18 June 2014

One simple fix for California's drought

(via DA) I read that the Pacific Institute and NRDC have proposed "five simple fixes for California's drought." Putting aside the incorrect wording (the truth is that Nature makes a drought, but Man makes a shortage), I offered the following comment:
This typical, top-down list of to dos will accomplish nothing, as it requires (1) farmers to spend $100 to save $5 of water and/or (2) homeowners to spend hours on a leak that costs them $2.25 per year.

As usual, the INCENTIVE to reduce water usage is totally missing from this list of recommendations. Higher prices for water users will incentivize them to use less water (whether that means shorter showers or fixing leaks). For farmers, the same holds: Charge them more, or -- better -- give them the chance to sell water (recent auctions saw prices 50x normal, at $2000/af) and you will see many acre feet transferred to the urban sector.

Asking them to install efficient irrigation systems and THEN let the extra water flow in rivers? Hopeless. They will irrigate with 100% of their water, efficient or not.
Bottom Line: Drought reduces the supply of water. The obvious response is to reduce demand. The fastest way to reduce demand is to raise prices.  Don't tell them what to do. Tell them water is scarce and let them find ways of using less. They are more creative than people writing op/eds on websites.

2 comments:

  1. Might have been nice if David had READ our study, instead of just repeating the same old mantra of "price, price, price."

    First, our assessments were technical assessments of potential. We say NOTHING about the wide range of policies that might be implemented to capture that potential.

    Second, for an "economist," it is not clear that David fully understands the economics of efficiency improvements. Many have been proven to be hugely cost effective, even with today's inappropriate pricing of water (with which we have long, always, agreed). Where did the "spend $100 to save $5 of water" number come from? You must have made it up, since there is plenty of research that shows what improvements are cost-effective. And many are.

    Finally, more evidence David didn't bother to read our reports before launching this "critique"? In your conclusion you say "Don't tell them what to do." We don't. That is the next part of the critical discussion needed to move forward to capture the vast potential we identify in our assessments. And these weren't "op-eds" but technical assessments.

    If YOU (the reader of these comments) would like to read the actual studies, here are the URLs:

    http://pacinst.org/news/new-report-drought-stricken-california-could-save-up-to-14-million-acre-feet-of-water-enough-to-supply-all-the-states-cities-annually/

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  2. @Dr. Peter -- Thanks for the elaboration. I'm perfectly aware of the price-technology dynamic. Strangers to your reports may not be, hence my comment, so they see the larger context.

    I discovered a good formulation for the different way we discuss these ideas. Your work often focuses on the means of improving efficiency. but I focus on the environment (milieu) that would drive or retard those means.

    Since you ask, I'll tell you that IID is not interested in spending $150/af to save water that costs them $20/af. Perhaps that ratio is not as aggressive as you want, but it's demonstrative. Yes, there are cost-efficient ways of saving water out there. My point, as an economist, is that water users need to see BOTH the cost and benefit from conservation. Your reports tend to miss that, unless you say "raise prices and the cost of conservation will be worth it to users."

    Finally, I'll mention that nobody needs to read your reports except policy makers fishing around for dialogues. People know how to use less water -- if it's worth their while. My point is that it's often NOT worth their while.

    Glad you stopped by.

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