Environmental Economics

A water pricing debate at The Economist

From the inbox:

I saw your blog, Environmental Economics, and thought that you and your readers would want to know that tomorrow, September 30^th The Economist will start a two-week long Oxford-style online debate on the value of water. The proposition is “This house believes that water, as a scarce resource, should be priced according to its market value.”

Keep reading below but note, this is a long-ass email. I'm glad gmail doesn't charge by word.

For whatever it is worth, I'm a fan of water pricing. Surprise.

Rock Star: The Sequel

Aguanomics is at it again at Freakonomics:

In my second piece, I discuss water and oil.

Rock Star

From Aguanomics:

I have two guest posts going up this week [at the Freakonomics blog]. In the first, I discuss the Millennium Development Goal for clean water.

Here's the Bottom Line: MDG warriors, by emphasizing money over institutions, are unlikely to deliver safe and sustainable water. Hopefully, we won’t have to wait until 2015 for them to learn that.

Drink less water

From NPR:

Across the country, schools are eliminating lunch trays to cut down on water use and for health reasons.

A University of Virginia study found people tended to take more than they would actually eat if they had a tray.

The move has irritated students, however.

It takes a half-gallon of water to wash a tray? Is there any technology that could cut down on that? And how do you carry your cafeteria food? In one of the eco-bags that we're supposed to carry to the green grocery store? Is there any way that this paragraph could contain more question marks?

Hat tip: LFLIATWP ("Now I know where all of our trays have gone.  I knew it wasn't from all the sledding because we haven't had any snow nor do we have any hills.")

California water shortage and the ESA

I'm an east coaster (bias?), so I don't know much about this.  Maybe our west coast water correspondent can help me out:

California's state government is forming a "water bank" to buy water for local water agencies at risk of shortages next year should a current drought persist, Gov. Arnold Schwarzenegger said on Thursday.

Schwarzenegger in June declared the most populous U.S. state to officially be in drought and declared nine counties in its farm-rich Central Valley to be in a state of emergency because water supplies were so low after two years of below-average rainfall.

California's water shortages have been compounded by a federal court order to limit pumping water from the state's San Joaquin-Sacramento River Delta to protect a species of fish.

At the expense of a specie of humans?

Water in Iraq

via WaterSISWEB, we get this story:

The tanks were full of enough clean drinking water for some 200,000 Iraqis at a new distribution station in eastern Baghdad, but local officials struggled Saturday to agree on where it should go.

[snip]

"The challenge has been to come up with a distribution plan," said Maj. Gary Giles, a civil affairs officer with the 4th Brigade Combat Team, 10th Mountain Division, which is spearheading the project. "Here we're having some fits and starts." But Giles, 50, was optimistic the issue would be resolved so the trucks can start delivering water by the end of the week. Mudhafer Ali, the official in charge of the Baghdad water pipes network, said the water would be distributed by trucks carrying nearly 4,000 gallons each and there was a plan to eventually expand the project to provide irrigation water.

The Iraqis have $50-200 million to spend on water projects. The bad news is that they appear to be implementing the same old "cheap water everywhere" (irrigation!?!) method that will result in misallocation of water and underinvestment in infrastructure. Better to give "water vouchers" to citizens and then let "community" water projects (private or public) deliver water at prices that rise with consumption.*

Bottom Line: The Iraqis are trying to get  out of one mess. Don't push them into another!

* I've proposed that most of Iraq's political problems could be solved with the distribution of oil profits to all adults through similar vouchers.

Today at Aguanomics:
Flow, the Movie
Water Markets Fail(?)
Build Underwater Fast!
Lame Responses

Food or Subdivision?

In response to this post, I got this email:

Okay, my average monthly domestic water bill is $50/mo or $600/yr for about 2/3 AF/yr.  (I'm watering cows everyday on this water and go several months out of the year growing a 1/8 acre garden on drip).

My yearly irrigation water bill for 28 acres is about $700.  I am allowed 3AF per acre/yr.

So say water prices get so high I get priced out of ag, the most likely event would be that this land would be turned into a subdivision, say 1/4 acre lots with 112 homes. If their average household use was 1/2 AF/year their water consumption would be a total of 56AF/year. So assuming my consumptive use is actually 2.5AF/yr that means I am using 70AF/yr to feed a lot of people. How do you like those numbers?

There are three questions here: water prices and food markets; land use (food vs. residential); and water use by land type

1. If water prices rise across the board, food prices will also rise, but this rise will be dampened to the extent that competitors (with cheaper water) are able to supply the market. As I noted a few days ago, California has 40 percent of the Nation's vegetable acreage and 60 percent of its orchard acreage; that share will not fall too far with more expensive water. Agricultural markets can adjust to expensive water like they are (slowly) with expensive fuel.
2. If markets allocate land, it's easy to see that farms can be converted into subdivisions, since the value of land with a house on it is often higher. OTOH, zoning, easements and lack of urban amenities can keep land in ag.
3. How much water will be used on land that's farmed vs. subdivided? To know that answer, we have to know current ag use (IID land uses 6-8AF/acre-year) and consider the residential use. High density apartments will use a lot of water in total but not so much per person. Ranchettes may use a lot (lawns) or little (native vegetation). A 30 acre estate with "natural" groundcover may use less than all these options.

Bottom Line: Water use depends on many factors. Proper pricing of water (higher prices!) will minimize use -- no matter who the user is.

* Note that residential water costs $900/AF but agricultural water costs $10/AF. That's NOT because the quality of water is 90 times better but reflects the far higher fixed costs of residential water systems and probably reflects the cheaper costs of "sourcing" water for farmers who have senior rights.

Today at Aguanomics
Fake Grass
Higher Prices Work!
Household Water Costs?
Corrupt Water (California Edition)

Shall we dance?

Interesting read, not least for its title ("A Dance of Environment and Economics in the Everglades"), but also for the fact that

The Fanjuls’ company also now runs North America’s largest biomass power plant, producing up to 140 megawatts of electricity.

That's a sizable operation. The typical coal plant comes to perhaps 500MW. My only question: how replicable is it?

HT: Neil Patel.

Rock Star

Check out Aguanomics on Fox Business News talking about water pricing. The highlight is when the host asks Zetland, and I paraphrase, "why don't we make rain?"

The Water Shortage Myth

David Zetland on California's "drought" in Forbes:

The real problem is that the price of water in California, as in most of America, has virtually nothing to do with supply and demand. Although water is distributed by public and private monopolies that could easily charge high prices, municipalities and regulators set prices that are as low as possible. Underpriced water sends the wrong signal to the people using it: It tells them not to worry about how much they use.

...

Want to use more water? Pay for it.