31 March 2009

Should I Be an Environmental Economist?

NW says "I am thinking of becoming an environmental economist, but I have a few concerns:
  1. Are they high in demand by economics departments? If not, what can they do to make themselves more marketable?
  2. If environmental economists are not high in demand in academia, why not?
  3. I really enjoy thinking about, discussing, and solving problems like what we do on this blog. However, I fear that an economist, environmental or not, has a very different daily life - one that is much more technical and focused on the slow grinding of data. I haven't met too many environmental economists, and I would much appreciate your thoughts in this regard. Is this true for you?
  4. A frustrating part about economics is that there aren't opportunities for undergrads to do research or even volunteer with a professor, unlike science students, who get so many funding opportunities to do so. Thus, I fear that I won't get to know what it's like to work in academic economics until I get too far into my education. How do you suggest I to overcome this?"
My answers to these questions are:
  1. Departmental demand for enviro economists depends on the number of students who want to study that field and research funding -- both of which appear to be rising. Nevertheless, remember that you would be hired 5-8 years after you begin, so you had better begin a PhD because you LIKE the field.
  2. Note that enviro economists can work for consultancies (SOMEONE has to do all those EIRs), government agencies, companies, etc. They are in more demand than game theorists but less in demand than labor economists.
  3. Academic success is about publishing papers in academic journals -- something that I do not like (and am not good at). Teaching receives almost zero weight at the best schools (research universities). At teaching colleges (e.g., Cal State X), research isn't very important and class loads are doubled. Liberal arts schools tend to emphasize both teaching and research. You are considered "sucessful" if you publish two papers per year. As you know, I "publish" more than two posts per day. (Also note that I have no idea of where I will be working next, and academic economists have lifetime job security when they get tenure -- see cartoon!) In short, academic economists have far leeway to explore different ideas...
  4. The best way to find out what academic research is like is to... do research. Get a research assistant (RA) job at a university or think tank. Then see what it's like. The only differences (IMO) between the principal investigator and RA are salary, hours worked (RAs work less), and "control" over the research agenda. Note that PIs don't really control the agenda until they get control over funding, which is pretty hard.
Aguanauts -- please add your comments!

Bottom Line: Research is fun. Making it pay is hard!

Fixed and Variable Costs

I was explaining "cost" to a reporter last week, and we got onto fixed and variable costs (and revenues).

A fixed cost does not change with your behavior. My bimonthly water bill from EBMUD has a "water service charge" of $19.06 and "seismic improvement program surcharge" of $3.52. I pay these charges even if I use NO water.

A variable cost changes with your behavior. EBMUD has a "water flow charge" of $2/unit (one hundred cubic feet -- ccf -- or 748 gallons) and "drought surcharge" of $2/unit for "excessive use" (see Stupid Water Bills).

So EBMUD is collecting money from me for having a connection and for the amount of water I use. That seems to be a no-brainer, but here's the twist: This billing structure probably does NOT match EBMUD's costs.

According EBMUD's Budget Fact Sheet [PDF], 73 percent of its costs (debt service + capital appropriation) are fixed and 27 percent (operating expenses) are variable. 27 percent is WAY too high, of course, since salaries are included in operating expenses. Let's just say that 80 percent of EBMUD's expenses are fixed and 20 percent are variable.

Now get back to EBMUD revenues. If we take my water bills as typical, then 47 percent of EBMUD's revenues are fixed and 53 percent are variable.

Why does this matter? If everyone reduces their water use by 20 percent, EBMUD revenue will drop by 10.6 percent but its costs will only drop by 4 percent. Given that EBMUD -- a public utility -- runs on a break-even basis, such a change in costs and revenues will result in a "revenue shortfall," and EBMUD will have to raise rates to cover the losses.

(Note that Metropolitan Water District of SoCal has revenue that's 80 percent variable and costs that are 80 percent fixed; see p15 in my dissertation. In fact, most water utilities -- both public and investor-owned -- have this "upside down" structure.)

Those of you who have noticed the "use less, pay more" pattern at utilities experiencing water "shortages" will now understand three things:
  1. Utilities hit shortfalls because mostly variable revenues are dropping faster than mostly fixed costs.
  2. The resulting rate increases are unpopular because they appear to punish conservation.
  3. Utilities do NOT LIKE conservation because they will have to increase rates, a process that forces water managers to appear in public and be questioned/insulted by politicians and irate ratepayers.
So, how does all this matter?
  • The "right" way to bill customers for water is to charge a fixed price in proportion to fixed costs and variable price in proportion to variable costs.
  • This is not done, IMO, because the People want water bills to reflect water use -- so "water wasters" cover most of the costs of water service.
  • My own policy prescription of "some water for free, pay for more" is based on variable prices being a BIG part of people's water bill.
We can reconcile revenue-cost matching, wasters pay most, and "some for free" in this way: Water customers pay a fixed price in proportion to fixed costs, but a variable price that is FAR greater than variable costs. The surplus (variable) revenue is then refunded to ALL customers (per capita) so that "water wasters" still pay a BIG share of total costs, water misers get "some for free," and the utility breaks even.

And that's today's lesson :)

Bottom Line: Water bills do not reflect the cost of delivering water. If people vary their behavior, financial imbalances result and things get messy. If we fixed water bills (cover fixed costs and feebate variable costs), we would see the end of "I conserved water, and now I pay more!" headlines.

Food Chain FAIL


Bottom Line: Don't make "policy" about things you don't understand.

Self-Fulfilled Prophesies

As I noted here and here, simulations are only as good as the parameters specified, but this paper [PDF] takes that obvious truth a step further. In it, Kidson et al., estimate the reliability of Metropolitan's water supply -- given different shares of imported water in Met's total portfolio. (Local water may come from recycling, recycling, desalination, etc.)

Of course, you wouldn't know that this result was pre-determined by reading the abstract!
This study applies Monte Carlo stochastic inflow generation and a deterministic sequential approach to capture MWD’s harvesting and storage dynamics. Long-run reliability of MWD’s Year 2020 target portfolio is estimated, accounting for hydrological correlation between source regions and entitlement constraints. The results indicate that the target portfolio delivers high reliability (>98%), but that reliability was sensitive to portfolio composition. As the proportion of the hydrological sources increases within the portfolio, reliability declines markedly given 2020 parameters. This outcome implies that it is essential for Southern California to implement MWD’s diversification plan (and continue the development of alternative supplies over the next 10 years) in order to maintain future water source reliability.
"hydrological sources" refers to imported water, but let me spell it out for you: As the share of water coming from distant places (as opposed to local places) rises, water supply reliability falls. That's pretty obvious -- if you believe that water coming from a distance is less-reliable than water under your feet.

Here's a different way of explaining the "result": You have two sources of pizza -- your freezer and a delivery service. Say that is takes 20 min to prepare a frozen pizza and 30 min to get a pizza delivered. Now, if you get half your pizza from the freezer and half from delivery, your average wait time for any given pizza will be 25 minutes (50% * 20 minutes from the freezer + 50% * 30 minutes for delivery). Taking that as a baseline, it should be pretty obvious that increasing your consumption of delivered pizza will increase your average wait time while decreasing your delivered pizza consumption will lower the average wait time.

[Note: If you've run across delivered pizza that's better than frozen pizza, you may be willing to wait a little longer. The same applies to imported water -- it may be better (cheaper) than local water, even if it's less reliable.]

From this example, you can see why the paper's main result -- MET can increase water reliability if it uses more local water and less (unreliable) imported water -- is so obvious that the simulations are unnecessary.

So why did three people take all that time to write the paper?
  1. Academics call this "research."
  2. MET's managers want $millions for desalination and recycling plants, and they can use this "academic study" to convince MET's directors ("Southern California") to approve the expenditure.
BTW, I doubt if more than 10 percent of the directors who might be asked to approve such an expenditure (based on arguments "supported" by this paper) would even know what "Monte Carlo stochastic inflow generation and a deterministic sequential approach" means. (The first bit means that the inflow is estimated as the average of many draws from a probability distribution; the second bit means -- I think -- that water was allocated after it was received according to a known demand.)

Bottom Line: It's ALWAYS better to have local supplies of water (or pizza), but sometimes it's not worth the cost. (I coulda told you that without even going to Monte Carlo!)

30 March 2009

Earth Needs More Than ONE Hour!

This past weekend, people around the world "showed solidarity" by turning off their lights for one hour.

I don't know about you, but this seems like another example of greenwashing -- where people "do the right thing" for a moment before going back to business as usual -- or carbon offset indulgences -- where we do what we want and pay someone else to be virtuous.

(I'm reminded of the Live Earth "Concerts for a Climate in Crisis," which probably generated more carbon than they removed...)

Bottom Line: If people want to save the earth, they have to make changes for ALL 8,760 hours of the year, i.e., be vegetarian, ride a bike to work, don't have kids, etc.

California Is a Third World Country

via someone nice, I received copies of letters between Jean Sagouspe and Senator Dianne Feinstein. Sagouspe has donated over $90,000 to various political figures in the past decade -- according to public records.

(Interestingly, shehe has worked as "farmer, realtor, self-employed, homemaker, housewife [sic], Triple J Partners, Sagouspe Enterprises, Harris Ranch, JP Properties, developer, and owner-grower.)

What did he get for his money? Some attention, it appears...

In a June 28, 1999 letter [PDF], Sen. Diane Feinstein asks Sec. Interior Babbit to look into the increase in prices and drop in reliability on the west side of the San Joaquin valley. She says:
I think that this situation is untenable if we are to provide fairness and certainty, which should be a basic commitment of federal water policy.
In a July 12, 1999 letter [PDF] to Feinstein, Sagouspe says
I recognize that there are legitimate environmental issues that must be dealt with and resolved. However, it is virtually impossible to continue to do this on the backs of the federal export water users. There are broader implications associated with such a course of action than most people realize. An entire segment of California's economy is at risk here.

[snip]

There are several issues that will surface in the immediate future that can produce a crisis and you can expect to see these shortly. These include but are not limited to the issue of contract renewals, makeup water for delta smelt pump restrictions, B2 policy, and Trinity River fish flow increases.
Note the Delta smelt comment. That was ten years ago!

In a September 9, 1999 reply [PDF], Feinstein says "thank you for taking the time to contact me" -- and not much else.

10 years later, Sagouspe tells Feinstein [PDF] that California and the country are experiencing "a colossal failure of political leadership." He goes on to say:
It is true that we are experiencing a drought in California, but this is only the final nail in the coffin for California water users... there is absolute no excuse for today's abandonment of common sense for political expediency that is so pervasive in today's political environment. Our current political system has bankrupted this once great state by allowing runaway environmental regulations along with a failure to invest in water system infrastructure to completely destroy California's economic engine.

[snip]

You now have a situation where millions of acres of prime farmland are out of water costing billions in economic value and huge job losses. You are about to see an additional 23 million people in Southern California face a similar situation, and your hometown will be there soon. All of this was predicted and preventable, had there only been some leadership.

[snip]

The president and governor must declare a state of emergency for California. Water must start flowing again immediately or you will lose those additional 40,000 jobs from the Agricultural sector over the next few months. You will also lose many more thousands of jobs from other California businesses if this situation is not corrected immediately. You also see a dramatic loss in domestic food production capabilities, requiring the nation to become still further dependent on foreign food sources, which raises the issue beyond just the economy to one of national security. There is simply no time to waste.

[snip]

Many of us will not survive this disaster. The infrastructure that made us great is in shambles. California was once considered the bread basket of the world and the greatest state in the union. Tomorrow, California will be little more than a third world country. Businesses are leaving as fast as they can and there is little wonder why. I have already moved half of my assets out of California, and if I could move my almond orchards out of state I would.

[snip]

In closing I would like to thank you for reading this. You may not be hearing from me much longer, as I may be one of the ones that do not survive. Just remember that inaction is no longer an option. Tough choices need to be made and they need to be made now or the social fabric of our being and our way of life will be gone. We don't need or want a bailout. What we do want is the freedom to make a living without unreasonable government interference. Please keep in mind that agriculture is about the only sector of the economy not looking for handouts; we are simply looking for a chance to succeed at what we do best, providing jobs, and abundant quality food at affordable prices for everyone to share in.

Diane, only someone like you can accomplish this major task. I just hope that you do not wait too long to forcefully weigh in. What a legacy it would be for you to lead the effort that puts California back on a path towards prosperity. It was not that long ago when California led the nation in education, innovation, infrastructure, and prosperity. With your leadership, greatness is once again attainable.
I added the emphasis to the text above, and you can guess how I would comment on each carefully-wrought phrase.

The one phrase that I do want to expand on is "What we do want is the freedom to make a living without unreasonable government interference." Excuse me, but Westlands would NOT exist if not for the massive government projects that bring water to a VERY dry area.

Bottom Line: He who lives by the sword shall die by the sword.

Speed Blogging VIII

  • The short version of Lester Brown's plan to save civilization [a new book] is well-worth a look. He wants to cut population, reduce GHG emissions, and conserve other resources. He provides cost estimates, but I expect the real trouble is finding a way to get the programs going AND share the costs (only $200 billion or so...)

  • "Fish caught near wastewater treatment plants serving five major U.S. cities had residues of pharmaceuticals in them... Findings from this first nationwide study of human drugs in fish tissue have prompted the Environmental Protection Agency to significantly expand similar ongoing research to more than 150 different locations."

  • The Nature Conservancy kills a bunch of animals for a higher good: "A quarter of a century after conservation work began, and with the killing of nearly 50,000 sheep and 5,000 pigs, and the relocation of 44 golden eagles, the orgy of eradication is over.... the removal of invaders is a harsh necessity... to protect and preserve some of the world’s rarest species."

  • Frito Lay -- yes, the corn chip guys -- sponsored an insert ("Solutions for a Better World") in the April 2009 National Geographic. On water, they say typical stuff, e.g., drip irrigation saves water and increases yield, but farmers have no incentive to save water when governments subsidize it. Interestingly, the insert is NOT available online. Why the low profile?

  • "Appalachian By Design (ABD), a US rural non-profit venture, developed a social enterprise to creatively address the isolation and lack of job opportunities that have been a persistent problem in rural Appalachia, particularly for women. The organization introduced a trade into the region, machine knitting, because of market opportunities, and built the infrastructure to support it... The findings from the field show that it is one thing to design such a program, quite another to make it sustainable. At the end of the 2005, the founder of ABD, Diane Browning, with a bank loan due and a financial turnaround needed, faced a difficult decision."

  • "This article explores the psychological literature on rationalization and connects it with contemporary questions about the role of in-house lawyers in ethical dilemmas. Using the case study of AWB Ltd, the exclusive marketer of Australian wheat exports overseas, it suggests that rationalizations were influential in the perpetuation by in-house lawyers of AWB's payment of kickbacks to the Iraqi regime. The article explores how lawyers' professional rationalizations can work together with commercial imperatives to prevent in-house lawyers from seeing ethical issues as those outside the organisation would see them."

  • Speaking of that (?!), "This paper provides a theoretical analysis regarding the rationality of suicide attacks from an economist's point of view. It is argued that although a terrorist gives up future utility from consumption by committing a suicide attack, this loss can be overcompensated by the utility he derives from the attack." Clever economists! They've got a model that leads them to conclude that suicide bombers rather die than live.

  • "This paper exploits variations in the timing and size of oil discoveries to identify the impact of oil wealth on democracy... On average, discovering 100 billion barrels pushes a country's democracy level almost 20 percentage points below trend."

29 March 2009

Weekend Discussion: Foreign Food

NOTE: This post will stay here until Sunday night. Posts for Saturday and Sunday morning go below this post.

Dear Aguanauts,

Discussion posts allow you to discuss your beliefs on a topic -- to share your understanding, experience and opinions -- without worrying about what's right or what others think. (Check out last week's discussion on Tribal Water.) Most important, the discussion allows us to learn from each other. So...

Should we buy food from "foreigners" (another county, state, or country)?

What's Beneficial Use?

All over the western United States, water rights* are defined with "beneficial use" in mind. Section 2 of Article X ("Water") of California's Constitution says:
It is hereby declared that because of the conditions prevailing in this State the general welfare requires that the water resources of the State be put to beneficial use to the fullest extent of which they are capable, and that the waste or unreasonable use or unreasonable method of use of water be prevented, and that the conservation of such waters is to be exercised with a view to the reasonable and beneficial use thereof in the interest of the people and for the public welfare.
Now, I have always thought that beneficial use was defined to mean "producing positive economic value" BUT that transfers/trades of water were NOT considered beneficial use. Since transfers and trades DO happen, I think that's wrong.

Since control over transfers rests with the State Water Resources Control Board, I looked up their definitions of beneficial use (for municipal, irrigation, etc.), long-term transfers, and "wasteful use" [under California Code of Regulations, Title 23, Division 2, Chapter 2, Article 2, Subarticle 2 -- turn off pop-up blockers]

My impression is that SWRCB will approve transfers that continue to use water in a beneficial way but that such transfers do not automatically qualify as "beneficial." Is that true?

Just for reference, note that economists would define any result from a voluntary trade to be "beneficial," but I guess there are more lawyers than economists at SWRCB. That's a pity if it means that "legitimate" trades (win-win) are slowed or blocked by the need to prove beneficial use.

Bottom Line: Regulations regarding beneficial use need to be simple (or non-existent) if we are going to maximize the value of water rights.

* As a useful aside/addition, note these different types of water rights (via BLM):

Riparian rights result from the ownership of land bordering a surface water source (a stream, lake, or pond). As a class, these rights are senior to most appropriative rights, and riparian landowners may use natural flows directly for beneficial purposes on riparian lands without applying for a permit.

Appropriative rights are acquired by putting surface water to beneficial use. Prior to 1914, appropriative rights could be claimed by simply diverting and using the water, posting a notice of appropriation at the point of diversion, and recording a copy of the notice with the County Recorder. Since 1914, the acquisition of appropriative rights has required an application through the State Water Board.

Pueblo rights rights are derived from Spanish law whereby Spanish or Mexican pueblos could claim water rights. As a result, pueblo rights are paramount to the beneficial use of all needed, naturally occurring surface and subsurface water from the entire watershed of the stream flowing through the original pueblo. Water use under a pueblo right must occur within the modern city limits, and excess water may not be sold outside the city. The quantity of water available for use under a pueblo right increases with population and with extensions of city limits. In general pueblo rights are limited to use of water for ordinary municipal purposes.

My Talk on Insurance

I gave a talk on my idea of using insurance companies to monitor water managers for operating efficiency and/or capital expenditures at my department (Agricultural and Resource Economics @ UC Berkeley) just recently.

Here are the slides [PDF] and here is the audio [17 MB MP3] of the 50 minute talk.

The main points that came out were the importance of having enough companies competing for enough contracts so that they can calculate accurate actuarial risks (weighted probability of rationing, spills, etc. across policies for many water agencies) and the importance of disclosing the insurance premium to water customers who will want to know how well their managers "stack up" against other managers at other agencies. This latter point is important because water agencies are monopolies that face little competition. Since insurance companies will be competing for business, they introduce the helpful dynamics of competition where none now exists.

Insurance is not currently required of water companies that self-insure, but that situation is not useful to the extent that:
  • Water managers may self-insure in varying degrees that cannot be compared;
  • Managers who preside over accidents merely increase water rates AFTER the fact to pay for their mistakes; and
  • Regulators (CPUC over investor-owned utilities and politicians over municipal utilities) almost ALWAYS ratify these ex-post rate increases because they can see that a disaster happened and money is required.
That last point is important: Most water managers have no incentive to operate efficiently because they do not benefit if they do extra work, and they can always get money to fix problems if/when they happen. Further, they face pressure to keep rates low and raise rates if/when disasters happen, so we get a disaster-rate increase cycle that is disruptive (even tragic) and inefficient. Insurance companies would reduce those cycles by collecting money up front to cover disasters that happen later (rates will NOT rise by as much b/c the insurance companies will pay for the clean-up). Finally, the mere presence of insurance companies will improve efficiency everywhere, by making it "profitable" (lower premia) to improve operations.

Bottom Line: It's hard to regulate monopolies (like water agencies) because of asymmetric information (managers know more than we do) and the problem of free-riding (an individual's cost of monitoring operations are greater than his benefits). We can avoid both these problems by "outsourcing" monitoring and competition to insurance companies.

28 March 2009

Economy vs. Environment

This piece from the New Yorker is BRILLIANT:
The world’s financial and energy crises are connected, and they are similar because credit and fossil fuels are forms of leverage: oil, coal, and natural gas are multipliers of labor in much the same way that credit is a multiplier of wealth. Human history is the history of our ascent up what the naturalist Loren Eiseley called “the heat ladder”: coal bested firewood as an amplifier of productivity, and oil and natural gas bested coal. Fossil fuels have enabled us to leverage the strength of our bodies, and we are borrowing against the world’s dwindling store of inexpensive energy in the same way that we borrowed against the illusory equity in our homes.

[snip]

The environmental benefits of economic decline, though real, are fragile, because they are vulnerable to intervention by governments, which, understandably, want to put people back to work and get them buying non-necessities again—through programs intended to revive ordinary consumer spending (which has a big carbon footprint), and through public-investment projects to build new roads and airports (ditto). Our best intentions regarding conservation and carbon reduction inevitably run up against the realities of foreclosure and bankruptcy and unemployment. How do we persuade people to drive less—an environmental necessity—while also encouraging them to revive our staggering economy by buying new cars?

The popular answer—switch to hybrids—leaves the fundamental problem unaddressed. Increasing the fuel efficiency of a car is mathematically indistinguishable from lowering the price of its fuel...
Read the WHOLE thing (2 pp) -- it's the best short description of the econ-enviro tension that I've read recently.

Bottom Line: The only way we can save the environment is by living sustainably, i.e., using resources (renewable and non-renewable) at a pace FAR BELOW current consumption rates.

Don't Subsidize Water

From the Department of No Duh!, we get this World Bank paper:
The pressure on an already stressed water situation in South Africa is predicted to increase significantly under climate change, plans for large industrial expansion, observed rapid urbanization, and government programs to provide access to water to millions of previously excluded people.

The present study employed a general equilibrium approach to examine the economy-wide impacts of selected macro and water related policy reforms on water use and allocation, rural livelihoods, and the economy at large.

The analyses reveal that implicit crop-level water quotas reduce the amount of irrigated land allocated to higher-value horticultural crops and create higher shadow rents for production of lower-value, water-intensive field crops, such as sugarcane and fodder.

Accordingly, liberalizing local water allocation in irrigation agriculture is found to work in favor of higher-value crops, and expand agricultural production and exports and farm employment.

Allowing for water trade between irrigation and non-agricultural uses fueled by higher competition for water from industrial expansion and urbanization leads to greater water shadow prices for irrigation water with reduced income and employment benefits to rural households and higher gains for non-agricultural households. The analyses show difficult tradeoffs between general economic gains and higher water prices, making irrigation subsidies difficult to justify.
In sum, water markets will move water to higher-valued uses, which may impoverish those benefiting from current restrictions on water trade. What's the solution to this? Addressing poverty with direct income support to the poor -- not second-order policies like water subsidies, which create terrible first-order distortions.

Bottom Line: Never take a roundabout trip when you can go direct!

27 March 2009

Drumming up Business?

(via DW) The Pacific Institute says that "significant improvement is needed in the depth and breadth of corporate reporting on water, particularly regarding water issues outside of direct business operations"

Now water reporting sounds like a great way for various consultants to make good money from corporations, and I am sure that the Pacific Institute knows that.

According to PI's 2005 and 2006 IRS form 990s, it appears that PI gets about 1/6th of its revenue from "fee for service contracting," and I hope that those fees are NOT coming from making water reports for companies (i.e., a variation on "we find that we are necessary), since such income would conflict with PI's mission to provide objective advice to policy makers. Perhaps they placed such a disclaimer in their report, but I could not find it.

Bottom Line: When one is working "for the People," one must be careful to clarify when one's personal interests may conflict with those of the People.

Greywater

In the comments to my post, greywater came up.

[Interested readers will want to revisit this post on greywater regulation and this one on health standards. Also get more information from the Greywater Alliance or Greywater Guerrillas.]

In this update (via DW), we get an idea of the silliness surrounding greywater regulations:
The vast majority of gray water systems in California don't have permits, making it difficult to quantify the phenomenon. State rules and local permitting requirements for using gray water are complicated and costly to follow, so most residents don't file the paperwork.

“You would be hard-pressed to find a law that is as widely flaunted,” said Art Ludwig, an ecology consultant in Santa Barbara. His Web site, oasisdesign.net, offers gray water tips and project plans.

Ludwig estimates that California has 1.8 million gray water systems.

[snip]

County officials said it's illegal to divert washing-machine effluent for landscape irrigation without obtaining a permit, which involves filing detailed documents, submitting soil percolation data and completing an inspection.

“Gray water is untreated wastewater that has the potential to contain high levels of bacteria,” said Tom Lambert at the San Diego County Department of Environmental Health, which regulates gray water in the region. “Our first and foremost objective is to see that it is used in a way that will not create any public health risks.”

His database shows 41 permitted gray water systems countywide, but he acknowledges that unpermitted ones are widespread. Lambert said county agents don't go looking for renegade users.
Yeah -- let's go GET those renegades, those LAWBREAKERS who are trying to move water from inside their house to outside their house -- without a PERMIT!

I wonder what's next, a law forbidding a couple from sharing the same fork while eating cake?

Here's a challenge that I suggested to the greywater folks at the PG&E thing: Give a bunch of people new, plastic water bottles and tell them to drink, refill and reuse the bottled for 10 days. Then measure the bacteria. Then compare the results to the health codes of allowable bacteria, etc. in drinking water systems.

I am guessing that there will be PLENTY of nasty stuff growing on those bottles but -- you know what -- NOBODY CARES because those germs are THEIR germs. It's the same thing with greywater: If I want to pee in my garden or dump MY shower water on MY plants, well then let me. I am just spreading my germs all over MY PROPERTY.

Geez.

So, if someone does that study, please send the results to me AND to those health fascists who are regulating the wrong things...

Bottom Line: Health officials, regulators and politicians should let us take care of the germs we knowingly inflict on ourselves and spend their energy protecting us from the things we cannot see, detect or avoid -- like pollution of groundwater, air, food, etc.

Landscaping Efficiency

During my water chat with Joe Berg of MWDOC, we discussed his studies of water conservation for landscaping in urban areas.

Although he discussed some on-going studies (where only 30 percent of homeowners given access to $3,000 credits towards installation of high-efficiency irrigation controllers actually opted into the program; 70 percent did nothing), he also told me about a completed study [PDF] where MWDOC and partners compared the impacts of three interventions on water waste (runoff):
The... retrofit group... used ET controller technology and public education. The... education group... received educational materials, but did not receive controllers. The... control group...received neither ET controllers nor educational materials.

[snip]

The R3 Study showed that weather-based irrigation controllers, which provide proper landscape water management, resulted in water savings of 41 gpd in typical residential settings and 545 gpd for larger dedicated landscape irrigation accounts. The observed reduction in runoff from the retrofit test area was 50 percent when comparing preintervention and post- intervention periods and 71 percent in comparison to the control group. The education group saw reductions in water use of 28 gpd, and a reduction in runoff of 21 percent in comparison to the control group.
How "economic" was the intervention? Unfortunately, the cost of fitting ET controllers ($150) and paying for the signal ($48/year) was only accompanied by annual savings of $14/customer. So -- although 44 percent of retrofit customers and 23 percent of education customers reported reductions in their water bills -- the program is not cost effective.

There are two conclusions to draw from this study:
  1. More-expensive bills for excessive use (landscaping) would make these programs more economically attractive.
  2. Larger landscapers would benefit from them. (This was the finding of a related study [pdf] of large landscapers, where water savings (=avoided use) cost only $165/AF.)
Bottom Line: Lawns in deserts are luxuries that suck precious water. Charge more to have them, and people will forgo them -- or irrigate them more efficiently.

26 March 2009

Water Wars NOT!

Fleck has a great post on water wars:
It is still important that the popular myth of water wars somehow be dispelled once and for all. This will not only stop unsettling and incorrect predictions of international conflict over water. It will also discourage a certain public resignation that climate change will bring war, and focus attention instead on what politicians can do to avoid it: most importantly, improve the conditions of trade for developing countries to strengthen their economies. And it would help to convince water engineers and managers, who still tend to see water shortages in terms of local supply and demand, that the solutions to water scarcity and security lie outside the water sector in the water/food/trade/economic development nexus. It would be great if we could unclog our stream of thought about the misleading notions of ‘water wars’.
I left this comment:
There's no sense fighting wars over water because it's too damn heavy to move around (as booty) or control (vs. diamonds or oil). Back to the cost-benefit table.

OTOH, I would also say that water cooperation is more predictable than water wars b/c civilization is FOUNDED on water cooperation (e.g., public fountains), and those that cannot cooperate dry up and die b/c they cannot protect their water sources. When it comes to neighbors, cooperation is better than fighting b/c NEITHER side is served by destroying the water supply (very easy) in a conflict.

Finally, it's that old moral question: Is it better to cooperate over water or fight and harm each other? I think that most humans KNOW that water is precious and that denying water to others is the lowest form of behavior.

Keep up the debunking!
Bottom Line: Politicians (and reporters) love the "water wars" meme, but let's stop talking nonsense and get to the real problems: corruption, for example.

One Year of Aguanomics

Today is the first anniversary of aguanomics! [Here's the six month update.]

So how are we doing?

In the past year, I have averaged about 3.5 posts/day. Why?
  • There's a lot to be said.
  • I like to say it.
  • You all want to hear it. (Keep those emails coming!)
Current readership is divided into about 700 RSS/email readers and about 300 daily unique visitors. (Let's be generous and say that about 1,000 people read this blog every day :) Here's a PDF showing stats for the site over the past year. Basically, 46,000 people have made 76,000 visits; 80 percent of the visitors are from the US.

In the past year, I added the following features:
  • Weekly polls
  • Weekend discussions
  • Various feed and subscription tools (feedburner, sitemeter, clustrmaps, and WaterSISWEB)
  • Bookmark & Share -- still trying to find out if people use it...
  • Damian as an occasional (and valuable!) co-blogger
  • Water Chats
  • tags/labels on posts
In the year to come, I am hoping to add the following:
  • Blast from the past (post of the week from one year before)
  • More water chats
  • Whatever works!
I am also interested in improving stickiness -- so that visitors stay around longer and make more comments. Please email me with suggestions/help in that area.

Here are some logistical notes -- just so you can plan ahead :)
  • My fellowship runs until May 2010, so I should be here for another year.
  • I'll be in Europe from late June (EAERE in Amsterdam) to late August (World Water Week in Stockholm), so contact me for coffee and/or talks. I'll try to get at some euro-water issues...
  • I have no idea what I'll do after that. Please send job ideas but note that I tend to work for the People -- I'm not looking for partisan positions :)
Bottom Line: Blogging is a competitive business (to me), and I want aguanomics to be the number one blog for the politics and economics of water policy. Let's continue the dialog, but let's make this next year one with more RESULTS!

Mulroy Channeling Mulholland's Sprawl?

In response to this post, LR says:
Great column on Pat Mulroy’s dreams of becoming the next William Mulholland. (Really. She loves the comparison.) One of the things that too many mainstream news organizations have omitted is the cost – not financial, although I think the credible estimates bring the pipeline cost to somewhere in excess of $10 billion – but environmental. I have worked as a reporter and now environmental advocate for decades, more than 10 years in Las Vegas. I have failed to meet a single independent scientist that does not believe there will be massive environmental impacts from the pump-and-pipe scheme.

Mrs. Mulroy in January convinced the Water Authority board to ban residential graywater systems, probably the most promising way to increase water conservation and efficiency out there. It would also, of course, have saved massive amounts of power by making it unnecessary to pump water up from Lake Mead (or, God forbid, from the environmentally fragile Great Basin).

The extremely low cost of water is a huge problem and paradox for the Southwest. I served on the committee that set the existing rates (I was the only conservationist). I joined members of the general public and Peter Gleick, one of the world’s premier experts on water use and conservation, in arguing for an aggressively tiered pricing structure that would hit high-volume water users with much higher prices, therefore encouraging water conservation and smart water use.

While we have a tiered structure, it is very anemic and does little to really encourage water savings. It’s just too cheap to bother, especially for the very wealthy people who tend to be the highest water users. It may be interesting to note that during the discussions on water use, abuse and price, Las Vegas water officials insisted that there was no correlation between high-volume water use and income or wealth.

Also, the main concern expressed by water officials was not that there was a need to conserve water, but that people, when faced with higher prices, would indeed cut back water (and therefore agency income) excessively. In other words, there is a crisis, but it isn’t a water crisis. It is a crisis of political will, outmoded economics and greed.

Here is a file [680kb XLS] of the biggest water users in the metropolitan Las Vegas region. One will find some of the richest people in the region – indeed, the world – as well as our elected political leadership. I would additionally note that Mrs. Mulroy, the “Czarina” of the region’s water agency, and her husband use nearly 700,000 gallons annually. That is more than 10 times what my household uses.

And that, too, helps explain why the Southern Nevada Water Authority and affiliated water agencies do not like to charge high prices to high-volume water users.
I was interested to see that Pierre Omidyar (founder of eBay and philoanthropist) uses over 17,000,000 gallons of water per year. (That's 53AF/year! Is he growing alfalfa?)

On Mulholland, btw, read section 3.2.2 of my dissertation, where I point out his connivance in declaring a SoCal water shortage in 1922 (à la Chinatown) -- one year after he declared an abundance of water in the area. Mulholland's testimony was absolutely critical to the foundation of the Metropolitan Water District of SoCal, which was charged with building the Colorado River Aqueduct. The $220 million bond issue to fund the aqueduct (in 1931) was the biggest ever issued in SoCal. When built, the CRA delivered SO MUCH water to SoCal that it set off an orgy of expansion, annexation and sprawl that permanently redefined how people perceived and lived in SoCal.

Bottom Line: Beware of water managers who promise that "just a little more water" will fix our problems.

Report: Water Conservation Forum

As promised, I went to PG&E's forum in San Francisco. I had the chance to attend two talks, and neither was very satisfactory.

(Someone just told me that it's hard to blog when you may say something that upsets the boss. My boss is dead, so I get to say what I want.)

Blaine Hanson from UC Davis basically said "if you like food, don't take water from farmers" -- a form of FUD that I find particularly galling. Of COURSE farmers will grow food if water is reallocated (via markets):
  1. There's NO WAY that cities could absorb all the water, and environmental flows can co-exist with agricultural application.
  2. Farmers will always grow the most-profitable crops. If they have less water left after welling some, they will stop growing the least-profitable crops.
  3. Food prices will rise if land is taken out of production, drawing in supply from other states and countries -- as well as bringing California land back into production.
I got in trouble for interrupting him so often, because his presentation [PDF] lacked the most-basic qualifications of economic costs and benefits. It would have been better if Hanson spent more time on what he knows (irrigation) and less time on what he doesn't (markets).

Rick Soehren from California's Department of Water Resources gave a typical drought presentation [PDF]. When I asked him about groundwater, he deferred to the Legislature. (He did say -- as a private citizen -- that groundwater and surface water need to be co-managed.) When I asked him if DWR has done a white paper on the value/consequences of groundwater monitoring, he fell silent. I can predict that legislators want information on groundwater from DWR. If DWR has nothing to offer, either nothing will be done, or some political hack job will make matters worse. DWR needs to at least PRETEND that it understands Water Resources!

Bottom Line: This forum was heavy on low-flush toilets and weak Weak WEAK on the economics of water conservation. If I was presenting, I would say one thing: There's a water shortage because demand exceeds supply, and the way to fix that is by raising prices!

25 March 2009

Water and the Central Valley

via PB, Richard Howitt (my dissertation adviser) and others have a write-up [pdf] of their estimates of the impacts of lower water supplies on the economy of the central valley.

Yes, it's the 80,000 lost jobs and $2 billion reduction in gross receipts study.

I have two comments:
  1. Their results rely on serial simulations (SWAP results fed in to REMI) of general equilibrium models. In lay terms, that means that they put some numbers together, found their relations, and then estimated the impacts of changes in one model (agricultural production) before using those results as inputs into another model (economic outcomes). These simulations are often the only way to get "reasonable" estimates of what may happen, but they are:
    • Vulnerable to mis-specification, i.e., Garbage-In, Garbage-Out
    • Impossible to verify -- because they predict the future.
    • Reasonably arbitrary and subjective -- which is why dueling economists often cannot agree on anything when they represent opposing sides in court
  2. Howitt et al. point out that south-of-Delta water markets can reduce harm from reductions in Delta exports by significant amounts (e.g., 50 percent fallowing falls to 10 percent fallowing). Good idea!
Bottom Line: It's hard to predict the future, but markets can reduce the harm when a "bad" future arrives

Robert Glennon on the Diane Rehm Show

Robert Glennon, Professor of Law & Public Policy at the University of AZ, was on the Diane Rehm Show today discussing the "water crisis" in this country. For those that are familiar with water issues in the west and elsewhere, it may not be worth a listen, which is why I do not like Diane's show. It seems her coverage is always too broad rather than detailed and investigative. Anyway...

Glennon says a couple interesting things (16 minute mark):
  • "We must price water appropriately." I agree, and wish he would have stopped at that statement rather than continuing with what he really meant, which is to increase the price of water everywhere rather than to price water "appropriately." A big difference.
  • He claims that the California farmers "might receive no water this year." This confuses SWP/CVP users with everyone else. Their deliveries will be much less this year, but both are going to receive water--not as much as in previous years--but some. And many will pump a lot more groundwater than in previous years as well, mitigating some of the damage.
  • Many cities are still unmetered, and "that simply has to change." This is somewhat true in California, but relatively rare. Even so, installing meters is costly and must be worth the benefits of reducing water usage. Sacramento is the number one example of a city without meters, and they claim that while meters will indeed reduce usage, reducing usage for the hell of it is pointless if much of the excess diversion returns to the Sacramento River anyway. Economics plays a role in deciding to conserve, and should not be undertaken at all costs.
  • 1/3 of the water utilities charge decreasing block rates, and they must shift to increasing block rates "to encourage conservation by all user groups." Perhaps some should, but again, a sweeping statement masks the problem. Cincinnati does indeed have a decreasing block structure, but they currently have no need to conserve.
  • Agricultural users need to do better, but nothing really new or insightful here.
Bottom Line: Glennon understands that we need better pricing, and the more voices here, the better. I just wish Glennon would recognize that the details matter--over-simplifying and making sweeping pronouncements masks the areas that truly are in crisis.

Mississippi Pipeline to Colorado?

This story made me laugh. I understand the fear that Gary Hausler has about urban users slowly sucking dry the farms in CO. But how does he rationalize $22,500 per acre foot? That pencils out to a delivered cost of about $.07 per gallon. Currently, the city of Denver, which just raised its water rates, pays about two-tenths of one cent per gallon for treated water. The pipeline water would cost at least 36 times what city residents currently pay. If Denver boosts its first tier water charge from $1.81 per 1000 gallons to $65, and demand still necessitates capacity expansion, then the legislature could revisit the pipeline. Until then, I hope they continue to laugh at his proposal just like I will.

Bottom Line: Projecting future demand based on current cheap prices is foolish.

Poll Results -- Better Blogging

Hey! There's a new poll (farmers and water) to the right! --->
Making a Better Blog (choose 3)
I like the day's posts appearing in the morning 11 votes
I like the day's posts appearing throughout the day 8 votes
Posts are generally too short 0 votes
Posts are generally too long 3 votes
Posts are generally the right length 20 votes
I want more posts 2 votes
I want fewer posts 6 votes
I want the same number of posts 15 votes

These results are encouraging (glad to see that there's not much demand for MORE posts!) I will try to drop in an afternoon post on weekdays to keep you "during the day" people occupied :)

Bottom Line: Better blogging is about better dialogues, and I always enjoy improving ours.

Water and Population

In response to this post, JR writes:
You've said many times that there is no water "shortage" in the southwestern U.S., and that instead there is only a failure to set sufficiently high prices for water and market it appropriately. The implication seems to be that all water-related problems would be solved by raising prices and facilitating water markets.

Respectfully (and I mean that), I believe that conclusion is wrong. I agree that it could be very useful to raise prices for water (when the amount used is beyond a certain minimum allocation that everyone should get for basic sustenance and health needs -- your principle of "some for free, pay for more"); and I agree that well-conceived, well-managed water markets could be very useful in addressing many water management issues in the western U.S. (and elsewhere).

But I disagree with your exclusive focus on prices and markets. While useful, those measures won't solve all our water problems as we move forward into a future where population grows way beyond the carrying capacity of our natural resources, and climate change substantially increases aridity and decreases the supply of freshwater available for the western states.

Today you said that laying the blame for western water problems on overpopulation is "not valid". But I'm sure you don't believe that population can continue to grow indefinitely in the arid and semi-arid western states at the rate it is currently expanding without eventually leading to dire, and very real, shortages of freshwater. Even if we raise water prices and implement water markets, there are limits to the size of the population that can be supported in the desert and semi-desert (or anywhere, for that matter) due to a finite, and shrinking, water supply.

It's not "politically correct" to talk about population, but if we don't start addressing that issue as a society, we're in deep trouble. You touched on the population issue briefly today vis-a-vis carbon, and yet you explicitly indicated the issue doesn't apply vis-a-vis water. I strongly disagree.

California and the desert southwest aren't alone in facing a future with an insufficient supply of freshwater to support our exponentially growing populations. The exploding human population world-wide is going to cause precisely the same problem around the globe. See this article.
To which I replied:
Water "shortage" will NOT occur if water is expensive enough. The population in the SW would not have come (and would not be here) but for the cheap water we have provided. Note the small population in another desert -- the Sahara. (As economists would say "water is necessary, but not sufficient, for human settlement")
To which JR replied:
I certainly agree that the population in the southwest would not have grown to its current level, and many of today's cities wouldn't exist at all, if "cheap water" hadn't been provided.

So, basically, your view is that a future water shortage (a real one) will not occur if water is made sufficiently expensive, because when people realize how much it's going to cost for them to sustain their desired southwestern lifestyle, the population won't continue to grow beyond the carrying capacity of the resource? But if every person gets "some for free," isn't there still a limit on how many people can be drawing upon that free allocation before the limited resource is tapped out?
...and then I said:
Good point (if everyone gets some for free), but I think we'll hit other constraints before that point (e.g., population density like NYC...)
... and then JR said:
Ah, population density like NYC; precisely (not) what people were seeking when they decided to settle in CA and the southwest... Fundamentally, we need to decide what kind of a future we're unwilling to have, and strive to avoid it.

I'd really love to see you use your considerable blogging skills to focus more attention on the population issue.
...and NOW here's what I say...

Population is NOT something that we can "manage" to an efficient level. (Note how the Chinese one-child policy cut population growth but led -- via selective abortion -- to a "shortage" of women, a problem that has fed a growing business of kidnapping women from elsewhere.)

Population will rise and fall as the cost and benefit of children changes. The "demographic transition" begins (population rising quickly) when babies stop dying, food is cheap, and adults live to 60+ years. The transition ends (population stabilizes) when women can choose how many children to have and bear a cost (i.e., lost work time) for additional children.

Note that the Green Revolution saved many from starvation but also facilitated today's 6+ billion world population -- via cheaper food.

Putting aside population magnitude, population distribution is the result of the costs and benefits of living locations. As many of you are aware, the population of Zimbabwe has fallen (through emigration and premature death) by 25% because the government there is so venal, corrupt and incompetent.

Population in the American southwest increased for the opposite reason -- immigration and a healthy, WET environment (at least initially) that attracted people from elsewhere (in the same way that the Thirteen Colonies attracted the poor and huddled masses from Europe).

The cheap water policies that politicians ordered and the Bureau and Corps delivered was part of our "Manifest Destiny" to fill the continent with white people (no PC in the 1800s), and those policies were VERY successful. A lot of land developers got rich, and a lot of people got happy, and everyone enjoyed the cheap water brought from there to here. On page 84 of my dissertation, I write:
Beeson et al. (2001) find that precipitation has a significant positive effect on population density in the United States of 1840. By 1990, this significance disappears. In fact, precipitation has a negative correlation with population growth in the 150 years after 1840. These results correspond to what we know about water in the western US: As infrastructure has brought water to arid regions, people have moved from wet, colder areas to dry, warmer areas.
Bottom Line: I predict (as others have) that the southwestern population will get denser as expensive water leads to smaller lawns and shrink as desert living becomes more expensive. As usual, those predictions may be swamped by other considerations (the same way that New Yorkers are happy to pay high rents in exchange for the "good life"), but I have no doubt that water shortages (or expensive water) will dampen the appeal of the Southwest.

Watershed Plans

JC sent me a thumbdrive with a 490 page draft of a plan [230MB ZIP]:
The Santa Ana Watershed Project Authority (SAWPA) officially launched this Integrated Regional Water Management (IRWM) planning effort during a meeting in which 178 officials representing more than 100 agencies in Riverside, San Bernardino and Orange counties met to discuss the framework for the One Water One Watershed Plan (OWOW), a shared vision of the Watershed – a 2,650-square mile area from the San Bernardino Mountains westward to the Pacific Ocean. The goal and expectation was that this Integrated Regional Water Management Plan would be far more comprehensive than any plan that could be developed by a single agency.
I'll let you all decide if it's comprehensive or merely incomprehensible...

Bottom Line: Regional plans among multiple jurisdictions and authorities are hard to design -- and even harder to implement!

Trivial Lattes

Thirsty in Suburbia questions water footprints -- with good reason. They are useless if opportunity costs are not explicit (i.e., if we do not have to choose between different "water consuming" actions).
One stat burning the wires over the past several months: one cotton t-shirt = 2,700 litres of water.

[snip]

Many “water footprints” strike me as dumb and dumbed-down in the same way. Your not buying a t-shirt will not directly benefit the water-deprived of the world. And by oversimplifying a complex system, we encourage disbelief or worse, apathy.

My bottom line? Too much “GEE WOW,” very little “WHAT NOW.”
Note: When water prices reflect scarcity, we will make the "right" production/consumption decisions -- in the same way that we would make the right decisions when the cost of pollution (a negative externality) is reflected in the price of the product.

Meanwhile, MIT Sloan's blog comments on the significance of the 200 liters of water required to produce a latte:
The issue isn't that we should stop using water but that we should start using it more intelligently, to avoid shortages and water resource wars in the future.
I left this comment:
These trivia are interesting, but non-actionable (do you want to save water or drink coffee?)

If the price of water (energy, etc.) reflects the resource's "true value", then the price of the latte is appropriate -- and no further action is required. Read Hayek to understand why.
Bottom Line: Water footprints are great for generating consultant fees, but they are useless unless we are going to use them in some way. It's much easier to price water at a sustainable level (so we have neither shortages nor surpluses in the long run) and then let people make decisions based on price alone.

24 March 2009

Speed Blogging VII

  • National Geographic has an article on the environmental, economic and social impacts of Alberta's tar oil tar sand industry. There's also an interesting article on a reporter's struggle to reduce his family's CO2 emissions to "sustainable." They reduce their output by 50%, but that's only 50% of the way...

  • "A coworker who considers herself 'green' rides a scooter to work, confident she's leaving a smaller carbon footprint than us slugs who drive cars. But her ride has a two-stroke engine. I recall hearing that running a lawn mower for 30 minutes pollutes more than commuting all week in a car. What's the deal, Cecil? Which pollutes more per mile, a 15-MPG SUV or a 75-MPG oil-burning Vespa?" Cecil [of the Straight Dope] answers here.

  • The Onion reports the best way to make a living: "A new study released by the U.S. Bureau of Labor Statistics Tuesday confirmed that the most dependable source of income for American workers in the current economic climate is to win a novelty contest in which one must successfully shoot a basketball from half-court. 'After factoring in the odds of your ticket number being called while attending a game, the median dollar value awarded, and the athletic ability of the average American citizen, and cross-referencing these data with employment forecasts and current job-security indices, we have determined that half-court shooting contests are currently the most effective way to support a family of four,' the report read in part. 'While this may seem like dire news, keep in mind that the consolation prize for missing the shot usually includes a food item from the concession stand.' The report cited several other possible methods of securing a livelihood, including 50-50 raffles, lotto scratch-offs, and inventing YouTub" [The Onion is a satirical paper, in case you didn't know...]

  • "London is underwater, New Orleans won’t be rebuilt a third time, the arctic is ice free, and agriculture is failing, which leads to global food riots and ultimately the collapse of civilization…. This is the premise of the new crowd-funded British independent film The Age of Stupid. Set in 2055, the film portrays a post-apocalyptic world ravaged by the worst impacts of climate change, and looks back at the critical period between 2005 and 2015 to examine why we didn’t save ourselves when we still had the chance."

  • Speaking of which, "U.S. environmental organizations finally pulled together a climate policy, but the National Call to Action on Global Warming issued by 53 organizations on March 5 is a mistake and should be reconsidered. [snip] No attempt was made to hide the illogic of the National Call, which claims to stand on "climate science" yet recommends inadequate, lower-end IPCC targets based on essentially antique science which does not fully encompass the risk of abrupt climate change. [snip] None of our organizations and leaders truly disagree with the precautionary position as a matter of science, so why did 53 sign on to an statement calling for less than we know is now necessary to avert catastrophe?"

Practical Optimism

In the interests of practical optimism, here are a few suggestions on coping with economic crisis, environmental stresses, and water shortages:
  • Remember the big picture: your health, your family and friends, and all the other luxuries of life.

  • The environment is still pretty amazing and beautiful -- get out to enjoy a sunset, a swim or walk and appreciate that you have the freedom to enjoy that beauty.

  • We are NOT running out of water. Although water policies may be "wrong" in this way or that, most of us are lucky enough to have wonderful water available at our taps, for very low prices. Drinking water will ALWAYS be affordable to people in developed countries, and people in developing countries can get good water for a few cents/day (via chlorine treatment).

  • It may be difficult for businesses, farmers and fish to accept the current policy mess. All want the same thing (a much water as they got in some "perfect" past), but that past is no more. Get over that fact and prepare to adjust. (Also remember that it could be worse!)

  • Take all these feelings into consideration when negotiating or contemplating the positions of those who want "your" water. They see you as the same kind of "problem" in the way of what they want. Ok, fine. Now accept that neither of you are right and negotiate a compromise -- hopefully through markets.
Bottom Line: You can't always get what you want, but you can enjoy what you get.

San Diego Update

Mayor Sanders has announced San Diego's updated drought program [PDF].

The new plan is better than the old plan [PDF] (which I criticize here and here) because it exempts water misers (less than 6 units of water/month/METER) and penalizes "heavy" users.

Before I get into the problems with the new plan, let's take a moment to note the problems that plagued the old plan. First, the city's water department tried to limit the debate on options (see slide 14 of their presentation [PDF]) by restricting questions at the "public discussion" forums to the questions that they wanted to answer. (DW tells me that the staffers took questions on index cards and then chose which ones to answer.)

Second, listen to DW:
They've got several problems according to the public workshop I attended.

One is their customer database is very limited, and they don't even know how many occupants are in each customer home. They haven't done any specific surveys to link occupancy to customer meters.

Two is that they've always left it up to commercial and multfamily developers the decision of installing master meters or individual unit meters when they built new office buildings and apartment/condos. In most cases the developer chose the cheaper master meter option.

So they have a whole bunch of master metered customers who don't even know how much water they're using, and currently they plan to just leave it up to landlords to figure out how to distribute any reduced water allocations to their tenants, which may cause discrimination problems.

Apparently there is a new system on the market to retrofit multifamily and commercial buildings by installing meters on individual units pipes, but the department is waiting for the state health dept to approve the new technology before asking landlords to retrofit their buildings.

Everything they propose seems pretty voluntary when it comes to master metered commercial or multifamily landlords.
Third, I got an email from a staffer at the Mayor's office. He basically complained that critics (like DW and me) are being too hard on people working diligently to make things work. My response to that was that SD has had plenty of time to figure out an equitable and efficient water allocation plan. (60+ years, in fact, of living at the end of the pipe.)

So we are seeing a "top down," not-invented-here mentality from water managers (and politicians) trying to control the debate.

So how does the "new" plan look? Here are the main points:
  1. Water misers are exempt, and water wasters "will" be penalized.
  2. Outdoor irrigation will have to be cut by 45%; indoor by 5%.
  3. Allocations are more flexible, to allow people to save more on average.
Now the current plan falls short in several ways:
  • Allocations are still "per meter" and not per capita.
  • They are still based on prior use.
  • The City is going to measure indoor/outdoor use by seasonal fluctuations, which does not penalize people who water year-round. (It's easier for the water managers to calculate, however.)
  • There is no clear price signal except a vague threat that the City -- as a whole -- will pay sharply-higher rates for exceeding its allocation from SDCWA/MWDSC. Such a structure (and vagueness) makes it easy for individual customers to use more with the hope that others will reduce their use.
  • There is no clear method of allocating to businesses. (I suggest the right way here.)
Mayor Sanders and his staff say that any shortage allocation plan must be fair, easily understood, ready to implement by July 1, and likely to achieve "required" reductions.

Their current plan is not fair (per meter and historic use vs per capita), not easy to understand (everyone gets a different allocation), and unlikely to achieve "required" reductions (telling people to use less will not work).

The one virtue of the "plan" is that it WILL be implemented by July 1. That will count as success to some people.

Bottom Line: San Diego's politicians need to serve citizens -- not water managers. For this to happen, water policies have to be based on people -- not meters, lawns or historic waste.

More on Private vs Public

via NH, we get another paper on the perennial debate:
The review of 22 empirical tests and 51 case studies shows that private sector participation per se in water supply does not systematically have a significant positive effect on efficiency. Thus, the choice between public and private water delivery is probably not only a question of efficiency.

We developed a complete theory of the choice between public and private water supply based on four components: difference of cost of funds, transaction costs of outsourcing, difference of efficiency and potential political cost of privatizing. Since determinants of the theory fluctuate over the time and depend on the local context, this theory can explain both privatization and municipalization movements as well as why some local governments outsource water supply, while others opt for direct provision.

The tests on 459 US counties in charge of water supply in 45 states provide substantial support for the theory. Significant determinants of the choice of public versus private water delivery include the cost of funds, especially the social cost of taxes, transaction costs, the difference of efficiency and the potential political cost of privatizing.

Moreover, we tested other literature's theories, which suggest employment as a motive of public provision and cost of public wages as a cause of privatization. These two arguments seem to be irrelevant.

We additionally tested the influence of ownership on the number of drinking water environmental violations and found no significance.
Bottom Line: So the decision boils down to the cost of charging taxpayers, the change in efficiency and the political cost of moving from one ownership structure to another.

23 March 2009

Responsibility or Retribution?

I was having dinner with a friend when our talk turned to the actions (and inactions) of our recently-departed Prez Dubya.

My observation (the short version) was:
If the Republicans are the party of "reap as ye sow," then how fantastic is it that Dubya -- after presiding over 8 years of obfuscation, inaction, hesitation, sabotage and denial of climate change -- will just retire to his ranch, to watch the world melt down? After all, he was in the right place at the right time -- and squandered MULTIPLE chances to get ahead of the curve (precautionary principle!) on climate change...
Remember that Clinton was impeached because he lied about a blow job extra-curricular sex, and Nixon was vilified because he was over-eager for re-election.

Addendum: My point on Nixon and Clinton is not that they did not commit crimes, but that Bush's actions appear to put him in the same category.

Bottom Line: I hope that Bush has a nice chat with St. Peter over his actions -- and I hope that Peter sends him down to visit with the cousins... I hope that people don't get the idea that bad outcomes are an acceptable legacy.

Report: Water Education Foundation

On Thursday, March 12, I attended and spoke at the WEF's 2009 executive briefing in Sacramento. I made recordings of many speakers, and you may want to listen to them. (Sorry about the quality; I did what I could!)

You may hear me talking about (and asking questions on) groundwater -- a topic that I believe to be particularly relevant to the decision-makers in Sacramento [read this and this].

State of the State’s Water by Lester Snow, Director, California Department of Water Resources [48min 17MB MP3]

View from the Legislature by State Senator Fran Pavley, Chair, Senate Committee on Natural Resources and Water [26min 9MB MP3]

Peripheral Canal Bill by State Senator Joseph Simitian [29min 10MB MP3]

The Delta Decision -- panel discussion [1hr27min 30MB MP3]
  • Steve Macaulay (Moderator), Vice President, West Yost Associates
  • Tim Quinn, Executive Director, Association of California Water Agencies
  • Jason Peltier, Chief Deputy General Manager, Westlands Water District
  • Laura King Moon, Assistant General Manager, State Water Contractors
  • Leo Winternitz, Director of Delta Projects, The Nature Conservancy
  • Jonas Minton, Water Policy Advisor, Planning and Conservation League
  • Mel Lytle, Water Resources Coordinator, San Joaquin County

The photo above shows the panel participants, who spoke from right to left.

My title: On That Letter (Reducing Water Deliveries to Riparian Users et al.) by James Kassel, State Water Resources Control Board [23min 8MB MP3]

Getting By With Less – The Response to Drought -- panel discussion [55min 19MB MP3 + 6min 2MB -- battery problems :(]
  • Richard Howitt (Moderator), Professor and Chair, Agricultural and Resource Economics, University of California, Davis
  • Eileen White, Water Operations Manager, East Bay Municipal Utility District
  • Chris Scheuring, Managing Counsel, Natural Resources and Environmental Division, California Farm Bureau Federation
  • David Zetland, Postdoctoral Fellow, Natural Resource Economics and Political Economy, University of California, Berkeley
  • Paul Lanspery, Deputy General Manager, San Diego County Water Authority
  • Elissa Lynn, Senior Meteorologist, California Department of Water Resources
The photo [from aquafornia] of our panel is not in order: Howitt on right, Lanspery on left and Schuring in front; Lynn is in back and White is in front. (Yes, that's me with a tie!)

Rita Schmidt Sudman, Executive Director of the Water Education Foundation, writes her thoughts on the briefing here. She summarizes the talks and there has some photos, but I think she did not capture the spirit of "our" panel's discussion of water prices and markets.

The most surprising things to me were the absence of discussion on pricing or markets, Lester Snow's assertion that the Drought Water Bank would handle 500TAF, and the need for a "Delta Conservancy." (Seems that the Nature Conservancy's endorsement of the Peripheral Canal is already paying off!)

Bottom Line: It was good to get everyone in the same room -- even if they did not agree on everything or failed to consider "unconventional" ways to manage our water.

What's the Right Price of Water?

In the comments to this post, DFB says:
We need to admit that farmers have been paying less for the same amount of water wholesale as cities and other users. That has created a misallocation of resources toward crops that do not make complete economic or water sense. The delta [difference] between the market rate of water and actual price for water also makes some farmers very wealthy at our expense. Sure, we pay less for produce; however most of the crops raised in California are not sold here.
DFB makes two points:
  1. Farmers pay less for the "same" water as urban users.
  2. Such a result may reflect the political desire for cheaper food.
I have responses:
  1. Farmers pay less because their water costs less to deliver, but often they pay less because they have senior (i.e., better) water rights (as I mentioned here).

    Ignoring groundwater (which costs as much as the energy to pump it), we can see the former case with water imported from the Colorado River. PVID farmers who are next to the river pay about $60 to get 9AF of water delivered. (They "use" 5AF, the rest flows back.) For the "same" water, MWDSC pays about $70/AF to move the water to their system, where it is treated for drinking and piped even further. By the time retail customers get it, they are paying $1,300/AF.

    The latter case is much more obvious: Some urban agencies have arrived "late" to the game, and their water costs more because it comes from a more-distant or less-desirable source. The most obvious example is desalination where the water costs $1,200/AF EVEN BEFORE it's pumped through the system. Those agencies buy that water because it's politically easier to build a desal plant than to raise prices ("free" water from a reduction in a demand), trade water, etc.

  2. Cheap food policies do NOT help the poor as much as they help the rich. They do NOT help Californians as much as they help non-Californians. If politicians want to help California's poor buy food, they should not use cheap water. They should charge more for water and then give checks (money saved or subsidies) to poor Californians -- who can then afford to pay "correct" prices for food (the same prices that the rich and non-Californians pay).
Bottom Line: The price of water reflects its source, its cost and the politics of its final users.

No Oversight Please

This article shows how water managers try hard to resist change:
The Santa Clara Valley Water District board on Tuesday agreed to ask a state lawmaker to submit a bill that would require it to adopt nearly a dozen reforms, from more open records to limits on revolving-door hiring. If passed in Sacramento, the measure would usher in some of the most substantial changes in the way Silicon Valley's largest water agency — which has been hampered by controversy in recent years over its spending and management — has been governed since its creation in 1968.

[snip]

Voting no were longtime board members Sig Sanchez, Larry Wilson and Joe Judge. Although praising some of the reforms, the opponents said they don't want them written into state law.

"It is not good governance for the state to dictate how local government should be run," Wilson said.

Added Sanchez: "It would demean this district to where we were relegated to the role of some small district in the Central Valley."

[snip The reforms...] include a one-year ban on board members seeking employment from the district after they leave office; a ban on board member travel unless it is approved in public meetings; and more transparency, including annual public hearings on the district's financial reserves; and regularly written summaries of the board's closed session meetings.

[snip State Representative...] Coto cited newspaper accounts and a 2006 grand jury report that noted the water district doubled its payroll between 2000 and 2006. The agency also ran into controversy in 2007 when its former CEO, Stan Williams, hired board member Greg Zlotnick to a newly created $184,000-a-year job without advertising the position.

When Coto demanded the reforms as a condition of carrying the bill, a board subcommittee at first agreed. But then last week Sanchez removed Kwok from the subcommittee, and its members reversed course, recommending that Coto be asked to remove all 11 reforms or kill the bill.
Bottom Line: Egads! Can we get some basic oversight?!