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Kriston McIntosh
Phone: (202) 797-6157
kmcintosh@brookings.edu
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Palo Alto, CA – Earlier this week, The Hamilton Project at Brookings and the Stanford Woods Institute for the Environment hosted a forum and released new papers highlighting opportunities for improving water management in the United States in the face of scarce water supplies. Three panels of experts discussed the potential for market mechanisms to improve our country’s water management systems; opportunities to promote water innovation; and the impact of climate change on America’s water resources. Event materials, including audio and video by panel and select pull quotes, can be found below.
NEW PAPERS
In Times of Drought: Nine Economic Facts about Water in the United States
by Melissa S. Kearney, Benjamin H. Harris, and Brad Hershbein
Shopping for Water: How the Market Can Mitigate Water Shortages in the American West
by Peter W. Culp, Robert Glennon, and Gary Libecap
The Path to Water Innovation
by Newsha K. Ajami, Barton H. Thompson Jr., and David G. Victor
OPENING REMARKS
Facebook Chief Operating Officer Sheryl Sandberg gave welcoming remarks, followed by an introduction and roadmap of the event by former U.S. Treasury Secretary Robert E. Rubin. California Governor Jerry Brown gave featured remarks on the landscape of water in the West.
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“The knowledge economy is based on the resource economy. Everything companies like mine does is based on energy and water. So without the efficiencies that we work for at Facebook... and others work so hard for, without those efficiencies we can’t continue to create the growth that we want to see for our economy. So we’re really excited that The Hamilton Project is here, partnering with Stanford to talk about water - because we understand how important water is to the underpinnings of the knowledge economy that we depend upon.” Sheryl Sandberg
“Water pricing is massively inefficient in this country, and that severely distorts the allocation of water supplies, incentives for technological advancement, water conservation, and dealing with the problem of water waste.” Robert E. Rubin
“I can promise you in the next four years, water is a key issue… It’ll be controversial; the issues have not been fully resolved – but like energy and climate change that have been contentious, but also led to very productive initiatives – the same will be true of water… You’re hearing today: water is going to be a major issue that will be addressed in the California legislature, and in Congress, and throughout communities everywhere.” Governor Jerry Brown (CA)
“I’m confident that just as California has led the way in renewable energy and initiatives regarding climate change, we can do the same thing with water. We’re in the arid West. We’re facing more drought. We’re facing more extreme weather events. We’re facing (the) sea level rise… We can respond, but only by bringing both parties together; regions - north and south; different aspects of the state economy, agriculture, environment, urban businesses and users. All that has to come together. It’s a real challenge that will test our governing system.” Governor Jerry Brown (CA)
PANEL 1: SHOPPING FOR WATER: HOW THE MARKET CAN MITIGATE WATER SHORTAGES IN THE AMERICAN WEST
The first panel focused on the new proposal to improve water markets and included participation by Robert Glennon of the University of Arizona; Thomas Iseman of the U.S. Department of the Interior; James Lochhead of Denver Water; Ellen Hanak of the Public Policy Institute of California; William Phillimore of Paramount Farming Company; and Melissa Kearney of The Hamilton Project, who moderated the discussion.
“When we look at our water systems, what we see is a system that was set up on the assumption that the past would be a reliable guide for the future. There’s a new normal. That no longer prevailed. And yet there is little resiliency in our water system – each person or each group hanging on to their little piece of the pie. We need to build resiliency in the system.” Robert Glennon
“It’s a classic tragedy of the commons problem. We need to break the relentless cycle of overuse. And what Peter, Gary, and I set forward in our paper is using market forces to encourage the reallocation from lower value to higher value uses.” Robert Glennon
“If Prop One does pass [on the 2014 California ballot]… think about using some of those funds to purchase water rights for the environment.” Ellen Hanak
“We need to work with the local water users and empower them to make some of these decentralized decisions on how to take advantage of markets.” Thomas Iseman
“Our environmental regulatory structure is based totally on the preservation of the status quo… a status quo which will not exist in 20 to 30 years with the advent of climate change.” James Lochhead
“One of the difficulties that we have in water markets in California is the uncertainty of water rights. Water keeps getting taken away from us… One of the things you need for an efficient market is the basic right or the basic ownership of the product.” William Phillimore
“Water law is archaic, complicated but at bottom it is this: Use it, or lose it. That’s the rule… to waste water is not to use the water; to conserve water exposes the water rights holder to loss of the water right. There are no incentives to do what we think needs to be done.” Robert Glennon
PANEL 2: THE PATH TO WATER INNOVATION
The second panel focused on the new proposal to spur water innovation and included participation by Barton “Buzz” Thompson of The Stanford Woods Institute for the Environment; Michael Markus of Orange County Water District; Tamin Pechet of Imagine H2O; Peter Yolles of Water Smart Software; and Roger C. Altman of Evercore, who moderated the discussion.
“The U.S. is providing water at one of the cheapest rates in the domestic world…regulations in the water field are providing too much obstruction to new technologies and too little incentive for water technologies.” Buzz Thompson
“When we are faced with water scarcity, we don’t adjust the price of our water to reflect that particular scarcity. I don’t think that there is any other resource that when it becomes scarcer, the price of that resource actually doesn’t rise.” Buzz Thompson
“There is no average price for water or sewer that is relevant to an innovative company trying to sell to a customer. The only price that matters is what that customer pays.” Tamin Pechet
“There are far too many special water districts and there is a need to consolidate and create tremendous economies of scale in doing so.” Michael Marcus
“There is no single person or entity thinking holistically about water, and that is why we have to look to the states and local agencies for innovation.” Peter Yolles
PANEL 3: THE IMPACT OF CLIMATE CHANGE ON AMERICA’S WATER RESOURCES
The final panel focused on the impacts of climate change on water resources and included a range of experts: Wade Crowfoot of the Office of California Governor Jerry Brown; Noah Diffenbaugh of the Stanford Woods Institute for the Environment; Peter Gleick of the Pacific Institute; Solomon Hsiang of the University of California, Berkeley. Investor, Philanthropist and Advanced Energy Advocate Thomas F. Steyer moderated the discussion.
“We can use California as an example of understanding the [water] crisis itself, talking about the impacts, and talking about what the right polices are going forward.” Thomas Steyer
“Among the worst impacts of climate change are going to be on water resources. The hydrologic cycle is the climate cycle. As we change the climate, we’re going to affect water. And not just the natural system, we’re going to affect the infrastructure and the massive institutions we put in place to manage as well.” Peter Gleick
“Despite the fact that we’ve been talking about [climate change] for a while… our water managers are still not sure what to do about this. They’re not sure how to integrate the coming changes that…we’re pretty confident about it, into management. In the broader discussion about all of the things we talk about –water rights, water laws, institutions, pricing—we now have this additional complication that the climate is no longer static.” Peter Gleick
“I think this is really a conversation about risk…the probability of a physical hazard—like a heatwave or a drought or a severe storm—and how that interacts with ecosystems and people…The current drought in California is a great example of that risk. We know it’s a rare example. We understand really well the atmospheric causes and why it hasn’t been raining... How rare are these atmospheric conditions? In our recent paper we’ve concluded that global warming has very likely increased the probability of those atmospheric conditions by about a factor of three." Noah Diffenbaugh
“The way to think of the economic risk of climate change and the drought is to think about how it projects onto the economy. The economy is made out of a bunch of building blocks—people, crops, buildings and infrastructure—and we see that the drought and climate change affects the productivity of those individual building blocks… On very hot days, counties lose basically $20 per person. These aggregate up to be very large economic costs…Agriculture is one of the most vulnerable sectors.” Solomon Hsiang
“You have these simultaneous problems of the infrastructure is now not allocated in the optimal way at the same time that the climate is also reducing the productivity of individual locations and that’s causing the value of land to depreciate even faster. And so these are some of the biggest risks to the economy directly. What we should do is think about how to plan going forward but the problem is climate change also makes the future uncertain. So coming up with long-term plans becomes increasingly difficult because as the climate changes we are forced to rely more and more on models—projects of the future—and less and less on historical data because that historical data is no longer valid. Because of that we are no longer sure what the best course of action is, and that uncertainty also creates an additional economic burden on planners and government.” Solomon Hsiang
“If any of you got into your car after this conference and drove three hours east of [Palo Alto] and went to Madera County or Kings County, you would encounter thousands of people that live in homes that don’t have any water. They turn on the tap and they don’t have water for drinking, for washing themselves, much less washing their dishes or their clothes.” Wade Crowfoot
“In [California} we contracted with the UC Davis Watershed Sciences Center to do a model of what are the economic impacts to agriculture of the drought. Their model suggested California agriculture will be short about 6.7 million acre feet of water this year. It will make up for that shortage with about 5 million acre feet of groundwater pumping…The resulting shortage of 1.7 million acre feet has an economic impact of about $1.5 billion—$1 billion in reduced crop yield, and about $500 million increase in groundwater pumping costs. That translates to about 20,000 lost jobs, which of course have economic impacts particularly severe in poor farming communities.” Wade Crowfoot
ADDITIONAL MATERIALS:
Kriston McIntosh
Phone: (202) 797-6157
kmcintosh@brookings.edu
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