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Water Policy

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Crystal Leal

on 6 March 2018

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Transcript of Water Policy

By: Jonathan, Crystal, James, & Meryl
The Economics of Irrigation Water Use
Economic Efficiency
Pareto efficiency
- no one is better off without making someone else worse off after internalizing social costs and benefits
Assumptions of perfect competition → Pareto efficiency
-In irrigation water use, these are broken by the presence of externalities
Positive Externalities
Third party benefits from the consumption or production of a good

Results in problems of underpricing and underconsumption
→ Deadweight Loss (DWL) or a Pareto inefficient outcome

Positive Externalities
Flood control (Dwyer et al. 2006)

Improved food security (Young 2005)
Rural development (Tardieu 2005)
Positive Externalities
Negative Externalities
Third party is harmed by external damage resulting from the consumption or production of a good

Results in problems of overconsumption → Deadweight Loss (DWL) or a Pareto inefficient outcome
Negative Externalities
Negative production externality
-Elevated risks of algal blooms (Tiwari and Dinar 2000)
-Preventing aquifer recharge (Lara, Donovan and Whiteford 2009)

-Disruption of the hydrologic cycle (Young 2005)
-Overconsumption (Young 2005)
Negative Externalities
Theory of the Second Best
Usual policy remedies for externalities → taxes and subsidies
When multiple market failures exist, corrective policy action may amplify existing externalities (Nguyen and Wait 2016)
Consequences of a larger DWL
No policy action may result in a ‘second-best’ outcome
Irrigation Subsidies
Attempt to encourage rural development externalities

But effects include:

-Water overconsumption → depletion and scarcity, downstream consequences (Tiwari and Dinar 2000)

-Disproportionately benefit large agribusiness → inequality and concentration of market power (Chadd 1995)

-Overdependence → profit equation π =
TC is
distorted (Tiwari and Dinar 2000)
Traditional Subsidy for Positive Externalities
Where the subsidy s equals the size of the positive externality, the consumption subsidy results in a Pareto efficient outcome
Subsidies in a Pareto Efficient Market
Water Underpricing
Where a good is underpriced, there is excess demand.
Policy Measures – Volumetric Pricing
Marginal cost pricing – internalizing all externalities
-Supply cost = full cost (Rogers et al. 1998)

Steep implementation costs

Alternative is non-volumetric pricing – per-area pricing
-Easy to exploit
The Psychology and Sociology Behind Tap Water Disappearance
Tapped Out?
Externalities, Subsidies and Pricing
By: Jonathan Gu
By: Meryl Press
From Sickness to Safety:
Municipal Water Development
Perrier Frenzy
Nestle: “Pure” Life
Flint, Michigan Water Crisis
Stigma: Public Water Fountains
How Do Water Use Habits Change in Response to Scarcity?
A Case Study of Australia’s Millennium Drought 1999-2009
By: James Holloway
How is water distributed?
89.01% of Australia’s population live in urban areas
62% of water in Australia is used by agriculture
The majority of this water is used in irrigation
Cotton irrigation alone accounts for 17% of irrigation water use
Background to the Millennium Drought
Lasted from the mid 90s to around 2010
Affected most of Southern Australia, including both rural and urban areas
2001 – 2003, and 2006 – 2008 were particularly dry years
Effects of drought compounded by record breaking heat across these years
So how did we respond?
Urban: Sydney
-75% of water use is residential, 25% industrial, commercial, and government
-Sydney’s primary source of water is Warragamba Dam
-The dam reached an all time low of 32.5% in February, 2007
-The City of Sydney responded with water restrictions
Water Restrictions:
3 stages
of increasing severity
Stage 3 implemented in 2008

-No sprinklers, Hand watering of gardens only when sun is down, No hosing of hard surfaces, No pools over 10,000L
Replaced by
Water Wise Laws

-Hoses must have a trigger nozzle
-Hand held hoses, sprinklers and watering systems may be used only during specific hours
-No hosing of hard surfaces
-Fine for non-compliance
Other methods of water reduction:
$1.8 billion desalination plant opened in summer of 2009-10
-Plant is currently in care and maintenance mode
-Will restart when dam falls below 60%

Leak inspections
Water efficient technologies and change in consumer demand
Did they work?
Water use in Sydney down from around 630 GL/yr to about 558 GL/yr.
Water use is about the same as 2004 despite a 20% increase in population as of 2017

-The number continues to rise
-Population continues to increase
-Discovery of aquifers in 2005 creates potential complacency
-Desalination however offers a backup
Irrigated agricultural products represented 23% of the gross value of agricultural commodities in 2004-2005
Water use by agricultural industry fell by 37% between 2001 and 2005 due to the effects of the drought
Cotton production dropped by 66% during the drought
Dairy industry revenues dropped by 4.5% in 2004
Passed in 2012 to address:
-Prolonged drought
-Natural climate variability and climate change, leading to deterioration of rivers, wetlands, forests and floodplains in the basin

10,876 GL of surface water could be taken (or diverted) from the Basin each year, and 3,324 GL of groundwater
This is a decrease in surface water diversions by 2,750 GL a year
Achieved through more efficient water infrastructure, environmental measures, and water purchases

Response: Murray Darling Basin Plan
Much controversy around the plan:
Wentworth Group of Concerned Scientists believed that a minimum of 4000GL needed to be returned to restore river sustainability

Plan to increase groundwater extractions by 2,600 gigalitres at the same time – groundwater linked to river systems, but not accounted for

Agricultural interest groups warned river communities would face annihilation if 4000GL were returned
Is it working?
As of March 2014, 70% of the proposed 2,750GL has been recovered

There are limitations however:
-Firstly, due to pressure from special interests the Basin Plan is not ambitious enough to restore river back to ideal health
-Secondly, does not take into account impact of groundwater extractions
-Thirdly, water return has slowed in the past few years
-Lastly, while the Basin Plan was successful in reducing water allotments, it does not address the fundamental issue at stake here:
>that we live on the world’s driest inhabited continent and 26% of Australia’s irrigation water is used by a single crop – cotton
A soft-path approach:
Despite the limitations of the urban and agricultural responses to water scarcity, both plans represent a soft-path approach to water policy
They focus on reduction and efficiency rather than increasing supply
Nonetheless, influence from interest groups and rising populations threaten the efficacy of such plans

Water Usage
Water Rights
Unequal Water Distribution in the Central Valley
Agricultural Water Use During California's Drought
By: Crystal Leal
Central Valley
Supplies 25 % of all food in the U.S.
-98% Pistachios
-91% Strawberries
-88% grapes

80% of water goes to agriculture
-Agriculture only responsible for 4% of employment
25% of state water flow goes to Kern County alone

California Drought: 2011-2017
State's Approach to the Drought
Voluntary reduction of water use
-State only made recommendations on how to reduce water use
-Not successful in conserving water
In 2015 Governor Jerry Brown issued an executive order that enforced statewide water restrictions
-Prohibited irrigation of lawns, sidewalks, and decorative water features
-$500/day fine for misuse of water
Executive order didn't regulate agricultural water use
-Agricultural is the largest human use of water in CA
Requires all 127 high- and medium-priority groundwater basins in CA to develop groundwater sustainability plans that achieve sustainability within
20 years
of implementation
Groundwater basins account for 96% of the state's groundwater use
SGMA does not make any changes to a landowner’s water rights
Emphasis on local agencies

Sustainable Groundwater Management Act
Groundwater Use in California
Highly unregulated
Groundwater supplies between 30-60% of the state’s water supply
4 severe years of drought increased groundwater overdraft
-Overdraft of groundwater for agricultural use in the Tulare Lake & San Joaquin River region was 1.4 million acre-feet year (CA Dpt. of Water Resources 2013)
Also caused an increase in land subsidence
Support of Agricultural Water Use
Gaining Responsibility on Water Act (GROW)
of 2017
-Bill introduced by Tulare County Representative David Valadao
-Aimed at restoring water reliability and certainty to cities and farms in CA
-Passed the House in 2017 but failed in the Senate
-Supported by mostly all the cities in the Central Valley
Demonstrates continuous support of agricultural water use
-Opposition to the state's sustainability efforts
-Farmers do not look at environmental effects but only their self-interests

Central Valley Project
-18 dams and reservoirs
During 2014-2015 drought years the CVP did not allocate a lot of water to contractors
2018 allocation:
-Central San Joaquin Water Conservation District & Stockton East Water District= 100% of contract total
-Agricultural water service contractors South-of-Delta = 20 % of their contract total
“If I win, believe me, we’re going to start opening up the water so that you can have your farmers survive, so that your job market will get better,” Trump (May 2016, Fresno)

Will sustainability & conservation efforts work?
There is too much support for agricultural industry
- California & the government prefer to have a booming agricultural industry, while the environment suffers
Water=power & farmers have all the water
Full transcript