California is in the grips of a very bad drought? How bad? This bad:
The current drought in California is not only the worst in modern history, but is among the worst in half a millennium. We know this by studying the growth rings of long-lived trees like the Giant Sequoias in the Sierra Nevada, and the Bristlecone pines in the White Mountains of eastern California. In fact, the state has weathered six very dry years since 2007, this year being by far the lowest.
It’s actually worse than the press is letting on. In response to the drought, many areas are drilling down to aquifers and draining them. These are not an easily replenished resource; in fact, the changes that occur after an aquifer is drained may prevent it from ever being filled again. The problem has been exacerbated by California over-allocating water rights by a factor of five and forcing water to be sold at below-market rates.
(And for God’s sake, what’s the heck, California?! It’s the year 2014. Do people still not realize what happens when you force things to be priced below market value?)
Much of the debate going on is about global warming. That’s a useless conversation to have right now. First of all, while there are some indications that global warming may make droughts more likely, it’s impossible to tie any particular event to global warming. This area had an even more severe drought five hundred years ago without any SUVs. Second, blaming global warming does not solve the immediate problem. And third, even if we embarked on a massive campaign to stop global warming today, it would take decades for the effects to be felt. Whatever the cause, this is happening and it needs to be dealt with. And moreover, if we are going to have a drier world, we need to come up with strategies that can be used for future droughts.
Fortunately, there is precedent:
Australia has already pioneered many policies could help. Supplying free and below-cost water encourages users to drain rivers, leaving fish and riparian species high and dry. So the first step is to decide how much water based on the best available science should be allocated to environmental flows. Obviously this process will be politically fraught, but after water rights are allocated they can be purchased to further enhance environmental flows. In Australia, the government has spent $2 billion to purchase private water rights to increase river flows. Currently in California, about 50 percent of freshwater flows are reserved for the environment, although that varies greatly by river basin.
In Australia, water rights were historically tied to specific pieces of land. The reform severed these ties and divided rights into water access entitlements and water allocations. For example, if there is a moderate drought, state agencies might set water allocations to 80 percent of each water entitlement. A person owning 10 acre-feet of water would be able to use eight acre-feet of water that year. Owners can sell their entitlement or their annual allocations. If an irrigator who is allocated 8 acre-feet adopts methods that cut his water use to 6 acre-feet, he can then sell the extra 2 acre-feet for whatever price the market will bear.
This policy guided southeastern Australia through the recent millennium drought. It did so while keeping the vineyards and orchards that needed lots of water intact. At the peak of the drought, water right were very expensive. But now that the drought has ended, they are back to being cheap.
What he’s talking about is essentially cap-and-trade. Cap-and-trade is a little tricky. It’s an idea that arose in conservative think tanks in the 80’s and worked spectacularly to reduce sulphur dioxide emissions and acid rain. But sulphur dioxide was a small market and it was comparatively easy to find way to reduce the emissions of something that wasn’t essential. Cap-and-trade with more abundant substance — carbon dioxide or water — is much more fraught with problems. I have opposed cap and trade for greenhouse gases, for example, because it became obvious that putting cap-and-trade on something so universal would create a huge cesspool of political influence and corruption (and probably not work anyway).
But trading water rights worked very well in Australia. It worked because water is something people consume rather than emit. And so simply providing a market encourages people to cut their consumption the best way they can.
California is slowly moving in that direction. They are also trying other idiotic policies involving micromanagement and dumb politics. But allowing markets in water should be a no brainer. This is Econ 101. Prices are not something that appear by magic or are set by the Illuminati. Prices are information. When the price of something is high that tells you it is scarce and you need to conserve it. Let water prices reflect the realities of California’s situation and you’ll find that people find ways to consume less of it.
This will require some changes at the local level. Many areas in California and other western states have codes that require green lawns despite being in naturally dry areas. But the pressure to change those policies will be much higher when water costs what it costs rather than what state agencies think it should cost.
To be fair, markets won’t solve everything. The dangerous draining of aquifers does require government intervention. Aquifers are a public resource and you can’t create an environment where drilling and draining aquifers is a sound business plan. I suspect the best plan may be something like what we’ve seen used to replenish dangerously depleted fish stocks: the sale of aquifer “shares” that cap the amount that can be drained and encourage better management.
Whatever the solution, California’s water shortage and water crisis have been made by decades of idiot policies. Refining those policies or adding even more idiocy to them is not the solution. Turning to markets might be part of one.