17 Feb 2009

Drought and Economic Meltdown

Tom Graff of EDF asks:
Can we use the attention the drought has focused on water to address long-term issues, including most notably the effects of climate change, simultaneously with the focus on addressing this year's immediate drought-related problems?
...and here's what I said:
Now is the time to introduce the radical (!) notion of markets for water in the agricultural sector. Markets would allow ag to reallocate 80% of "our" water among themselves without getting into the pain of ag-urban or ag-enviro transfers.

With a drought AND poor economy, it makes sense for ag to improve the allocation/pricing of its most important input.
Obviously, functioning ag-water markets would reduce the cost of ANY transfers (forced or voluntary) from ag to urban/enviro uses.

They would also push back the day when California can no longer grow food for lack of snowpack and preciptation.

Bottom Line: Markets serve all those who use them. Farmers need water markets if they are to prosper in the new era (well, since the 1970s) of water scarcity.


  1. "Now is the time to introduce the radical (!) notion of markets for water in the agricultural sector."

    Why just ag? Why not urban?

  2. Urban water markets have much higher transactions costs (the number of actors involved) whereas the ag sector has fewer players... That's why I say auctions for wholesale and higher prices for retail...


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