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How 'Virtual Water' Can Help Ease California's Drought
HughPickens.com writes Bill Davidow And Michael S. Malone write in the WSJ that recent rains have barely made a dent in California's enduring drought, now in its fourth year. Thus, it's time to solve the state's water problem with radical solutions, and they can begin with "virtual water." This concept describes water that is used to produce food or other commodities, such as cotton. According to Davidow and Malone, when those commodities are shipped out of state, virtual water is exported. Today California exports about six trillion gallons of virtual water, or about 500 gallons per resident a day. How can this happen amid drought? The problem is mispricing. If water were priced properly, it is a safe bet that farmers would waste far less of it, and the effects of California's drought—its worst in recorded history—would not be so severe. "A free market would raise the price of water, reflecting its scarcity, and lead to a reduction in the export of virtual water," say Davidow and Malone. "A long history of local politics, complicated regulation and seemingly arbitrary controls on distribution have led to gross inefficiency."
For example, producing almonds is highly profitable when water is cheap but almond trees are thirsty, and almond production uses about 10% of California's total water supply. The thing is, nuts use a whole lot of water: it takes about a gallon of water to grow one almond, and nearly five gallons to produce a walnut. "Suppose an almond farmer could sell real water to any buyer, regardless of county boundaries, at market prices—many hundreds of dollars per acre-foot—if he agreed to cut his usage in half, say, by drawing only two acre-feet, instead of four, from his wells," say the authors. "He might have to curtail all or part of his almond orchard and grow more water-efficient crops. But he also might make enough money selling his water to make that decision worthwhile." Using a similar strategy across its agricultural industry, California might be able to reverse the economic logic that has driven farmers to plant more water-intensive crops. "This would take creative thinking, something California is known for, and trust in the power of free markets," conclude the authors adding that "almost anything would be better, and fairer, than the current contradictory and self-defeating regulations."
For example, producing almonds is highly profitable when water is cheap but almond trees are thirsty, and almond production uses about 10% of California's total water supply. The thing is, nuts use a whole lot of water: it takes about a gallon of water to grow one almond, and nearly five gallons to produce a walnut. "Suppose an almond farmer could sell real water to any buyer, regardless of county boundaries, at market prices—many hundreds of dollars per acre-foot—if he agreed to cut his usage in half, say, by drawing only two acre-feet, instead of four, from his wells," say the authors. "He might have to curtail all or part of his almond orchard and grow more water-efficient crops. But he also might make enough money selling his water to make that decision worthwhile." Using a similar strategy across its agricultural industry, California might be able to reverse the economic logic that has driven farmers to plant more water-intensive crops. "This would take creative thinking, something California is known for, and trust in the power of free markets," conclude the authors adding that "almost anything would be better, and fairer, than the current contradictory and self-defeating regulations."
This plan seems to forget that it takes time to grow these crops. It takes 3 years for your first crop of almonds and 8 before the tree is delivering anything like commercial quantities. These trees have decades of work invested in them and the posts suggestion of ripping out the crop is stupid.
There are lots and lots of ways to lower the water usage of both the general population and water intensive applications such as farming. Are all the irrigation channels covered? That makes a huge difference. Installing dual flush toilets, recommending low flow shower heads. South East Queensland went through an 8 year drought and people were encouraged to bring their water usage down to 200l per person per day. That may still seem a lot but it is significantly lower than the normal usage.
From there you also have to look at recycled water. What happens to the waste water once it has been treated? Using RO membrane treatment plants the water is purer then what falls from the sky, so pipe that back into your reservoirs instead of dumping it in the river / ocean.
The "virtual water" concept is unnecessary just to improve on real-water scarcity. Just price real-water properly.
...instead of enabling or encouraging farmers to become water speculators?
If the inputs are priced more accurately than the outputs should reflect these costs. If almonds take a lot of water to grow, then almonds should be more expensive to reflect the higher water prices.
Allowing farmers to sell unused water seems like an invitation for speculators to buy farms not for the purpose of farming but to just speculate in water, or worse, figure ways to manipulate both commodity markets and water supplies.
A better solution might be encouraging water CREATION through incentives for water recycling or desalination through renewable energy.
They had price controls at the customer level and market prices at the wholesale level. Guess what happened?
Yep that's right shortages, just like the last million times price controls were tried.
Fee Fie Foe Fum... I Smell ENRON!
ENRON. The latest wonder-tool of the late 90s, a bold new approach to the distribution and settlement policies of grid energy [or water!] suppliers. You have all been losing money trying to buy and sell your product among yourselves. Now it is time to buy and sell your product through US. We'll take a percent and you will have MORE.
ENRON. Let us make everything into a stock market, a futures market. Let us negotiate on your behalf (said to both halves at once). Let us woo you with impressive corporate speak and wooly acronyms to describe what is essentially a transparent middleman-insertion tactic.
ENRON. Tired of trying to sell your customer base on some desired tactic by disclosing said tactic to the PSC and the public? Tired of those public hearings? Let ENRON come to the rescue. Tell us what you need to happen and we'll see that back-room conspiratorial tactics can ease your pain, by making all other options seem more expensive.
ENRON. Ask us how triggered brownouts [or droughts!] and planned resource shortages can improve your bottom line [and ours]!
ENRON. Because if energy [or water!] were priced properly, it is a safe bet that people would waste far less of it. We can help.
ENRON. Because no one needs to innovate or improve infrastructure. We just need to make life suck a little more, cost more, and people will demand less. More complicated is BETTER.
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<blink>down the rabbit hole</blink>
You miss the point. The exact problem with retail price controls and a wholesale free market is that it's vulnerable to gaming, Enron-style. Proper markets expect every participant to be gaming the system as hard as they can. They're built on it from the start, have evolved for centuries to cope, and they work nicely for most commodities in the world - just a few government-granted monopolies left over causing problems.
Socialism: a lie told by totalitarians and believed by fools.
You jest, but why has it become such a novel concept to grow nut trees where there is no need to water them at all, that it can be seen as joke? I don't know about almonds -- maybe they need hot weather -- but walnuts grow fine over large swathes of the country without ever being watered by anything but the rain.
What changed under Obama? Nothing Good
said bureaucrats will ensure a) that no food is produced in California and b) the cost of living increases as fuel costs are paid to have all food imported from out of state. Well done sirs, well done.
If the bureaucrats won't do it, aquifer depletion will.