Economist's View on Drought Management

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Economist's View on Drought Management

California has a wealth of young, talented economists already active in public water policy and who will be around for future droughts. Five of them gave insight on what California should be doing to prepare for a fifth year of drought and beyond

Get inside consumers’ heads

By Kurt Schwabe

Does a lawn use more water than a pool? How much water will be saved by replacing turf with drought-resistant landscaping? Will it be cost-effective? What will be the effect on residential water use if a water agency incentivizes customers to use water more efficiently (adopts a budget-based tiered water rate)?

It depends . That is, these questions are difficult to unpack since they are intricately tied to human behavior.

For example, the degree to which drought tolerant landscaping saves a household water relative to turfgrass will depend on, among other factors, how they irrigated their lawn before and after replacement. Alternatively, the relative water use of a pool versus turfgrass also will depend on, among other factors, their irrigation habits prior to installing the pool. Unfortunately, restricting water use to fewer days a week – as some research shows – doesn’t necessarily save water, nor does refilling one’s pool every other day rather than every day (as one customer tried to convince me of during a recent trip to the barbershop).

Historically, California’s management of severe drought has centered on engineering solutions. In the current drought, however, understanding human behavior and the demand side of water management is beginning to share the center stage.

Forward-looking water agencies are overcoming the stigma that investments in understanding human behavior are somehow less worthy than augmenting water supply in addressing drought. Indeed, these agencies are systematically evaluating numerous ways to improve demand-side management through analyses that identify:

Such efforts can lead to more informed, targeted and cost-effective conservation programs.

Kurt Schwabe is associate professor of environmental economics and policy at UC Riverside.

Increase role of water markets

By Katrina Jessoe

Economists have long recognized well-functioning water markets as a valuable tool for reducing the economic costs of drought.

They involve voluntary transfers of water between parties, usually from higher priority to lower priority water-rights holders, at a negotiated price. They offer an opportunity to transfer water from lower value to higher value uses, regardless of whether those uses are for agricultural, urban or environmental purposes.

Water transfers in California have been occurring since the 1976-77 drought, but their role in managing droughts should be increased. Reducing transaction costs and expanding groundwater markets could do this.

The former does not imply that the environmental impacts of transfers should be ignored. Environmental costs are real and should be taken into account before approving a transfer. However, the current transfer process is cumbersome and drawn-out. A more streamlined approach could reduce transaction costs and encourage market activity.

The recently enacted Sustainable Groundwater Management Act, requiring local agencies to manage underground pumping and recharge sustainably, may encourage groundwater banking and borrowing.

Groundwater markets would allow for trading to occur over time with increased pumping during times of scarcity and the replenishment of aquifers during wet years. These transfers would introduce further flexibility in managing water resources.

Water markets will not prevent droughts but they offer a feasible and flexible pathway to lessen their economic costs.

Katrina Jessoe is assistant professor of agricultural and resource economics at UC Davis.

Source: Public CEO

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