California Water Market. A Policy Brief

Transcription

1 California Water Market A Policy Brief

2 A Brief History Whiskey s s for drinking;water s s for fighting over Mark Twain Prior Appropriation First in time, first in right Little regulation needed Growth of Agriculture and Cities Increased Privatization

3 Rise of the Environmental Hetch-Hetchy Hetchy Valley and Mono Lake Public Trust Doctrine Top Down Controls Clean Water Act California Environmental Act 1970 Environmental Reviews Movement

4 Move Towards Markets Population Increases 50 million by 2025 Shortages of 3.9 trillion gallons per year Need for more flexible policy 1980 s: Water Markets Supply and Demand Mixed Results Environmental Quality and Justice Issues

5 Market Properties Economic Efficiency Given the initial starting wealth of a society, trade will make everyone involved better off, without making any one worse off. (Pareto Optimality) Ownership Rights Property rights, or ownership of the water, must be well defined and enforced by law in order for the market to function.

6 Types of Water Markets Two major types of water markets: short term and long term Short Term Only short term water markets currently exist. Farmers sell water rights at a certain quantity for a short period of time. They have historically been efficient and successful.

7 Existing Short Term Markets Westlands Water District Only agriculture to agriculture transfers Market is performed by farmers calling each other up, or meeting each other in person. An agreement is reached and recorded in the county accounting offices California Drought Bank Coalition of various California water agencies. Works collectively with farmers to develop a standard market price and allow one time contracts to buy water be developed.

8 The Long term goal Long term markets allow for transfers on prearranged terms, that are not negotiated each time. Contracts are created, bought, and sold to ensure water reliability of an area s s future. Has proven difficult to achieve because of the variable aspects of water as a commodity. Weather, drought, business profitability, generational equity.

9 California Water Market - Benefits Water markets are not a source of water supply, but rather, they are a way of matching supply and demand Sellers (mainly farmers) profit incentive Buyers (mainly municipal sectors) increased water availability

10 Benefits - Economic Statewide economic benefits Although jobs maybe lost in areas selling water, more jobs are created in areas purchasing that water In 1991 the California Water Bank estimated a net economic benefit of 104 million dollars Increase in average farm profit from water market transactions 4-6% in Yolo and Solano County

11 Benefits - Environmental Farms have incentive to invest in improved water management technology Example: Switch from surface irrigation to drip irrigation Surface Irrigation Drip Irrigation

12 Benefits - Environmental Improved water quality Reduced agricultural runoff which contains sediments, salts, fertilizers and pesticides detrimental pollutant to rivers and aquifers

13 Water Market or Racket? Water Tables Local Communities Wildlife Ethical Concerns

14 Ground Water & Subsidence

15 Waterfowl Habitat 10 Million Birds on the Pacific Flyway 95% of California Wetland Gone Land Fallowing and Habitat Loss Audubon and Ricelands Habitat Partnership

16 Solano and Yolo Counties had depressed economies -3.5% and -5.0% Less Revenue due to labor, tractors, seed, fertilizer, etc. Local Economy

17 Commoditizing water a good idea? Marc Faye and most agricultural communites think not Vivendi s Scary Purchase Public Resource Ethical Questions

18 Current Situation Water resources dominated by state government Citizens Agriculture Efficiency and environment Right to use water, allocated through prior appropriation; does not constitute ownership

19 How can the state use market efficiencies? Define property rights Delegate management authority to communities Better management practices Equity State will assist in transport and public protection

20 Conclusion State s s primary responsibility to citizens Property rights State Community partnership Utilize market mechanisms