Environmental Economics

Where's Noah when we need him?

From the Columbus Dispatch:

Flood warnings are flying this morning as river forecasters predict some evacuations may be needed...The north fork of the Licking River in Newark is expected to rise to 18.3 feet, nearly six feet above flood stage...The Muskingum River is already at 10.85 feet, and flood stage is 11 feet. It it expected to rise above flood stage late this morning, and will rise to 11.4 feet by midnight. South of Columbus, flooding of the Scioto River at Piketon may be the worst since 1964. The river was two feet above flood stage this morning at 20.7 feet and could hit 31.9 feet on Friday....The Scioto at Circleville will rise to 25.6 feet by midnight and remain over the 14-foot flood stage through Sunday. Roads west and north of the city could be submerged and a favorite target -- the Old Shady Acres Mobile Home Park -- could be swamped.

Quick question.  Old Shady Acres Mobile Home Park is a 'favorite target.'  So it has flooded before?  Then why is it called mobile?  MOVE!

Southeast U.S. water fight update

Don't you hate it when the kids can't get along?  From YahooNews:

Interior Secretary Dirk Kempthorne acknowledged Saturday that White House-brokered water negotiations among Alabama, Florida and Georgia have failed.

But don't worry, Dad (or Big Brother?) will fix everything:

Without an agreement, the Army Corps of Engineers and other federal agencies will begin implementing a water-sharing plan of their own, Kempthorne said in a letter to the governors.

Southeast drought update

Since I seem to have become an accidental expert on the drought in the Southeast (see here and here and here), John pointed me toward this story in the NY Times today:

Georgia lost a major court fight in the Southern battle over water rights on Tuesday when a federal appellate-court panel said the state could not withdraw as much water as it had planned from an Atlanta-area reservoir.

[...]

Gov. Bob Riley of Alabama hailed the decision as “the most consequential legal ruling in the 18-year history of the water war, and one of the most important in the history of the State of Alabama.”

He said the ruling “invalidates the massive water grab that Georgia tried to pull off.”

Alabama and Florida, which depend on water from Lake Lanier for power generation, industry, recreation and commercial fishing, argued Georgia had no legal right to the reservoir, which was originally built for hydropower.

In Big Ten Eleven country, we settle our differences on the football field.  Obviously those nuts in the SEC take it to another level.

Water trading California style

I'm all for water trading in times of water restrictions, or any time really.  The sale of marketable water rights is a simple way to efficiently allocate scarce water.  But what if the water rights being sold were obtained at a discount--from the government?

From the AP:

With water becoming increasingly precious in California, a rising number of farmers figure they can make more money by selling their water than by actually growing something.

Because farmers get their water at subsidized rates, some of them see financial opportunity this year in selling their allotments to Los Angeles and other desperately thirsty cities across Southern California, as well as to other farms.

Like I said, I'm not against the sale of the allotments.  But the current problem was at least partially caused by the subsidized water allotments. With the subsidies, water is over allocated to farmers.  Now a quantity constraint leads to the discounted asset becoming more valuable to farmers.  What's the rational farmer to do? 

This sounds an awful lot like the debate over permit allocation in the carbon cap and trade debate.  The government hands producers an asset at a discount (carbon permits) then allows them to sell at the market price.  When market prices rise, the producer receives a windfall. 

The difference, though, is in the case of carbon, cap and trade is designed to correct a market failure--no scarcity of carbon.  In the case of water, scarcity already exists.  Efficient water pricing would result in a better allocation of water.  Subsidizing water to farmers increases farm profits, but creates an inefficient allocation of water. 

And besides, the Federal government will bail us out anyway

From the Columbus Dispatch:

Thousands of properties in central Ohio will officially move into the Federal Emergency Management Agency's recalculated flood plain in June, and thousands will move out.

...

Marilyn Walters, whose home at 3610 Park St. in Grove City is labeled high-risk by Floodsmart.gov, will see her property move out of the flood plain in June.

"I don't care what they say, I'm not taking out insurance," she said. "My home has never flooded. I've lived here 45 years. Some homes on Grant did flood when we had the 8 inches of rain, back in '99 or so … but we never had a problem on Park."

Water pricing lessons from TimeWarner

Environmental news is slow right now, as always happens when the economy starts to tank and I'm teaching like crazy (2 PhD courses plus an environmental seminar) so the extent of my in-depth analysis consists of quickly browsing the news sites for stories to make some sarcastic economic-related comments about.  Like this one*:

Time Warner Cable will experiment with a new pricing structure for high-speed Internet access later this year, charging customers based on how much data they download, a company spokesman said Wednesday.

NNNNOOOOO!  I'm a TimeWarner customer--which means I have no access to the NFL Network or the Big Ten Network, but I do get high speed internet at home (RoadRunner) for one semi-low monthly fee.  As an economist I know that graduated pricing is a reasonable way to ration a scarce good--bandwidth in this case--but as a frequent internet user, I like the all-you-care-to-eat internet plan. 

As John likes to point out, one reason water shortages occur is prices don't typically rise when water is scarce.  If TimeWarner is succesful in rationing bandwidth, maybe water commissions can learn something about water pricing.

Drink Less!

I placed a Drive Less! bumper sticker on my cargo box this weekend. With a drought in the Southeast it might be time for Tim to gear up for a Drink Less (water)! campaign. One family in Raleigh chose to take quick showers and Flush Less! to get their individual consumption down to the Governor's moral suasion limit of 25 gallons per day:

We had room to spare when we limited ourselves to four brief showers, five toilet flushes, one load of laundry, one dishwasher's cycle and a minute or two of soaking pots and rinsing plates in the kitchen sink.

I've reduced my own water consumption by taking most of my showers at the gym.

Water Wars East

We're used to water wars in the western U.S.  The consequences of developing deserts.  But now, we're starting to see water battles in the eastern U.S. that go beyond concerns over intermittent drought conditions (From AP):

North and central Florida aren't feeling very neighborly at the moment as they battle over water from the St. Johns and Ocklawaha rivers to meet central Florida's exploding population demands.

Central Florida plans to take millions of gallons of water a day out of the rivers, angering north Florida residents and officials who say that could cause grave environmental damage, particularly to the north-flowing St. Johns.

"It is madness. We do not believe there is surplus water in the river," said Neil Armingeon, a St. Johns riverkeeper. The position is a privately funded advocate for the river. "We are not going to stand by and let the St. Johns and Ocklawaha rivers be degraded."

North Florida cities such as Jacksonville, St. Johns County and a river advocacy group all say the plan would destroy the delicate balance of saltwater and freshwater needed to preserve critical biological habitat and submerged vegetation.

I'm tempted to blame Disney, but they ship in bottled water and then charge visitors $4 a liter.

Mickey Mouse, DONALD DUCK, Mickey Mouse, DONALD DUCK...

Raising water prices

The Raleigh mayor has suggested raising water rates during drought conditions and the city council wants to wait (Council delays vote on raising water rates):

The Raleigh City Council today postponed acting on Mayor Charles Meeker's proposal for a temporary 50 percent hike in water and sewer rates, one of a series of steps he advocated in the face of a persistent drought.

...

Both proposals are likely to come before the council again in two weeks after city staffers conduct a study of their economic impact. The rate increase, which Meeker called a surcharge, would add about $178 to the annual water bill of a typical single-family home.

"I think we need a budget impact study to see why we need the surcharge," council member Philip Isley said.

If residential water demand is inelastic, and 'tis, the higher prices will increase revenues. OK. As far as I'm concerned the budget impact study is now complete.

Observing the drought

As promised, here are some pictures from Lake Lanier, north of Atlanta (Click each picture for a bigger view).  Due to a Southeast drought, the lake is at near historic low levels--well at least since it was dammed.  And yes, it was raining hard when we were taking the pictures.  Kinda ruins the effect, but I'm a fan of irony.

Picture 1:  Closed boat ramp--you'll understand why it's closed after you view the next picture.