23 December 2011

Aguanomics is on vacation

I am in Egypt right now, but I'm taking the next week off -- to give both of us some free time from blog writing/reading.

I'll be back on January 2 2012.

Until then, contemplate this interesting, funny, and sad perspective on freedom and democracy:


I'm not, btw, saying that Egyptian democracy is perfect, but I am definitely saying that "our democracy" is imperfect enough to recommend that we leave others to find their own path -- something we've often failed to do, with poor results. Here's the Dilbert version:


See you in 2012!

Friday party

This is just ridiculous (mind the volume when you play it).



Speed blogging

  • I discuss sharing trans-boundary rivers (wrt China, in particular) during this BBC segment [MP3]. I follow Dan Ariely (review of his Predictably Irrational coming soon!), so pay attention after 8:18.

  • Jamie Workman's ode to a dam breach'd.

  • A VERY GOOD video (8 min) explaining why the Kyoto Agreement failed.

  • News from Australia: "Irrigators are employing increasingly sophisticated strategies to meet their changing water requirements and generate income from their water rights assets."

  • What's the world going to be like in 2050? Watch this video (and buy land in Canada and Siberia!)
H/Ts to NP and AT

22 December 2011

Anything but water

  • Digital retouching of photos is not only getting out of control ("unreal" humans) but contributing to people's anxieties (self image, etc.) Want to scare yourself? Look at the before and after photos here (seems Ms. Jolie is dong pretty well). Speaking of weird perceptions, read the straight dope on being "black."

  • Personal assistants by the task. This, combined with peer-to-peer banking, is going to undermine the taxation system. Time to look again at property taxes?

  • Oh snap! bioplastics are not always biodegradable, good for oceans, petroleum-free, good for the environment, or the solution to the "plastic" problem.

  • The five best toys of all time. Seriously.

  • Economists have thought, since Hotelling's 1931 paper, that energy extraction activities would balance between current prices and future prices, in an effort to maximize current and future "rents" from the resource. This paper [PDF] (via KP) shows that's not the way the industry works. The implication is that we may not be efficiently managing resources with free market price signals. That's not a silly idea where energy is concerned -- taxes on consumption of this resource can slow down consumption to keep energy cheaper tomorrow. Think about it.

21 December 2011

Water efficiency or propaganda?

This article from the Jerusalem Post compares water use patterns between Israel and Arizona/Nevada. On Israel's side, we hear:
As natural water sources in countries such as Israel continually decrease every year, they must learn to create sustainable and reliable supplies using new techniques, many of which Israel has already undertaken, according to Tenne [chairman of the Israeli Water Authority’s Water Desalination Administration].
Sharon Megdal (director of the Water Resources Research Center at the University of Arizona in Tucson Arizona) then added:
In Arizona, about 40% of the water used comes from groundwater, 3% from recycled water and the remainder from the Colorado River, whose basin Arizona shares with six other states, as well as Mexico and Native American reservations inside Arizona that have independent water authorities.

“They have sovereignty when it comes to water management, so we share water with a lot of different entities,” Megdal said.
Then Pat Mulroy (president of the Association of Metropolitan Water Agencies in America and general manager of the Southern Nevada Water Authority) weighed in:
"This is a place where innovation and technology, but most importantly diplomacy, is all-important. Our solutions are not ones we can find within our own boundary," she said. “What do you do the day that there’s nothing left in the Colorado River to exchange? That’s the challenge. How do we face a reservoir that has less than one year’s supply left in it?”

In Mulroy’s opinion, you work with your neighbors – to go so far as to invest in financing desalination plants in Mexico’s vast open space, and then sharing the end result.

“We seven, very different, disparate states have to agree,” she said, adding that “Mexico has to be a full participant.”
I don't quite agree with these comments. Israel has invaded countries to get water (Syria's Golan Heights and the Sea of Galilee/Kinneret) and takes water from the West Bank that belongs to Palestinians. Arizona "shares" water with a lot of states, but its groundwater use is unsustainable (mining), its surface water comes from a stressed river, and most of that water goes to irrigation. Las Vegas? Where do I start? Let's just say that Pat Mulroy is just about the last person I'd call a diplomat (power-player is more correct), and her venture into Mexico has nothing to do with "working with neighbors" (remember they are paying $170 million for the Drop 2 reservoir on the Mexican border that's ONLY purpose is to prevent ANY excess water from accidentally making it to Mexico) and a lot more to do with regulatory arbitrage -- hoping that a little less environmental regulation will help her get a desalination plant in Mexico more easily than a US plant.

Bottom Line: Sounds like there was a lot of self-congratulation going on in Israel. I'd be happier to have the opinions of a few (involuntary) participants in these management "successes."

20 December 2011

Internal performance insurance markets

Here's an addition to my idea of improving utility performance by "importing" competition via insurance companies that compete to write policies:*

This insurance idea can be run inside a company with many operating locations (e.g., Veolia with water treatment plants all over the world).
  • It would treat each plant as a separate business, with a policy that might target water quality and a premium based on existing management.
  • The premium would rise or fall, depending on the inspections of outsiders (former water quality managers still working for the company).
  • All premia would go towards a fund to pay for lapses in quality. 
  • It would be important to consider the objectivity of inspectors and their premium reputations, since mistakes would be harder to overcome without some competition from another insurance company.
  • It may even be possible to allow OTHER managers to travel to "expensive" locations to recommend ways to improve operations and reduce premiums.
  • The complications of these overlapping roles are only possible if a company has enough staff and locations to keep them busy year-round. (These people already work on these problems, so it's a transformation of their work structure.)
This system would create higher-powered incentives that may improve performance over the current system of "informal" inspections and guarantees from the center to various divisions.

Bottom Line: Companies can use internal markets to improve their performance.

* They compete to offer low premiums on policies (to cover loss of service, poor quality, etc.) to water utilities but still need premiums to be high enough so they can stay in business. The resulting rate to customers (tariff + premium) reveals the overall quality of water management.

19 December 2011

Monday funnies

This 2008 video (via MG) is funny, yet painfully true:

Paying for floods

RM sent me this article discussing the release of new FEMA flood maps that will show some areas to be under a greater threat of floods.

The responses to this sensible, scientific exercise -- and the resulting changes in flood insurance policies -- are funny (sad):
Rice grower Tara Brocker, who lives and farms south of Nicolaus at the confluence of the Sacramento and Feather rivers, said the floodplain restrictions will likely convert agricultural communities like hers into ghost towns.
Yes, that's because it's not a good idea to live in a place that's likely to be underwater.
"For a lot of farmers, they might have financing on their operation and when they get remapped, their lender will say, 'You are in an A zone now; you have to purchase flood insurance.' This can increase one's insurance costs four to six times," Gallagher said.
Yes, because the objective measure of your risk went UP. That's how insurance works.
"We believe most people will agree that agriculture makes sense as the best use for floodplains," said Elisa Noble, director of livestock, public lands and natural resources for the California Farm Bureau Federation. "However, agricultural and rural communities need to be compensated somehow for bearing this increased risk."
No, you have to STOP building facilities on flood plains, plant annual crops, take the free fertility that comes from a flood, and move on. You can't just keep asking for more money. (Well, I guess you can, but don't moan if you don't get it.)

Bottom Line: Don't expect special favors when you live in a flood plain -- even if you have a past experience of special favors. Stupidity cannot go on forever.

17 December 2011

Flashback: 12 - 18 Dec

A year later and still worth a read...

Local weather -- lots of snow in A'dam last December. I leave for Cairo on 11 Dec (some snow came on 18 Dec).

Ecosystem services -- the debate on their value -- and who should pay for them -- is ongoing, but we DO get value from ecosytems!

Flood zones in the Netherlands -- their MINIMUM safety standard is one flood in 1250 years. What's Sacramento? One flood in 50 years? Damn.

Living below sea level -- one year later and I am still impressed by the Dutch dedication to solving this problem AND how little work it takes once people agree that flooding is not cool.

Deceptive numbers -- READ this if you rely on statistical significance for your work!

16 December 2011

Friday party!

"It's the first follower who transforms a nut into a leader."

Watch how to start a movement


(I forgot who told me about this. Sorry!)

Notes from AWRA -- future visions

While at AWRA in Albuquerque, I was able to attend a talk by Bill McKibben (founder of 350.org and active participant in OWS) at a neighboring conference (The Quivira Coalition for 21st Century agriculture).

I asked if he had bought the domain "450.org" (we are now at 390 ppm and emitting record volumes of GHGs).

He was simultaneously defiant ("we must work hard") and pessimistic ("we're gonna see temperatures jump by 7 degrees F"). In a well-practiced rant, he attacked overconsumption ("people are living in starter castles for entry-level monarchs") and geoengineering ("geoengineering is junkie-economics. Desperate for a fix, people make up any story -- no matter how implausible -- to keep up their habit."), but he didn't go where his co-speaker (Bill DeBuys, author of A Great Aridness) had already ventured: prepare for a Southwest emptied by high temperatures.

Bottom Line: McKibben says "never give up!" I say be prepared!

15 December 2011

Notes from the Nexus

Here are a few notes from the Bonn Rio+20 conference on water-energy-food nexus:

Bad news: we will continue to do what we are already doing, i.e., more conferences:
  • 1972: Stockholm "on environment"
  • 1992: Rio was "environment & development" in the North but "development & environment" in the South. Huh.
  • 2002: Johannesburg on "sustainable development"
  • 2012: Rio "sustainable development (+ 20)"
One speaker claimed "if you cannot solve the problem, enlarge the problem." Presumably that's why we added food to the water and energy nexus (others have already added "climate"). I'm not sure that's a great idea in terms of solving problems. I'd prefer Hayek's view that appropriate pricing in each activity will lead to efficient interactions between activities. (None of these activities NEED government involvement -- they are ALL related to resources!)

Along the same lines, there was a discussion on whether it makes sense to merge separate ministries of food and water (say) into one super ministry. On the one hand, that makes it easier to manage interdependencies; on the other, it risks subsuming one topic (food!) to another (water!), without anyone noticing. Given my experience of bureaucracies, dropping a ball between cracks of merged ministries seems more dangerous than worrying about coordinating efforts (assuming that's even necessary -- see above).*

The background document [PDF] was weak in its discussion of the biggest problem in "managing the nexus" -- government bureaucrats who are too incompetent or corrupt to do so. In my paper on international aid (Save the poor, shoot some bankers), I spent a LOT of time discussing incentives to perform. This conference -- attended by MANY of the usual suspects -- took strong intrinsic incentives to perform for granted -- contradicting facts on the ground.** People are either ignoring or glossing over the magnitude of this BIG problem.

They started the conference with draft policy recommendations, and I didn't see the main speakers (or organizers) go far off that script. There was some anger among delegates on the silly practice of following scripts instead of engaging in serious debate over hard choices. I shared that anger (but spent most of my time talking to people in the atrium). Even sillier were time schedules that allowed people 10 minutes to present something but no time for questions or discussion!

While I was there, I had many discussions on zero-value carbon and the water data hub. Both ideas were well-received, even as the people I spoke to said they had no time/money to deviate from their organizations' missions. This is a BIG problem if you are trying to address issues of global magnitude. It's also a problem that most businesses do NOT have. They have an incentive to change -- and do change -- their path when actions are going to produce better results.

Bottom Line: It was interesting to see world leaders continue to promise that they can "manage" its biggest problems -- while failing to show any sign that they know what they are doing. Why are many terrorists engineers? Because they think they can make the world a perfect place! I worry about the same with these kumbaya bureaucrats.
* That reminds me to remind you that most government ministries of water, agriculture and energy are not only a waste of time and money -- they actively ruin citizens' lives in service to the industries that have captured them. This is a BIG problem. Read this and this.

** I was pleased to hear the head of the Indonesian association of farmers and fishermen say that "corruption is a problem" in Indonesia (in response to my question).

14 December 2011

Cutting edge regulation at Ofwat

Ofwat has regulated investor-owned water companies in England and Wales since privatization in 1989. These regulations have often been on the frontier of performance incentives, which means that Ofwat is often the first regulator (worldwide) to attempt to put new incentives into place.

One such scheme -- "common carriage rates" for one water company to use another company's network for serving a customer -- was a good idea that has failed in practice: only one customer out of 2,200 eligible customers signed up.

I spent two days in London recently, learning about Ofwat's latest ideas on regulation.

On Monday evening, I participated in a panel discussion on big strategic questions regarding sustainable water. Many of my answers to questions involved more pricing (less regulation) and more markets (less management), which may not be news to readers of this blog, but was more often news to the audience.

On Tuesday, I participated in workshops on water trading and breaking the vertical monopoly, i.e., separating the monopoly wholesale monopoly on sourcing, treating and distributing water from the (potentially) competitive business of administering customer services and billing (post to come).

Most water trading proposals involve long term sales from water companies in surplus areas to other companies in shortage areas. Participants wanted to find the "right price" for a this bi-lateral monopoly structure, but that price is hard to know. Some suggested that the regulator should set the price; others worried that prices and deals might come unstuck in year 22, say, which would upset financial markets.* Even worse, there was no clear indication of how profits from trades (on both sides) would be treated against regulated returns. It's clear that profits could not be used to lower prices, but also clear that prices SHOULD move in response to rising/falling revenues. These discussions were even premature -- given the importance of quantifying water rights that were both over-issued (familiar problem!) as well as badly specified. I suggested that participants look to existing water markets in Australia for success (and California for failure), while attempting to bring in as many ideas as possible from competitive markets. We'll see how this project develops.

Despite all of these problems, Ofwat can move towards wholesale markets for water (abstraction permits and flows) by starting trade among homogenous groups:
  1. quantify rights, 
  2. set a simple transaction structure, and
  3. ensure access to conveyance.
Problems of bi-lateral monopoly, price discovery and trading volume can be addressed via my all-in-auctions idea. Start with short-term trades before moving to long-term trades. Also note that robust market institutions will be useful in coping with changes in environmental flows, adapting to climate change, and maximizing flexibility among different water users. They should NOT be used to increase water consumption, since such "optimization" will remove buffers from systems that will need them in case of big disruptions (everything from infrastructure failure to drought).

For deeper thoughts on these issues, I recommend Jon Stern's papers on reforming and improving water company performance. Begin with this short overview of the industry [PDF], then read Jon's proposal for including scarcity charges in water prices [PDF]. (Are you folks in the "water crisis" areas listening?). You can also browse most of his papers here. HIGHLY recommended.

Bottom Line: Ofwat's process of inviting discussion from industry, interested parties (consultants, consumer groups, other ministries) and outsiders (me!) is a brave and useful way to explore and design innovations in water regulation that will keep water companies in business while benefitting consumers.

* Water companies are far too coddled by regulators, which is why financial markets love them (guaranteed returns!). It would be better to put more emphasis on company performance -- including taking more risks -- than on stable cash flows.

13 December 2011

Death to pennies!

I totally agree with this (it's a transactions costs thang).

Speed blogging

  • This paper (PDF in French but try Google translate) describes how people in France decide among multiple water sources (municipal, untreated groundwater, stormwater and greywater) based upon the water quality they need and the relative cost of each type of supply.

  • Pesky academics: "Although the Groundwater Management Act was designed to end groundwater overdraft by 2025, in part through progressively more efficient water-use standards, our findings [PDF] reveal that the Arizona Department of Water Resources, the state legislature, and the municipal water providers in metropolitan Phoenix have steadily eroded conservation standards and made woefully inadequate progress toward reducing urban water demand."

  • "On the Water Front vol. 2 offers a collection of the most innovative and important insights on water and water quality presented at the 2010 World Water Week in Stockholm... on how the public health sector will be impacted by climate change, the most potent policy cocktails to protect coastal waters, the best-practice solutions to wastewater reclamation and reuse, what the potential onset of peak water and peak phosphorus could mean to humanity, new ideas to mitigate the growing dangers of chemical and agricultural pollution to human and environmental health, and much more."

  • An interesting overview of water markets [PDF] from 2006, with an emphasis on Texas.

  • Apartheid in Israel: "Under the 1995 Oslo II agreement, he explained, the Palestinians had agreed to an inequitable distribution of the Jordan River’s water. Roughly 90 percent of the water supply was allotted to Israel and 10 percent to the Palestinians, he said, and the Israelis had veto power over even the simplest rainwater catchments projects in the territories. All water-related projects required technical, political and military approval by the Israelis...the Palestinians’ consent to inequitable use of the Jordan and transboundary aquifers shows that hydro-hegemony can be attained by coercion rather than force."
H/Ts to AL and GM

12 December 2011

Monday funnies

Engineers may see the world in simple terms, but economists know that tape and spray can fight back.
H/T to TV

Regulatory fail in the making

The California Public Utilities Commission is contemplating imposing postage stamp rates (PSPs mean same price, no matter where you live) across ANY AND ALL districts run by the same investor owned (IOU or "private") utility. PSP were a big theme in my PhD dissertation on the Metropolitan Water District of Southern California, i.e., unsustainable sprawl and inefficiency down there is due to PSP.

(This webpage has links to Word and PDF files detailing the proposed rule, but I can barely understand the bureaucratic gibberish.)

This idea means that ALL customers in districts operated by the same company will face the same price of water, i.e.,
Multi-District Water Utilities
Districts
California-American Water Company
             6
California Water Service Company
           23
Del Oro Water Company
           17
Golden State Water Company
9
San Gabriel Water Company
2

PSP is a stupid idea because it:
  1. Creates cross-subsidies from "cheap to run" to "expensive to run" areas. Want a desal plant in Monterey (a CalAm territory)? No problem! Have customers in Sacramento and Ventura pay for it!
  2. Does nothing to address water scarcity. They may even increase water consumption by lowering the "cost" of water below its actual cost (via a subsidy from elsewhere).
  3. Makes it easier for water companies to spread wasteful capital spending and the cost of inefficient operations across many customers, leading to a deterioration of overall quality and value for money.
  4. Shifts costs from heavy to light water users and from established neighborhoods (rich, rural or dilapidated) to new neighborhoods (first time homeowners).
  5. Increases sprawl by lowering the price of system expansion to new customers.
There are only two advantages to PSP that I can find: IOUs can use them to make more money and regulators like them because they can do less paperwork (and get paid the same!).

There's nothing good in them for customers, and who's speaking for customers here if the regulators are pushing a policy that suits them?

(Some people claim that PSP make it easier to make "expensive" repairs in areas where customers cannot afford the improvements. THAT problem should be addressed by regulatory relief and/or income transfers, NOT excess taxes/charges on other customers who've paid their way. PSP subsidies to "poor" customers are neither sustainable nor financially responsible and those customers will pay more in the end...)

I'm sending these comments to the CPUC via email. You can too, if you send them before 15 December (in three days!). Be sure to cite "OIR 11-11-008."

Bottom Line: Postage stamp/average cost pricing is neither fair, efficient or sustainable.

10 December 2011

Flashback: 5 -- 11 Dec

A year later and still worth a read...

More corruption in the Central Valley (aka, that silly rail project). AFAIK, politicians still clamor for that pork.

Silent Spring -- The Review. Five stars. Read it.

Gasland -- The Review -- a year later, and I think I was pretty accurate (caveats provide wiggle room, but they also make it easier to carry on a nuanced conversation).

Users should pay for water and infrastructure. Seriously -- if we took care of this problem, we'd solve 80% of the water "problems" worldwide.

Spam from me?

Did anyone get this email from "me"?

09 December 2011

Friday party!

Cool!
 

Anything but water

H/Ts to AG, RM and HZ

08 December 2011

Buy The End of Abundance for $202.95!

Well, that's the price that you might pay if you look for that book on the Barnes & Noble website, e.g.,

On the one hand, this is the result of me restricting B&N from my sales channels. (I had signed up for it, but their discounted price -- $13 -- was only possible because they cut my royalty.)

On the other, it's a "bad shopper" tax, if someone can't find TEoA at its normal $20 price. (How is it possible that someone has NOT heard of TEoA yet! :)

Do you know anyone who is so lazy as to not look for a lower price on a book?

TANSTAAFL -- the review

It's generally true that writing gets better with each draft, but at some point a writer must stop, as his cost of re-drafting exceeds his benefit (the benefit to readers is a different story).

But sometimes we get the chance to re-write an earlier work, not just to finesse the original perspective but to add wisdom and highlight important points.

Edwin G. Dolan has taken this second path with his "Version 40.0" 2011 update of his 1971 book, TANSTAAFL (There Ain't No Such Thing As A Free Lunch) - A Libertarian Perspective on Environmental Policy.*

Now some readers may be tempted to stop reading this review, since they are not interested in a "libertarian" book on environmental policy. Don't libertarians, after all, think that money should determine who gets what, in some kind of Darwinist struggle to allocate rainforest to the richest?

Not really, and definitely not in this book.

That said, Dolan doesn't shy away from highlighting the dangers of government failure and command and control myopia. In fact, he does an excellent job of exploring the tradeoffs between individual liberty and government guidance when it comes to managing our environment -- saying things I've said in the past, but adding more discussion that I wish I had and explaining more clearly than I ever did.

In other words, I like this book. I like it in the same way as I like "Economics in One Lesson" [free download], which I assigned to my Environmental Economics and Policy class at UC Berkeley, and I'd definitely assign this book to ANY class with "environment" in the title. It's important to note that the book is written in clear prose, with no equations and only a few simple tables and figures. Fantastic.

And here's the coolest thing about this book: Each chapter has two parts -- the 1971 original and the 2011 update on "what's changed" and "what hasn't changed." I really liked this structure, as it revealed how much economists had to say so long ago (the first Earth Day was in 1970!) as well as bringing the reader up to speed on current events.

The book starts with its awkward title, i.e., every decision involves tradeoffs. I make this point to environmentalists when I talk about water. For example:
The only way to leave the environment intact is to take ZERO water; that action would result in a 90% population shrinkage as we returned to a life of hunter gatherers. If you want that, fine, but if you want a modern life, then you must agree that SOME water is going to be "taken" from Nature. The only question is "how much?"
Let's go over the chapters:
  1. A comparison of "throughput" and "closed loop" economies in which Dolan points out how the throughput basis of GDP distorts policies and decisions. In his 2011 addendum, Dolan points out the silly nature of policies designed around "willingness to pay" that do not actually involve payment. This paragraph alone should get about half the environmental economists in trouble (hear me guys?). He then goes on to demolish the "affordable energy" lobby (oil companies that like subsidies).
  2. A nice explanation of basic economics (in 9 pages!), i.e., how the law of decreasing marginal benefit and diminishing returns result, respectively, in the laws of demand and supply. His 2011 addendum demolishes crony capitalism ("Drill baby drill") and silly regulations, e.g., CAFE fuel standards dedicated to protecting America's dinosaur car companies.
  3. A move from market distortions to market failures and a discussion of pollution (negative externalities), property rights, tort laws and regulation. Dolan (like me in my book) points out that regulation can not only interfere with the discovery of "efficient" levels of pollution, but it can also fail to compensate those who are harmed by pollution AND result in far more pollution. In his update, he writes out the 20/80 rule (p. 77):
    Putting a price on pollution is by far the best way to affect the behavior of people who are neither environmental activists nor environmental skeptics, but are simply indifferent.
    That said, he also supports government and non-government involvement when it's too difficult to use price signals.
  4. Dolan covers "political economy" (oh boy!) and my favorite topic: who gets the costs and who gets the benefits from policies and how are we to organize collective action to make sure that the majority are not over-run by special interests (aka governments do not impose regulations ON industry; governments provide services TO industry via regulations). Wow. Every environmentalist should keep this chapter on the bedside table.
  5. Ehrlich, Malthus, The Limits to Growth [my review] and steady-state ideas. Dolan's discussion of anti-population (Ehrlich) vs. pro-population (the Pentagon) views is still timely, but he falls (surprise!) firmly on the side of individual choice AND an end to "pro-child" ideas like welfare payments for children, etc. In his update (7 billion people!), Dolan is neither optimistic (per Julian Simon) nor pessimistic (per Population Council); he ends with a plea for a woman's informed right to choose how many children she wants. (Read, via AW, Herman Daly's comment on how we've passed the limits to net-positive growth.)
  6. A discussion of economic development and the environment in which Dolan brings up one of my favorite taboos: if we find the way to feed the poor, then what do we do when they have children who are hungry? This awkward question should be debated every day in every aid agency that delivers superficial help (the fish) without deeper solutions (teaching the poor how to fish). He goes on to discuss the demographic transition and environmental Kuznets curve. In his 2011 update, he compares the good news (most people's lives are improving) to the bad news (massive corruption still harms many).
  7. A discussion of government intervention -- for better or for worse -- and the special interests (from oil to greens) who profess to speak for the People. Dolan wishes that government would get out of the business of destroying the environment (e.g., USACE and their silly cost-benefit) but also that environmentalists would support non-elitist outdoors (hear that Restore Hetch Hetchy?)
  8. A discussion of the steady state economy (don't) and plea for individual decisions instead of delegation to a "Central Environmental Administration" (the EPA was founded in 1970, so this is a funny term) in the move towards a sustainable macro-economy. In his 2011 update, Dolan reaffirms the power of prices over regulations (e.g., lightbulb prices vs bans).
That's where the 1971/2011 update ends, but Dolan adds a fascinating chapter on climate change and climate policy (reprinted from a 2006 CATO Journal article) in which he says that there's too much risk to wait for iron-clad proof of climate change AND that those who have committed the harm (more the US than China) need to pay the costs of mitigation and (Dolan also emphasizes) adaptation. These arguments are firmly grounded in libertarian economic theory (Coase, Hayek, Locke, et al.)

Bottom Line: I give this book a very firm FIVE STARS. Anyone interested in the environment (science, policy, economics, life) should read it -- and then go out and tell some emperors that they are naked!

* Searching Finance, the publisher, sent me a review copy and offered to pay me a commission on purchases from their website (paperback or PDF). You can also buy the paperback or Kindle version at Amazon. I don't care about the commissions (I wrote the review based on my real thoughts on the book), so click for convenience.

07 December 2011

The Riverview Project

This is cool (I met Jared a few months ago in San Diego).

"Jared Criscuolo and Kristian Gustavson are building a visual database of America’s most imperiled rivers and crowdsourcing their restoration online...Beginning in spring 2012, they’ll start with the Sacramento, San Joaquin, and Colorado rivers. After capturing the necessary footage, they’ll post 360-degree panoramic views of each river, from source to sea, online." Read more at Outside Magazine.

Here's the website. Fantastic application of technology, to let you virtually tour a river.

Donate $50 to the project and get a free subscription to Outside.

MS Word update

After 15 years of updates, Microsoft Word STILL sucks so badly.

Just crashed while trying to run spell check (lost work, of course!)

MS needs more rocket-scientists (they appear to work for most other software companies).

Speed blogging

  • From the UK: "Untapped Potential identifies reforms to regulatory arrangements for abstraction and water supply, to better protect rivers and natural environments at lower costs."

  • I just heard about this depressing problem:
    A lawsuit... accuses the U.S. Department of Energy of withholding a crucial study on how to solve the national confrontation between water supply and energy demand that was ordered up by Congress in 2005 and never made public.
  • More of a complement than substitute for IBNET: "The European Benchmarking Co-operation is an industry-based, not-for-profit benchmarking initiative for water services. It aims to facilitate water utilities in improving their performance and raising transparency."

  • Use this! "OpenEarth is a free and open source initiative to deal with Data, Models and Tools in marine & coastal engineering projects."

  • And this! "The SWITCH project looked towards water management in the 'city of the future' aimed to challenge existing paradigms and to find and promote more sustainable alternatives to the conventional ways of managing urban water." Here's a really great presentation [PDF] by Kalanithy Vairavamoorthy, the director of SWITCH, on future urban water use that takes energy, transport, etc. into consideration (from this session at Bonn Rio+20).

  • (via Aquadoc), the National Water Commission Report of 1973 [PDF] had the answers, e.g.,
    The Commission addressed the important role of full cost pricing and user charges in the delivery of water and sewer services to customers. It noted that proper pricing would conserve scarce water supplies, discourage or delay investment in water infrastructure projects, and make the use of resources more efficient. The Commission recognized that utility regulation may be aimed at accomplishing multiple objectives, and only incidentally be concerned with conserving and efficiently using water supplies. Still, it recommended that water and sewerage charges should be based on the costs that users impose upon the system and the costs imposed on society from the loss of the use of the resource for other purposes.
    Shall we just print it out and get to work -- or do we need more studies?

06 December 2011

Should water companies self-regulate their risks?

This white paper [PDF] from Ofwat proposes a move from output- to outcome-based regulation of water companies in England, i.e.,
The first change is to the current system of regulatory reporting. This would move Ofwat away from detailed regulatory monitoring of compliance. This change puts the companies firmly in charge of managing their risks, and redefines our role as holding them to account for the results, not the processes they adopt to ensure compliance.

Second, we propose that Ofwat itself adopts a risk-based framework. This will not only include a systematic assessment of risk and opportunity but will also allow us to focus the allocation of our own resources. This will demonstrate that we intend to conserve resources and target our efforts, so we have the capability to act swiftly and decisively where there is a real risk to outcomes for water consumers. And the companies and we would be freed from regulatory burden where there are no material risks to consumers.
This project, while admirable, suffers from three fatal flaws:

First is the emphasis on self-reporting and regulation of risk by companies that have little incentive to provide accurate reports on risk. Mistakes, after all, can be plausibly blamed on "unexpected, outside" factors beyond the companies' control, i.e., "can we increase our prices to fix the problem please?"

Second, "self regulation of risk" does not instill confidence in people after the fiasco of self regulation of risk by financial companies that have absorbed $ trillions in bail out money, world-wide.

Third, Ofwat faces information and incentive problems in terms of monitoring risk inside companies. What questions should be asked? Who wins or loses if the wrong questions are asked or the wrong weights (in terms of risk) are applied to the answers? How will outsiders know if Ofwat is doing a good job at monitoring one company, let alone 20+ companies with very different institutional and physical characteristics.

Luckily, I have an answer to these flaws:
  1. Rebrand this effort as "delivering sustainable services" instead of "managing risk." 
  2. Require that water companies take out performance insurance with companies that will compete for business (minimizing the cost of insurance), watch water companies (providing oversight), pay for accidents (relieving customers of higher bills for mistakes), and provide a transparent view on performance (facilitating comparisons and benchmarking). All of these ideas are spelled out in this paper.
Bottom Line: It's difficult to balance between over-investment that taxes customers and under-investment that puts their water services at risk, but regulators can facilitate that balance by importing a competitive industry that will take responsibility for failure while getting paid for success.

05 December 2011

Monday funnies

I'm not sure if this is funny or just a sad indictment of American "culture":


Water stimulus stupid

(via RM links) The only thing I hate more than hearing about "stimulus spending" is "green jobs" rhetoric.*

That's why I dislike seeing "A UC Berkeley economist says one of the rewards for repairing California's broken water-delivery system could be 130,000 jobs."

Some of those jobs would involve construction of infrastructure for unsustainable water diversions;** others would result from unsustainable agricultural practices. Many of them, of course, would not be "net" jobs, but jobs for people who quit work in one place to work in another.

But most of the jobs would probably go to lawyers,*** consultants and economists lobbying to get a piece of all of the money that would be thrown at such a boondoggle.

Bottom Line: Make good polices for sustainable water management FIRST and then let the jobs flow where they may (or may not).
* Read about fraud in stimulus jobs and stimulated groundwater overdrafting, then read about why recessions are good (not recognized) and how to productively spend stimulus money (not tried).

** This community is fighting to "save its dam" because of all the jobs created when a reservoir replaced an ecosystem. By that logic, I recommend turning Central Park (or Golden Gate Park) into a Magic Mountain fun zone -- cut down the trees (logger stimulus!) and replace them with roller coasters, golf carts, and Coca Cola vending opportunities!

*** Like this ridiculous example of a lawyer trying to lead Peter Gleick to agree with the silly ideas that Las Vegas promotes in its attempts to grow via water imports instead of live within its (already way-over-extended) means.

03 December 2011

Flashback: 28 Nov -- 4 Dec

A year later and still worth a read...

The Economist calls it quits... ...on mitigating climate change -- as I did.

Failure as usual in India -- how is groundwater looking in UP?

BEST: A few words on footprinting (as in, bad idea).

BEST: Investing in Water -- still a lot of interest and a very few deals

Water auctions in Arizona that have not gone anywhere (right Taylor?)

Westlands takes its toys home -- from the Bay-Delta Conservation Plan. What happened since then?

02 December 2011

Friday party!

This video is fantastic (one of several filmed as part of a promotion of Basilicata, Italy)

Speed blogging

  • Thanks to my hosts at University of Reading, I was able to give a talk about The End of Abundance. Most of the 80 minutes [MP3] was spent discussing (very good) questions from the audience (as I prefer). If you want to attend one of these talks, try to get to Den Haag on 8 Dec or San Francisco on 1 Feb (see right sidebar).

  • "Can we fight global warming with artificial global cooling?" Don't be silly, put your time and money into reading this report on adaptation strategies!

  • THIS is sustainable: "Creating local capacity for improved rural living standards through affordable and sustainable energy and sanitation solutions" [more on the project in Kyrgyzstan]

  • Jay Famiglietti (UC Irvine), as the Birdsall-Dreiss Distinguished Lecturer for 2012, will be delivering 50 lectures in 50 weeks around the world on water cycle change and freshwater availability [his stuff is in TEoA]. He's blogging here. You can see lecture dates here AND request that he come talk in your city!

  • A great article on water leakage in Canada (it's more expensive than just a little lost water!)
H/T to MF

01 December 2011

The Eurozone crisis

Tyler Cowen nails it. A must read for anyone interested in macroeconomics, politics, culture and cooperation. Good news: There's hope.

A national vision for water management?

While at the AWRA, I participated in several discussion on this topic [PDFs of session 1 session 2]

Many people wondered if we should even use the words "national", "water" or "vision" in the same sentence, for fear that these "sensitive" words would provoke a political backlash.

I suggested that the US could have a "national water vision" modeled on the EU's Water Framework Directive, i.e., that governments on all levels agree to bring their surface- and groundwaters up to "good status" on environmental (quantity) and chemical (quality) measures that, together, would be considered "sustainable."

That said, locals would be allowed to find their own ways to reach good status.

In the same conversation, confusion over "bottom up" and "bottoms up" led me to anther recommendation on reaching good status:

First, make sure that most water management occurs locally, from the bottom up. Second, reconcile overlapping and conflicting jurisdictions, spillovers, and goals by locking politicians and bureaucrats in a room with a lot of alcohol, until their "bottoms up" negotiations produced a result -- an idea I proposed for ending deadlock in the Delta long ago.

As a first step in these negotiations, it would make sense to cede control to management teams that function on a watershed level (as is the case with the EU's WFD).

What do you think?

Bottom Line: We can have a national vision for water management, but it needs to be a vision that makes it easy to reconcile many different values over water, not a vision from above that forces a certain perspective or value.