman (former Director General of the International Water Management Institute, now at google.org) has an excellent and comprehensive overview of water issues in the world. Read the whole thing, but start with this useful observation:

water for drinking, cooking, bathing, and all other domestic needs is only a small fraction of the requisite supply. A much larger amount is needed to grow our food as well as the fibers, such as cotton, in our clothes. On average, growing a single calorie of food demands a liter of water... A healthy diet of 3,000 calories requires at least 3,000 liters of water to produce; a vegetarian diet requires the least amount of water, while a Western, meat-based diet rich in corn-fed beef can require as much as 15,000 liters of water per person per day. Roughly seventy times as much water is needed to grow the food that people eat as to serve domestic purposes.

Therefore, to understand the water crisis we need to distinguish two fundamentally different problems, which will require different solutions. The first, the drinking water problem, is about access to affordable water services: here we face a service crisis. The second is about the lack of the vastly greater water resources needed to grow food and maintain ecosystem services: here we face a problem of water scarcity, a resource crisis.

There's much much more, including discussions of institutions, green versus blue water, etc.

Bottom Line: Different problems will require different solutions (or different markets for different customers :)

hattip to JC

Natural Hydration Council

from Grist: Nestle Waters, Danone, and Highland Spring have founded the NHC to "research and promote the environmental, health and other sustainable benefits of natural bottled water."

You've got to be kidding me. Really.

Now what do they mean by "natural bottled water"? as opposed to unnatural bottled water? or natural unbottled water?

I went to their site and tried to become a member. I got this:

Thank you for requesting to access the Members Area of the NHC web site. This section is only available to members of the Natural Hydration Council. Your application is currently being reviewed and we shall be in touch shortly to let you know whether your request has been successful.

I'll let you know what happens. In the meantime, chew on this nugget:

In an independent survey conducted in May 2008 by Probe Research Inc., Canadians said they are not choosing bottled water over municipal tap water. They are choosing bottled water over other bottled beverages with more calories.

Good news!

Bottom Line: There's a lot of money being made on bottled water. Like cigarette manufacturers (remember the Tobacco Institute?), they will fund and promote whatever research supports bottled water sales.

New Yorkistan

People in the developing world have it tougher than we do:



Bottom Line: "Development" can be measured by the quality of water management. [We've got some issues.]

Dictators and Democracy

It's conventional wisdom in development economics that natural resources allow governments to ignore citizens. (Because the resources generate revenue, the governments need not depend on citizens for taxes.)

Good governments may use the resources to benefit citizens, but bad governments (that's why they are developING countries) will use the resources to benefit themselves (Swiss bank accounts) while failing to provide public goods, etc.

This paper fleshes out that argument by exploring one means of exploitation:

This article explores why authoritarian regimes create legislatures and then assesses their effect on economic growth and investment. In authoritarian regimes more dependent on domestic investment than natural resource revenue, the dictator creates a binding legislature as a credible constraint on the regime's confiscatory behavior. In regimes dependent on natural resource revenue, the nonbinding legislature serves as a mechanism for the dictator to bribe and split the opposition when he faces credible challenges to the regime. Using data from 121 authoritarian regimes from 1950 to 2002, the results indicate that binding legislatures have a positive impact on economic growth and domestic investment, while nonbinding legislatures have a negative impact on economic growth.

Bottom Line: The only way to avoid the "resource curse" is to have powerful (democratic) institutions for managing those resources.

Good Tree Bad Tree

This long article discusses water issues and ends with...

Mesquites have deep, deep taproots, wells in miniature that can provide them with water even during severe drought, thereby lending them an edge over such competitors as grasses. And they’ve been spreading — because of changes in wildfire regimes, livestock grazing or climate change or because woody plants are generally benefited by higher levels of atmospheric carbon dioxide. No one’s entirely sure why.

Mesquite trees enrich the soil under them, and they furnish good wildlife food and habitat, but in an era of climate change, another service they provide may prove to be more important: They’re long-lived and effective at sequestering carbon. If residents of the arid Southwest decide to get serious about doing what they can to limit concentrations of carbon dioxide in the atmosphere, encouraging the growth of mesquite trees wouldn’t be a bad way to go.

Except for this rub: A mesquite woodland uses a lot of groundwater — more than twice as much as the grasslands that are native to the same terrain.

So the trees are good as carbon sinks (good tree!) but bad as water consumers (bad tree!). I suppose that we should just be happy to know this, but you can be sure that someone will choose ONE aspect (good OR bad) to emphasize when proposing a "mesquite" policy.

A few years ago, I met a forestry guy who said we should cut down trees to increase the water supply. This policy sounded a little suspicious to me at the time, but now I see his point. In places where "no fire" policies were in place for years, dense tree cover should be thinned. OTOH, such an idea is no excuse to log, say, an old growth forest at steady-state densities.

Bottom Line: It's fine to reverse our own dumb forest policies, but let's not undo Nature's policies.

hattip to DW

Water and Growth

via Aquadoc, we get this interesting discussion [PDF] of changing land use decisions:

the exit of the federal government from subsidizing regional development, along with state inaction, is forcing urban areas to begin linking land use and water resources planning for the first time. Western cities may not stop growing, but growth accommodation will be more difficult and more expensive than it has been in the past. Increasingly, some form of water supply planning will be necessary before growth can continue. Water will be more costly, and the trade-offs between growth and its alternatives will become more intense and obvious. Global climate change adds an additional wild card to the mix. We are still a long way from achieving sustainable human settlement in the American West.

In Section 3.4 of my dissertation, I also discuss how cheap water was used to promote urban growth (sprawl) in SoCal in the 1950s and 1960s (a point that environmentalists have made for years), and I agree that scarce water is now dampening urban growth -- no matter what the mayors of San Diego and Las Vegas might want...

Bottom Line: When the price of development is subsidized, "over-development" will result. Now we are paying the price of past over-development (in terms of unreliable water supplies) while the developers enjoy their fat profits.

hattip to DW

Revolution

This strip gets at several topics (hyperinflation, water quality, water markets), but it reaches the right conclusion. Best beware the results of incompetent government.

Bottom Line: If that water was "free," it wouldn't be available at any price.

Economically Trivial Fish (or Farms?)

In response to this post, Fixed Carbon said...

A friend commented to me recently that the wealth generated by the agricultural sector is so much greater than that of salmon fishing and the other economically trivial concerns of environmentalists that we should forget about the fish. What do you think?

This comment raises two big concerns -- marginal values and property rights. Although those concepts can take ages to discuss, here's my simple summary:

The marginal value of something falls as you have more of it. The first glass of water (in the desert) is worth a LOT compared to the millionth glass of water out of a reservoir. Thus, it's not a simple case of all fish or all ag -- but where to balance between those two extremes.

Property rights are important. You can't just knock down someone's house to build something "more important" (unless you are in China or are named Kelo), so it makes no sense to wipe out a river and the "rights" inherent to the flows of water and fish in the river. The same case can be made for riparian rights to divert flows from a river onto adjacent farmland. What matters, once rights are determined, is that those who want to alter the distribution of rights be able to negotiate with those who hold them. Negotiation should involve money (and perhaps charm) -- not guns or legal coups.

Bottom Line: Farmers and enviros will have to live with each other. Better yet, they have the greatest incentive to protect property rights. (If they don't, urbans will eat both of their lunches.)

Google Transit

This addition to google maps gives public transit directions to get from A to B. Coverage is limited.

Bye Bye Baikal?

The Russians are expanding industrial production on Lake Baikal. Since Soviets Russians LOVE big mines, I'm afraid for the future of the world's biggest lake. [Photo: second largest mine in the world -- in Russia]

Addendum: Baikal is the is the largest lake by freshwater volume. Thanks for the correction, SISWebfolks.

NAFTA Water

I was sent this economic study [PDF] on the potential for selling Quebec's water to the US. Here's the money quote:

If the province exported, for example, 10% of its one trillion m³ of renewable fresh water per year at a price of $0.65 per m³, this would generate $65 billion in gross annual income. Even if only 10% of this amount is collected in royalties, and even if the technological, economic and environmental difficulties to be overcome are substantial, the amounts involved are considerable.

BTW -- $0.65/m³ is the "backstop price," i.e., the price of producing water anywhere by desalination. Moving the water (to San Diego!) will take energy and infrastructure so the market price for water will have to be less to reflect those "delivery" costs.

Bottom Line: If water managers raise prices, there will be less demand for Quebecois water. Even so, don't count them out in the long run. (Remember how people laughed at Alberta's tar sands?)

Mission Failure

MS sent me this interesting question:

what happens to a Bureau of Reclamation (BR) project when the entirety of the user base has converted from irrigated ag to suburban residential use?* All my readings of statute, case law and regs indicate that absent specific Congressional authorization, BuRec has no authority to deliver water to the now-urban use irrigation district.

I replied with:

BR is in trouble since it's supposed to deliver water to farmers -- not to highest and best use. If the farmers get it, sell out and move on, BR doesn't have a clue of what to do next, except pretend that nothing happened. (BR's statues make sales hard/illegal, but deliveries didn't stop, right?)

One way to get around this is for BR to assume farmers are still getting the water and then reselling it. Farmers probably need to get an exemption or pay off past subsidies for BR to walk away...

Can anyone comment on the general situation or a particular case with BR?

Bottom Line: BR doesn't have the institutional capacity (or authorization?) to innovate. (Can it ever?)

* The project is apparently in the interior Columbia basin, where "BR diversions are dewatering a salmon/steelhead stream on the Nez Perce Reservation but the water diverted is supplying outdoor landscape/small garden supply to 18,000 people (domestic from a groundwater source). Federal judge just tossed the BR's BiOp so tense and intense negotiations in progress. Tribal Winters rights not yet determined. The irrigation district receiving the BR water is the sole recipient of project water: there are no other currently possible users other than leaving the water instream."

It's Complicated

This bit of corporate propaganda is too long, but it makes a good point by accident. The speakers -- guys from ITT and two NGOs that received $3 million from ITT -- discuss how they have to "ask very very hard questions" before they can "solve" local water problems.

The Sanitation Crisis - ITT Watermark Discussion Series

They think they are tacking "difficult" tasks because they are trying to modify one-size-fits all "solutions"* to fit local conditions. Although flexibility (customer service!) is second nature to any entrepreneur in a competitive market, it is foreign to the big engineering firms that have installed command and control water infrastructure for government clients during most of their history.

Bottom Line: Most people know what they want. If you want to help, ask them what they want and then do it.

* I still think it's funny when companies sell "solutions" that are actually products. It's not until a product is combined with habits, institutions, modifications, laws, training, etc. that it becomes part of a real solution.

Freakonomics Debrief

I really enjoyed guest-blogging at Freakonomics last week. I got interesting* emails, good comments and lots of positive feedback from people I do and don't know.

I am wondering if blogging at such a high-profile place has any permanent effects. You can see that traffic to my site rose to about 400% of its normal volume (800 instead of 200 unique visitors) before returning to "normal."

OTOH, my "brand" is growing stronger among regular readers and other bloggers, so perhaps this is the way reputation is made: Some people deal with you all the time, some can remember your name, and some vaguely remember a name like yours connected with... what was it?

The good news is that I realized how pleased I am to be working on water issues. Water is not just relevant (life!) but also interesting, and I find my understanding of people increasing with my understanding of water. We are, after all, 60 percent water. :)

In the coming year, I will be thinking of where I am going with my life and career. The most obvious question is whether I will stay on an academic path (i.e., assistant professor at a research university) or go elsewhere (industry, liberal arts school, NGO, consulting, etc.). I'm not sure now, but I do enjoy communicating economics to people who care about and are likely to affect how water is managed.

Bottom Line: Life is complicated. Try many things in the quest for success.

* The weirdest request came from a website that offered to pay me for a "review" of their "medicine" for urinary tract infections -- presumably to build traffic. No thanks.

Poll Results -- Atlantic Hurricanes

There's a new poll to the right!

How Many Atlantic Hurricanes in 2008? 4 (already) - 7 23% 9 8-11 49% 19 12-15 23% 9 16 or more 5% 2 39 votes total

Bottom Line: Looks like our friends over at Env-Econ will have some "Wisdom of Crowds" to check in the next few months...

Geo-Engineering

The Economist discusses different proposals and -- importantly -- the potential dangers of "engineered" ways of slowing climate change:

Many scientists are understandably nervous about tinkering on a grand scale with the atmosphere and the oceans. The Intergovernmental Panel on Climate Change—a scientific body appointed by the United Nations to assess the risks of a changing climate—has described geo-engineering as “largely speculative and unproven, and with the risk of unknown side-effects”.

Broadly, there are two types of fears. The first is of technological hubris. History is littered with plans that went awry because too little was known about complex natural systems.

[snip]

The other fear is of moral hazard—the possibility that people would see the promise of geo-engineering their way out of trouble, despite its risks and uncertainties, as an excuse to continue to pollute the atmosphere as usual.

An excellent summary on the topic.

Bottom Line: I am willing to support reversible pilot schemes to test geo-engineering only after we stop doing stupid things, e.g., subsidizing fuel consumption (Iran, Indonesia, Venezuela, India, et al.).

Addendum: Read about the impact of $0.04/liter gas in Venezuela, e.g., 30 km commute that takes 3 hrs.

Gleick Responds...

...to my post on the Pacific Institute's recent report. [Ironically, I am accused of thinking that water markets are perfect. If only!] Read his response and my reply here.

Readers interested in the command and control perspective of politicians and regulators versus spontaneous order perspective of economists (me!) should take a look at this post on Hayek, Knowledge and Prices.

Hayek's 1945 The Use of Knowledge in Society [PDF] is perhaps the only paper one ever need read to understand why markets are awesome and central planners doomed.

Love for Showers

In this post, I reported that people prefer to install high-efficiency showerheads over shorter showers.

An inventor sent me a link to his 1.5gpm showerhead ("40 percent more efficient than the 2.5gpm showerhead!"), and he makes an important point:

The amazing thing is not how much it saves, rather the high (96%) user acceptance. People in general love the “feeling” of the high pressure shower, especially since most low flow showers have 30% to 60% complaints.

Bottom Line: I'm David Zetland, and I do NOT endorse this showerhead. I do endorse innovations that serve consumers and make profits for inventors.

Does "Free" Water Help the Poor?

J. David Foster writes this guest post from Hyderabad:

"I fully recognize that the U.S. has its share of problems but as an analyst one of the great things about India is that they leave so many of their problems out in the open where they are so easy for me to see. Not-with-standing this apparent oppeness, people then become very adept at ignoring (and perhaps not even seeing) those same problems. The Hidden Cost of "Free Water" is an interesting case in point.

When I inquired about the poor who were supposed to benefit from the tremendous water supply subsidies in urban India and yet were not even connected to the water lines, I was told not to worry because the poor got their water "for free" from public standposts, fountains, and water tankers. This link provides a useful look at the true cost (to the poor) of that water and it has been a useful class room exercise for helping students and policy makers better see some of those hidden costs.

Armed with this little spreadsheet and other analysis we have been able to persuade some policy makers that it is far better to provide household connections and charge for the water than to provide "free water" at the stand posts. With direct connections, especially if those connections are metered, the city benefits through increased revenue and the poor benefit because even if they had to pay as much as the richest man in town, the water still costs them less than the "free water" they had to fight for.

Unfortunately, traditional subsidies are highly perverse because they subsidize consumption but not connections. Water tariffs are typically 2 to 5 Rupees per kiloliter (5 to 10 cents) while typical connection costs can run as high as 10,000 Rupees ($250.00), and insurmountable barrier to the poor and, perhaps, not altogether accidental. Such low tariffs encourage profligate water use while high connection costs do nothing to encourage conservation.

Interestingly when direct connections are provided, not only does the incidence of water borne disease go down and the standard of living go up but the attendance of young girls in school goes up as well because they are the typical water carriers for their families."

[DZ's] Bottom Line: Don't condescend to "help" the poor by giving them "free" stuff. If free comes at a cost (longer waiting, lower quality, lower reliability, etc.), then perhaps the poor would prefer to pay for service.

Delta Death, Part 2

Lund and Howitt, two authors on the recent PPIC report recommending a Peripheral Canal, explain how Delta farmers are not going to get their subsidies way any more:

"For those delta landowners where the policy has been historically to help them--they would be losers. But I don't see any way they are not going to be losers, so the state policy should be that we all quit losing."

[snip]

"We wanted to put a lot of work into what really amounts to a triage list--and say which islands, if they collapse, we say, 'Sorry about that,' but you don't repair them or pump them. You adjust to a new ecology."

Bottom Line: Those spending OPM (Other People's Money) have a great time, but they should not be surprised when the party ends.

Pricey Holes in the Ground

Two SoCal water districts plan to spend $200 million to treat wastewater and then let up to 5,000 AF percolate into the ground. Those numbers make San Diego's $12 million for 30TAF look like a deal, but the more-expensive project will be closer to final users instead of over a hundred miles away.

The pity is that none of these districts have tried to reduce demand by implementing higher prices. (I mean really higher conservation prices.) Right now, all they are doing is spending more to "increase" supply.* If demand keeps increasing -- whoops -- the "new" supplies will also be inadequate.

Bottom Line: Water managers need to pursue the cheapest option -- not the engineering option -- first.

* I say "increase" because supply may not go up as much as promised.

hattip to DW

More on Dumb Farmers

This weekend, there were more op/eds on the Pacific Institute's report "Stupid Farmers Are Leaving Money on the Table" (my title -- see prior post), which claims that farmers could save oodles of water if they would just shift crops, install drip irrigation, etc. The flaw in the report is that it fails to highlight the fact that farmers will only make such moves (and save such water) when it's profitable. Economics strikes again.

Anyway, the SF Chronicle's op/ed rather naively repeats PI's claims. The Modesto Bee op/ed offers a more-useful perspective -- mentioning, e.g., how flood irrigation replenishes groundwater (something I've discussed before). Even better, the Bee mentions this blog and promoted me to "Professor." (Won't my advisers be proud!)

Bottom Line: Don't judge a book by its cover or an argument by its conclusion. Think through the implications!

BIG hattip to JC

Aquatest

Aquatest is an easy-to-use, low-cost device for testing water in developing countries.

Bottom Line: People everywhere need this product.

hattip to ED

Water Quality

Water quality is a beast -- it's hard to measure and control what may harm us in water.

We do know that many people do not have access to drinkable water. One way to improve their water is to give them cleaner supplies and/or purification technology. Tedd Miguel (UC Berkeley economist) reports that people in a study community in Kenya are unwilling to pay more than 15 cents/month to have clean water. [The community is considered to be typical of the developing world.] That's a problem: About 20 percent of kids in the study community have diarrhea in any given week.

Why do people who can afford such an amount fail to buy higher quality? The authors suppose that people may lack the practical health knowledge to understand the importance of clean water.

One organization trying to address that issue is the San Francisco-based Aquaya Institute, which "delivers scientific and technical innovation for preventing waterborne disease to developing countries." They'll need help.

Bottom Line: Bad water kills many people in developing countries. More wells and pipes will not solve the problem without better institutions for managing water quality.

hattip to JC

MET to End Subsidies to Farmers

MET (Southern California's water wholesaler) has sold "agricultural water" at a discount for years. But that program no longer makes sense. As MET's General Manager explained, why sell discounted water when demand consistently exceeds supply?

So MET is trying to end that program:

The proposal allows farmers to opt out of the discount program in January. It also outlines new conservation incentives to help farmers who pay full price install highly efficient irrigation equipment. Metropolitan also might pay farmers to not irrigate some parcels.

[snip]

Even farmers who opt to pay full price next year would be subject to any reductions in the regional water supply, just like non-farmers.

In the first paragraph, it seems that farmers choose whether or not to take cheaper prices. In the second, it seems that those who do opt to pay more will not have access to more "reliable" water supplies. So why would farmers switch from low prices to higher prices?

Because farmers who choose to pay more (the rate everyone else pays) will be able to escape current 30% "ag customer" rationing. While it's true that they may -- in the future -- face the same rationing as everyone else, that possibility is less threatening than the current, real cuts.

Bottom Line: One way or another, MET is smart to end its subsidies to farmers in exchange for greater reliability.* MET should now take the next step: Raise prices. When total demand falls to meet actual supply, customers will have 100 percent reliability.

* Something that I and many others have suggested for years (p. 17 of my dissertation!). Thanks for listening!

Not So Sexy Bottles

Sales of bottled water have slowed dramatically (to 1% growth). The marketers claim that people are getting squeezed by the economic slowdown. I (and commentators) think that people have decided that bottled water is not sexy.

Bottom Line: Consumer fads depend on the opinions of others. Now that bottled water is evil, people are drinking far less of it.

Feedback Loops

The Economist reports on current green home technology, and I thought this bit was interesting:

Once the house is sealed, producing its own power and using it efficiently, its inhabitants become the weak link. Lucid Design Group, a software company in Oakland, California, is trying to fix that. It has developed a web-based dashboard that uses the data from building-management systems to plot real-time electricity, water and gas usage. Simply visualising energy use this way can prompt homeowners to reduce their usage, says Joe Gotshall, a manager at the company. Lucid’s dashboard was first used to pit groups of university students against one another in green dormitories at Oberlin College in Ohio. Mr Gotshall says the competition reduced energy consumption by 55%.

Bottom Line: People need information before they can make decisions. After they make decisions, they need to see results. That's how you learn.

Institutional Inertia

In this short paper, the author discusses the role of institutions in the social management of natural resources, i.e.,

A number of scholars have used game theory to explain the power of institutions to resolve problems plaguing the commons. However, the game theory used thus far does not take into account that how we value the commons is subject to change. Using conventional game theory to describe the power of institutions to govern the commons, the article extends that theory and highlights a dark side of institutions.

[snip]

Values often collide in the commons. Should we protect owl habitat or employ local loggers to cut down trees? Do we keep our rivers free flowing or dam them for drinking water, to produce electricity, or for recreation? What should be done with the Arctic National Wildlife Refuge? The number of competing pressures vying for the commons within our forests, cityscapes, radio spectrum, and even global atmosphere highlight such tensions.

When institutions give a particular vision of the commons a privileged place, we may later come to regret it because our institutions lag behind our changing values, and sometimes painfully so. Stable institutions thwart emerging values in the commons by allowing a particular group with a particular vision of why a commons has value to hold it hostage to the detriment of other groups with competing visions of the commons. When values change, commons users seem more like commons cartels, and stable institutions look more and more like tragic institutions—an institution that systematically undermines rival values.

Bottom Line: Many institutions for managing water were established in a different era, an era when we had different preferences for the way water is used [I discuss this in my dissertation]. Now that times have changed (and many say they have), those institutions delay, rather than facilitate, change from a present use to a newer, more beneficial use.

Marketing or Education?

Sorrento Films (the production company) sent me this pro-conservation PSA [public service announcement], which was paid for by a cable company.



The message (save water, protect clean water) is not nearly as blunt as the pro-infrastructure message in "Liquid Assets," a video I called semi-propaganda a few weeks ago and which is now being used as propaganda, i.e.,

AWWA is recommending that utilities consider encouraging their local PBS stations to broadcast a documentary film on water infrastructure and use the opportunity to communicate the importance of water and wastewater service and the need for reinvestment in water infrastructure.

The trouble is that this propaganda may be "worthwhile," so it may not be a good idea to dismiss it as useless.

Bottom Line: When someone accepts funding from a source that does business in an area (e.g., The Steven Bechtel Foundation supporting the PPIC report on the Peripheral Canal), it's hard to know if the resulting product will serve the People or the Funder. Tricky.