29 September 2009

Carbonated Water

I newsletter that I receive (via TS) gave some useful context to the impact of carbon prices on water prices:
Based on analysis of national greenhouse gas production and the provisions of the bill contemplated by the Senate, the price of emitting one ton of CO2-equivalent gas is projected to be $15 in 2011 and rise to $26 by 2019.

To provide some perspective on this price, approximately 80% of the power used to move water through [Arizona's] CAP system comes from Navajo Generating Station (NGS). NGS emits about 1 ton of CO2 for every megawatt-hour (MWh) of energy it produces, and CAP consumes an average of 1.76 MWh for every acrefoot (AF) of water it brings into the three-county service area. If our calculations are correct, a CO2 allowance price of $15 per ton would increase CAP energy cost by approximately 50%; at $26 per ton, energy cost would nearly double.
With a carbon price of $20/ton CO2e, the cost of water would jump by $35/af. That's real money when the price of water to farmers is $45 [or $110/af pdf]

Bottom Line: As energy prices increase, so will water prices. Some prices will be high enough to make farming "uneconomic." Yes, that means that the price of food will rise.

3 comments:

Umlud said...

But what about the massive subsidies given to water projects in the US to begin with? If those were taken into account when CAP was first envisioned, wouldn't it not have been untenable at the get-go?

... and is there any way of knowing at this point whether AZ (or the federal gov't) wouldn't subsidize this water?

David Zetland said...

I'm not referring to those, but you may want to read this: http://aguanomics.com/2008/08/dunce-cap.html

enviroecon said...

It probably should. But - how much are you willing to bet there will be some freebies along the way?