Aerial view of delta patterns shot north of Sacramento. Photo by Paul Hames for California Department of Water Resources.

In his new book Living with Water Scarcity, David Zetland offers a brief yet astute description of what have become universal water allocation conflicts:

“Go anywhere in the world and you’ll find two opposing sides to a water allocation. A farmer complains about water going to the environment. An environmentalist complains about water going to the city. A businessman complains about water going to farms.” All of them are certain that they deserve the water more than others, Zetland says. They agree that politicians should allocate water for its highest and best use, but doubt the ability of water managers, government officials, and political leaders to decide what “highest and best” might be. 

Notice that there are more than “two sides” here. There are multiple competing demands for water, not only a finite resource but one of few requirements of life on earth. Deciding who or what gets water can literally be a life or death issue.

As Zetland explained in the first part of this discussion, understanding the difference between scarcity and shortage—scarcity being a perception and shortage, actual limitation on supply—is essential to begin successfully living with water scarcity. Separating politics from economics, a process discussed at length in part two, is the next step, necessary for later arriving at a solid “social good.” Moving into the political sphere, the final step, allows “for policies that are simple enough to protect common goods but flexible enough to allow a variety of behaviors.”

Water allocations are inevitably controversial, given that the community can’t agree on how best to serve the community. There is no lack of data or facts to support good decisions. The problem is that we each bring our personal experience—our own subjective “lens”—to interpretations of fact. Even when we recognize our biases and try to include or accommodate others’ opinions, our views are skewed. As a result “an irrigation manager may neglect environmental water flows” and others “may ignore industry’s plea for [water supply] reliability.”

Yet according to Zetland, people can be “pragmatic, creative, and engaged” in updating policies and arriving at new solutions through mutual respect and compromise.

How do we achieve such enlightened compromise in water policy decisions?

All of us have to pretend we don’t already have the right answer or answers, Zetland says. We have to pretend we don’t already have all the answers.

Summertime. Photo by Dani Alvarez/ CC BY-NC-ND 2.0.

“A community can move closer to common answers by asking people to ignore their personal role, costs and benefits. . . . If nobody has the answers, then everyone can participate in the solutions.”

Yep. This really is the hard part, and Zetland tackles it full on in the second half of his new book.

Regarding water monopolies, he suggests introducing competition as a way to create more effective, responsive, and responsible public service. To avoid disasters such the Tennessee Valley Authority’s toxic tailwater spills into rivers in 2008, destroying local homes, there must be some consequence for failure—something more effective than the blithe ability to pass the cost onto customers (in that case, $1.3 billion in fines and cleanup costs). Professionals provide good service, if there are consequences for failing to do so.

Assuming effective regulation or oversight, competition provides an incentive structure that rewards water managers for achieving customer goals. Having “skin in the game” makes a difference

When local performance benchmarks aren’t effective, as in large water monopolies, Zetland supports some form of “performance insurance” to be imposed by regulators, insurance that would be inexpensive for well-run and responsive organizations, quite expensive otherwise.

The community can participate by opting to run its local water monopoly as a cooperative, by “professionalizing” community oversight, or by making the utility more dependent on the goodwill of its customers.

A Human Right to Water?

Zetland doesn’t believe the global movement to recognize a human right to water is effective for solving the problem of inadequate water access for the poor: “A human right to water is worthless in a corrupt country and redundant in an honest one.”

“Rights only lead to results when governments are honest,” he says. “Dishonest governments, on the other hand, do not care about human rights, legal promises, or citizen complaints. An honest government will make sure that citizens get good quality water because people do not want to get sick or die. Good governance (a lack of corruption) separates civilized countries from their dysfunctional, struggling neighbors”.

A better way to overcome the indifference of leaders to the welfare of the poor is to put the focus instead on “governance and money,” which could include requirements (in exchange for aid, say) such as publicly registering or otherwise assigning communal property rights to water access.

“Other People’s Money” or Pay Your Own Way?

Who should pay for the dams, canals, pipes, and other water infrastructure that agriculture and other businesses require?

That’s an easy one for Zetland. If businesses pay the “full cost of water as a private good,” which means the current competitive price, then they are paying for infrastructure costs too.

Making those calculations can get complicated. In the case of “multi-functional” dam projects, for example, the value of public recreation and downriver flood protection can be hard to quantify, and “user” cost shares (for farmers and others) accrue to private benefit over very long periods of time.

Whitewater Rafting. Photo by David Berkowitz/ CC BY 2.0.

Farmers and other private business interests “work hard to direct public spending to their benefit,” Zetland points out. But reducing public subsidies for private benefits is the only way to assure rational infrastructure decisions, given that those “decisions will affect our choices, wallets, and behavior for a very long time.”

Zetland first heard the term “other people’s money,” or OPM, in reference to California’s Central Valley Project, a vast network of Northern California dams and delivery canals started in the 1930s by the U.S. Bureau of Reclamation—an immensely ambitious project and also an immense boondoggle, considering that the farmers who benefit from this massive publicly funded infrastructure have never repaid the construction debt. Not even the interest:

“The Other People who paid for this project in the 1930s never saw their money again. Their great-grandchildren have only seen 20 cents on the (depreciated) dollar returned.

Farmers, meanwhile, have “profited from cheap water for 75 years and counting,” he says, before adding, tongue firmly in cheek: “Not all those profits go to selfish ends. Many farmers ‘give back’ to their political friends.”

As for the arguments that California’s position as the country’s chief agricultural producer and its contribution to the California economy justify such massive public subsidies, Zetland says no.

The ecosystems that have been sacrificed for California’s water engineering benefited far more people than farms do, even now. Second, he says, agriculture uses 80 percent of California’s water supply to produce only 3 percent of the state’s economic output and 5 percent of its jobs. Finally, current subsidies benefit corporate farmers—farmers with political connections—more than they benefit small family farms, or farmers with real skill.

Worse, such massive public subsidies prevent good local farmers from replacing bad corporate farmers—resulting in “wasted water, expensive food, abused labor, and dying communities.”

Worse yet, the environmental costs of such a skewed supply-sided equation have never been factored in, at least not by decision-makers. Which is a shame, given that new, “green” approaches could make a different at every level of water management and use.

The Urgent Need to Protect Environmental Flows

“Less means more” when it comes to protecting the water that our shared environment requires for ecosystem health, according to Zetland—because we all benefit. We need to use less so there is more for ecosystem use.

Yet it’s no easy task to come to general agreement about precisely how much we should extract from the environment for human use and how much we should leave.

“The question is tricky because the environment is a public good that we all enjoy, regardless of how much we have contributed to its health or deterioration. The answer to ‘how much should we take?’ can be very different from the answer to ‘how much should I take and you leave?’”

Eagle Falls. Photo by Beth Young/ CC BY-SA 2.0.

So great is the human impact on the environment in general that scientists have declared the beginning of a new era, the Anthropocene, which could be considered the shadow side of the Age of Aquarius. Apart from biodiversity loss, the most important fact in this new, human-centered epoch is the impact of rapid climate change caused by converting fossil carbon sources into carbon dioxide and other greenhouse gases.

And climate change will disrupt the natural water cycle globally, increasing water scarcity and also demand while lowering water quality.

“Our past neglect has damaged the local and global environment. Now we must protect our local, water-dependent ecosystems and restore their flows,” he says. “A healthy environment with functioning ecosystems delivers clean air and water, gives us food and pleasure, and protects us from variations in temperature, water flow, and weather.” The reality of climate change makes these benefits even more valuable.

The challenge, he says, is to use our human cleverness to do much more with less, with water as with other resources. We can use less—in some cases, substantially less—with little ill effect.

“We cannot take as much water from the environment, so we must cope with less. Less personal water doesn’t automatically harm our quality of life. People in Amsterdam use one-fourth the water of people in San Francisco, but they aren’t any less happy.

Lobbyists and some editorialists may declare the end of civilization as we know it, Zetland says, but people doing business won’t, or at least not for long. They’ll respond to market forces, as they always do. “Business people—farmers, water managers, and industrialists—love free water, but they can find ways to work with less. Water scarcity in Texas has led oil and gas companies to recycle their production water.”

This writer has attempted to explain economist David Zetland’s views, in this and the two previous articles, but he probably does the job better than anyone–so download a free (PDF) copy of his book (see below) and dig in to get the authoritative word. David Zetland is assistant professor of economics at Leiden University College in Den Haag, the Netherlands. He received his PhD in Agricultural and Resource Economics from UC Davis in 2008. His blog,Aquanomics (that’s a “g,” as in the Spanish word for water, “agua”) and his first book, The End of Abundance, address these and other topics in more detail—and with more citations—than the new book. Yet Living with Water Scarcity, which like Abundance is for sale in both Kindle and paperback editions, is available for free if you’ll be satisfied with the PDF version.

Up the Road Editor Kim Weir holds a degree in Environmental Studies and Analysis and also a Master of Fine Arts in Creative Writing. She has been a journalist for an impressive number of years. A member of the Society of American Travel Writers since 1991, she specializes in California and the West. Weir wrote most of Moon Publications’ original California travel guides, including the best-selling Northern California Handbook.

Aerial view showing water running dow the Oroville spillway at Lake Oroville, California. Photo by Paul Hames for California Department of Water Resources.

Valuing Water as the Good It Is, Not the Good It Was

As discussed previously, economist David Zetland wants us to understand the difference between water scarcity and water shortage. Water scarcity, he says, is a perception. We worry that there may not be enough water to meet our needs, the needs of the environment, and the needs of agriculture and other business. Water shortage, on the other hand, is a fact. In the midst of a shortage there is no water to be had, at any price. Effectively managing water scarcity can prevent water shortages. Failing to manage scarcity will create shortages—an experience already shared by at least some California communities, businesses, farmers, and ranchers.

Zetland’s main point is that water needs to be managed “as the good it is, not the good it was.” Most of our water regulations and rules come from a time when water was abundant—and when public dollars were generously allocated to engineer the delivery of that abundance, via dams, aqueducts, and other infrastructure. Yet the rules that accompanied water abundance are inappropriate in a time of scarcity.

“So we need a new management paradigm in which we identify what type of ‘good’ water is, decide what type of good it should be, and change institutions to move towards our goals.”

This management process has multiple but distinct moving parts. To allocate what economists call “excludable” goods—in this case, water used by individuals or groups in ways that legally exclude others from using it—the tools of economics should suffice, as for any other commodity For non-excludable or community water, which can be used but also overused or abused by anyone, political decision-making is required, so this “social” good can be shared.

Fine-tuning these distinctions further, economists also recognize “rival” goods (in this case, water) that a person can’t use twice, or two or more people can’t use simultaneously, such as the water we drink. (Here’s a “fun fact” from Zetland: “Rival” derives from the Latin adjectiverivalis, for a person who shares a river or rivus with another.) Non-rival water would be the lake multiple people might swim in.

What makes allocating water so tricky, Zetland says, is the fact that changing circumstances can transform water from one type of “good” into another—which means management strategies also need to change. Rival water, for example, may be privately held or owned in a common pool. Whether that water would best be managed by economic or political means depends on local institutions: “Reforms won’t work if they ignore past practices and cultural norms.”

Using Price to Prevent Water Shortages

So how should we be managing the scarcity of water as a commodity (excludable good)?

“If water is scarce, raise prices. People will use less water, just as they would use less gasoline,” David Zetland says, noting that higher prices won’t threaten public health and safety. “We know—from studies and intuition—that people cut non-essential uses when prices rise. That is how we know people have plenty of water in the western U.S.: more than half of residential drinking water is sprayed outdoors.”

The rules of scarcity and shortage are the same for water as for other goods, he points out, except for the fact that, unlike most goods, water is not traded in markets that would balance supply and demand through higher or lower price.

Water doesn’t work this way because water regulators require water supply monopolies—which generally pay nothing for the water they distribute—to charge only for their delivery costs. Such “pro-consumer regulation” doesn’t include the value of water or the huge costs, later, of inevitable shortage.

Demand for the gallon of water we each need every day to survive is high, or inelastic. We’ll do almost anything—pay almost anything—to get it. What we’re willing to pay for water beyond that core need, though, is much more elastic. The cheaper that extra water is, the more we’ll use. But when water is scarce we make different decisions, demonstrating the elasticity of that demand. Witness the growing interest of Californians in replacing water-guzzling lawns with native or other low-water vegetation.

For a while we can “supply” our way out of water scarcity—by pumping groundwater, by recycling and purifying “used” water through new technologies, even by desalinating seawater—but that’s no solution if demand continues to increase.

“We can spend money on new supply, but that supply will be overwhelmed by additional demand if consumers do not pay the full cost of delivering their water,” as Zetland puts it.

California has an impressive history of spending more and more public money to increase water supply. The Governor Edmund G. Brown California Aqueduct, named after current Governor Jerry Brown’s dad, is the State Water Project’s largest conveyance. The aqueduct is essentially an open-air canal whose dimensions decrease as delivery needs (water supplies) decrease, traveling south. Photo by Dale Kolke for California Department of Water Resources.

The “scarcity value” of water is not included in the price water utilities and irrigation districts charge their customers so—keeping in mind that fresh water supplies are finite—over time the imbalance between supply and demand can only worsen.

Zetland points to the huge (and growing) city of San Diego in arid Southern California as a fairly typical illustration. The city’s aqueducts, more than 50 years old, deliver cheap water from elsewhere. The cost charged to users is just enough to cover delivery (aqueduct construction). Given their relativity cheap water, San Diegans use quite a bit—about 150 gallons per person per day, or double what people in Sydney, Australia use and five times water consumption levels in Amsterdam.

“San Diego’s water managers worry about shortages, but they have not raised prices to lower demand. Instead they look for additional supplies,” Zetland says.

In their continuing pursuit of “more,” about 20 years ago San Diego water managers started buying water from farmers, at a substantially higher price—but customers didn’t feel much pinch because the cost of old and new water was averaged over time. More recently, as scarcity arrived again, water managers decided to build a desalination plant.

The irony is that the extra cost of desalination could have been avoided through conservation, if scarcity costs were included in San Diego water bills. Instead, cheap water continues—because costs are averaged among all supply sources—and the region’s demand for water continues to grow.

“Nobody wants to pay more for anything, but it is better to pay more for something than less for nothing,” as Zetland puts it. “Sometimes we forget that value matters more than price.”

Because most water managers are biased toward seeking new water supplies rather than managing (lowering) demand—the longstanding assumption here in the U.S. and elsewhere being that increasing demand equals increasing wealth—the effects on the environment and on our collective future may well be devastating.

“The most important fact affecting water management across all sectors, worldwide, is the financial cost of raw water: zero. A utility pays a fee for its extraction permit and an irrigation district files paperwork to divert [or pump] water, but neither pays for the volume of water removed from rivers, lakes or underground aquifers.”

To begin to balance this skewed equation, Zetland proposes a “scarcity surcharge” on all water bills that reflects the value of water removed from the environment or “borrowed” from potential future use.

Better yet, we can begin to set prices with the goal of balancing supply and demand. The advantage of focusing on price—rather than subsidized conservation efforts or public education campaigns—is that water users can choose how they will respond to changes in supply.

“Correct pricing,” he says, will stabilize water utility finances, encourage conservation, and prevent shortages.

It will also encourage widespread recycling of “dirty” water, either to substitute for drinking water now used to wash cars and irrigate gardens or as an additional drinking water supply, depending on its purity. Pricing can also deter or pay for water misuse and the environmental degradation it causes.

Getting “Rights” Right

What about water needed for producing our food? Don’t farmers need cheap water to “protect us from foreign food of dubious quality, maintain the rural backbone of our culture, and feed billions”?

No, not really, according to David Zetland. Farmers provide food of appropriate quality to the highest bidder. The business of farming uses 70 to 80 percent of available water in most countries, as in California, so farmers have an immense amount to lose when the water runs out. Given the high stakes it’s easy to understand “why farmers complain when they do not get enough water, why they are increasingly in conflict with cities, environmentalists and each other,” and why, when faced with shortages, they want lax enforcement of rules that “threaten food security.”

Zetland says farmers must buy and sell irrigation water in markets if we want to “save communities, maximize food production, and improve water management in other sectors.”

Allocating agricultural water through markets won’t produce miracles or change the facts regarding water availability, but it will improve the facts—maximizing water’s private, social, and environmental benefits. Not all rural communities will survive, though, let alone thrive. Food won’t be so cheap. And not all agricultural and environmental demands will be met. Some farms—perhaps entire farming regions—will go dry. And some rivers may die.

Zetland’s book discusses three main categories of water rights. (Up the Road will explore California water rights in some depth later.) Yet in this country and elsewhere water rights have evolved to meet changing needs and to accommodate local circumstance.

Take the striking example of the Owens Valley and Mono Lake on the eastern side of California’s Sierra Nevada, where farmers had claimed prior-appropriation rights to water from the Owens River and nearby aquifers. Water engineer William Mulholland of the Los Angeles Department of Water and Power saw the opportunity to greatly expand L.S.’s water supply, to support further growth. The city bought up nearly all the land in the Owens Valley and then executed its right to export prior-appropriation water (water allocated to that land) via the Los Angeles Aqueduct—all perfectly legal.

Viewing the Milky Way from the South Tufa Towers at Mono Lake, site of one of California’s recent water-export battles. Photo by Joe Parks/ CC BY-NC 2.0.

Over decades those L.A. water exports depleted local groundwater, drained Owens Lake, and also diverted the local rivers that fed nearby Mono Lake. In 1983, the California Supreme Court ruled that Los Angeles’s water extraction was damaging Mono Lake. Exercising a public trust right to keep more water in the lake, the court weakened Los Angeles’s rights.

The key point, Zetland says, is deciding how much water is available for allocation—which would mean available water after necessary environmental flows are accounted for. Not only have rivers been allocated down to zero, in terms of the environment’s share, some have been over-allocated to the point that many rights will never be delivered.

“Water rights need to be reformed to reflect water flows, consumption, and supply,” he says, predicting that farmers will use less water if they can profit from selling their allocations in markets that reflect local conditions. “Farmers have the most to gain from markets because they have legal or traditional rights to most water.”

Though he generally supports market-based water sales as an effective tool for water allocation, Zetland also believes the community needs to act for the greater good. Given that different members of any community have different opinions about what that “good” may be, just how does he propose that we achieve that?

Up the Road Editor Kim Weir holds a degree in Environmental Studies and Analysis and also a Master of Fine Arts in Creative Writing. She has been a journalist for an impressive number of years. A member of the Society of American Travel Writers since 1991, she specializes in California and the West. Weir wrote most of Moon Publications’ original California travel guides, including the best-selling Northern California Handbook.

David Zetland is assistant professor of economics at Leiden University College in Den Haag, the Netherlands. He received his PhD in Agricultural and Resource Economics from UC Davis in 2008. His blog, Aquanomics (that’s a “g,” as in the Spanish word for water, “agua”) and his first book, The End of Abundance, address these and other topics in more detail—and with more citations—than the new book. Yet Living with Water Scarcity, which like Abundance is for sale in both Kindle and paperback editions, is available for free if you’ll be satisfied with the PDF version.

Aerial views of waterways & sloughs meandering through The Delta in California. Photo by Paul Hames for California Department of Water Resources.

There’s a difference between water scarcity and water shortage, and economist David Zetland wants everyone to understand that distinction.

Scarcity is a perception, but water shortage is a fact. Shortage is far worse than scarcity, he says, because even if you otherwise have the necessary money (or other requirement) to acquire what you want, when there’s a shortage you still can’t get it. 

Water scarcity is increasing in California and many parts of the world. Successfully living with—managing—scarcity, Zetland says, can prevent shortage.

Zetland’s new book, Living with Water Scarcity, “describes appropriate solutions for living with—perhaps even thriving with—water scarcities in both quantity and quality.”

Thriving with water scarcity?

That kind of shockingly optimistic comment sets Zetland apart from other talking heads on the topic of water.

Consider what he had to say to The Guardian on the topic of how California’s water system subsidizes the price of almonds for export: “The people of the state of California are more or less destroying themselves in order to give cheap almonds to the world.”

California grows more than export crops. Photo by John Chacon for California Department of Water Resources.

Even politicians use water. Photo by Florence Low for California Department of Water Resources.

Acreage planted to almonds in California has doubled since 1996, he points out. Due to the current drought farmers are now pumping groundwater to irrigate almond orchards at levels that are causing their neighbors’ wells to go dry. Almond growers, anxious about the future, are now starting to withhold some of this year’s crop, which is driving process higher.

But as Zetland told The Guardian, higher prices are a good thing, if they spur improvements in California’s water management.

“The problem is that California, because of its failed institutions for managing water, is allowing these almonds to come on market at $3-$4 a pound wholesale, when the price would be tripled if California was managing its water sustainably and farmers faced the real cost of water.”

Almonds are not the issue. California produces other agricultural products that use massive amounts of publicly subsidized water, such as grapes (including wine grapes) and milk. And it’s not just agriculture. California also supports an abundance of people, swimming pools, and golf courses. In addition the state needs water to support its diverse natural environments. No, the problem is antiquated water policies that don’t correctly recognize value.

According to Zetland there are very effective means available to equitably allocate scarce water supplies, for both private and public uses, and there are good examples of their application elsewhere. There are four main reasons these solutions aren’t widely used, all of them flowing from a time when water supplies were abundant.

“First, water managers trust systems that have worked for centuries. They do not experience the pain of scarcity and do not want to work now for benefits later.”

The current system also benefits special interests—meaning large-scale farmers and industrial-strength irrigation districts—which is motivation enough for them to consistently block change. In addition, “water customers have a hard time communicating their frustrations to complex water monopolies that may be slow to answer the phone.”

Finally, Zetland says, “politicians and regulators may be too biased to see the need for change, or too busy to promote it.”

But, he believes, “with a destination, a map, and hope” such barriers can be overcome.

David Zetland is assistant professor of economics at Leiden University College in Den Haag, the Netherlands. He received his PhD in Agricultural and Resource Economics from UC Davis in 2008. His blog, Aquanomics (that’s a “g,” as in the Spanish word for water, “agua”) and his first book, The End of Abundance, address these and other topics in more detail—and with more citations—than the new book. Yet Living with Water Scarcity, which like Abundance is for sale in both Kindle and paperback editions, is available for free if you’ll be satisfied with the PDF version.