We take it for granted that water comes out when we turn on our faucets and garden hoses – even in the drought-stricken west. Yet the way some doomsayers talk about the issue, it seems like one day we might wake up to a dry spigot. Such an outcome is unlikely, however, because of the nature of scarcity: when something becomes more precious, people find ways to conserve it. Prices rise to incentivize less use, and greater production.
Robert Glennon is one of the nation's preeminent experts on water policy and law, and the author of Unquenchable: America's Water Crisis and What To Do About It. He points to a fatal flaw in the allocation of water, particularly in the western states where resources are more limited: when the majority of water rights were assigned, several decades ago, they were based on incorrect assumptions about the supply. Today, there are more rights to water than there is water.
Glennon believes that the fix is multifaceted, and includes a mix of political and market solutions. He joined me to discuss how property rights can be clarified, and new markets created to allow for more efficient distribution of one of our most precious resources: freshwater.
In a Land of Scarce Water, Prices Should Be the Guide
Free Markets This week, the U.S. Bureau of Reclamation, which manages federal water resources throughout the West, announced a water shortage at Lake Mead, the country's largest reservoir, and resulting cuts in allocations to Arizona, Nevada, and Mexico. The announcement came even as parts of the West see massive monsoon rainfall resulting in washed-out roads and loss of life.
This week, the U.S. Bureau of Reclamation, which manages federal water resources throughout the West, announced a water shortage at Lake Mead, the country's largest reservoir, and resulting cuts in allocations to Arizona, Nevada, and Mexico
flexible rules and water markets offer a way to reduce both risk and waste of the valuable resource.
"What we have advocated for at PERC is the expanded use of water markets," Reed Watson, then-executive director of the Property and Environment Research Center (PERC) told Reason in 2016. "Can we define water rights in the state, just define them in such a way that they're tradeable so that people can buy and sell water freely?"
Political allocation vs. Market Allocation
Not all western states treat water the same way, but most recognize "appropriative rights" to water based on historical usage. That's helpful, since those rights can often be transferred independent of the land on which the water is located. So, water markets are developing, but they're compromised by political decision-making and regulatory barriers.
"You have to have markets that actually work, that allow competing users to resolve their competition amicably and efficiently rather than through political allocation of water," PERC's Watson added.
"The Tier 1 declaration gives states and local communities reason to remove barriers to transferring water," observes Robert Glennon, law professor and water rights expert at the University of Arizona. "Market forces are playing an increasingly critical role in water management in the West. Many new demands for water are coming from voluntary transfers between willing sellers and desperate buyers."
That said, Glennon doesn't advocate a completely free market for water, since he fears that farmers, who consume the lion's share of the region's water, wouldn't be able to compete with urban users. He supports "a process to ensure that transfers are consistent with the public interest," though it's unclear how to keep that from degenerating into the political allocation of water against which Watson warned. He also may confuse "public interest" with sentimentality over inefficient use of a scarce resource.
Still, Glennon co-authored a piece for the Brookings Institution in 2014 advocating that "sensible water policy should allow someone who needs water to pay someone else to forgo her use of water or to invest in water conservation and, in return, to obtain access to the saved water." To that end, "state and local governments should facilitate these transactions by establishing essential market institutions, such as water banks, that can serve as brokers, clearinghouses, and facilitators of trade."
Shopping for Water: How the Market Can Mitigate Water Shortages in the American West
In the face of a severe drought in the West, new approaches are required to mitigate the risk of water shortages. In this Hamilton Project paper, Peter Culp, Robert Glennon and Gary Libecap present five proposals to encourage the use of market mechanisms to increase flexibility and resiliency in water management.
Suggestions for building resilience into water management systems through markets:
five proposals to encourage the broader establishment and use of market institutions to encourage reallocation of water resources and to provide new tools for risk mitigation.
First, sensible water policy should allow someone who needs water to pay someone else to forgo her use of water or to invest in water conservation and, in return, to obtain access to the saved water. As a second step, state and local governments should facilitate these transactions by establishing essential market institutions, such as water banks, that can serve as brokers, clearinghouses, and facilitators of trade.
Third, water managers should support and encourage the use of market-driven risk management strategies to address growing variability and uncertainty in water supplies. These strategies include the use of dry-year options to provide for water sharing in the face of shortages, and water trusts to protect environmental values. New reservoir management strategies that allow for sophisticated, market-driven use of storage could build additional resilience into water distribution.
Fourth, states should better regulate the use of groundwater to ensure sustainability and to bring groundwater under the umbrella of water trading opportunities. Groundwater reserves are an important environmental resource and provide strategic reserves against drought, but proper management of groundwater is also critical to the development of markets. Markets cannot work effectively if users can delay facing the realities of local water scarcity through the unsustainable use of an open-access resource.
Finally, strong federal leadership will be necessary to promote interstate and interagency cooperation in water management, as well as to coordinate essential state-level gathering of data on water supplies and water use. In particular, the Bureau of Reclamation of the U.S. Department of the Interior plays a central role in water projects across the West, and its actions will be essential in confronting the crisis.
Brookings' Hamilton Project believes growth is the foundation for prosperity, and water management is needed for growth.
Why now? Drought and climate change have put additional stresses on growing populations.
Groundwater serves as a buffer/reserve, but the rights are not clearly defined, since the water table is spread across people's properties – not linked directly to the land above.
The lack of effective markets for water has produced the perverse situation where water itself cannot be easily traded, but the commodities that are produced with water can be, and are, traded. For example, farmers in California used more than 100 billion gallons of water in 2013 to grow alfalfa that they shipped to China to support its rapidly growing dairy industry, even as the rest of the state struggled through the worst drought in recorded history. If those alfalfa farmers were given an opportunity to sell water to their water-starved neighbors in other parts of the state, that might have alleviated some of the economic damage to California’s economy caused by the drought, while simultaneously generating higher economic returns for farmers.
Trading water rights depends on clearly defining property rights, exclusive rights to control the asset, and transferability. The problem is that we treat water as a kind of property, but fail to define the rights. The Bureau of Reclamation has allocated more water rights than there is water to distribute.
How to reduce transaction costs?
As another example, the authors also propose that states jettison a rule—known as the antispeculation doctrine—that requires water users to documentthe new location, purpose, and use of the water before it can be transferred.
Organic risk mitigation strategies and contracts would emerge, such as options, that would keep water flowing to where it is most essential, while incentivizing farmers, etc., who have some flexibility, to reduce their use in down years without losing money.
Federal government can help by providing better data collection and measurement
As Colorado River Basin states confront water shortages, it's time to focus on reducing demand
The U.S. government announced its first-ever water shortage declaration for the Colorado River on Aug. 16, 2021, triggering future cuts in the amount of water states will be allowed to draw from the river. The Tier 1 shortage declaration followed the U.S.
Water shortage declaration means less water for Arizona and Nevada and Mexico.
States must reduce demand for water (or at least the quantity demanded – i.e., by raising the price).
When water supply is from a single river or lake, there is a political process in determining how it is allocated.
Arizona suffers the biggest cuts because it agreed in the 1960s that it would have the lowest priority among the Lower Basin states.
The ultimate problem facing the Colorado River Basin states is simple. There are more water rights on paper than there is water in the river. And that’s before considering the impact of climate change and evaporation loss from Lakes Mead and Powell.
States could theoretically build new supplies of water, but this is impractical because of geographic boundaries like the rockies.
Why not use markets to equilibrate supply and demand?
Water markets threaten rural communities because farmers cannot hope to compete with cities in a free market for water. Nor should they have to. Water remains a public resource. I believe the states need a process to ensure that transfers are consistent with the public interest – one that protects the long-term viability of rural communities.
As the West enters an era of water reallocation, most of the water will come from farmers, who consume more than 70% of the region’s water. Cities, developers and industry need only a tiny fraction of that amount for the indefinite future. What if municipal and industrial interests created a fund to help farmers install more efficient irrigation systems instead of simply flooding fields, a low-tech approach that wastes a lot of water? If farmers could reduce their water consumption by 5%, that water would be available to cities and businesses. Farmers would continue to grow as much food as before, thus protecting the stability of rural communities. This could be a win-win solution to the West’s water crisis.
Not all farmers can afford the new systems, so Glennon advocates that urban interests subsidize them in exchange for receiving the water conserved.
Farmers are allocated water in a different way than other buyers. Currently, there is no way for them to sell the rights to water at certain times of year, when the water they use is low yield for the amount of water used, such as growing alfalfa during summer.
Interstate water wars are heating up along with the climate
Interstate water disputes are as American as apple pie. States often think a neighboring state is using more than its fair share from a river, lake or aquifer that crosses borders. Currently the U.S. Supreme Court has on its docket a case between Texas, New Mexico and Colorado and another one between Mississippi and Tennessee.
Currently the U.S. Supreme Court has on its docket a case between Texas, New Mexico and Colorado and another one between Mississippi and Tennessee. The court has already ruled this term on cases pitting Texas against New Mexico and Florida against Georgia.
What’s certain is that the “Law of the River” – the body of rules, regulations and laws governing the Colorado River – has allocated more water to the states than the river reliably provides.
Options for states with dwindling water resources:
St. George could emulate its neighbor, Las Vegas, which has paid residents up to $3 per square foot to rip out lawns and replace them with native desert landscaping. In April 2021 Las Vegas went further, asking the Nevada Legislature to outlaw ornamental grass.
IN the absence of efficient pricing, Congress has had to pass laws limiting the flow through shower heads, and creating standards, which Trump rolled back .
Today the United States faces serious water problems. Georgia and Florida are fighting a prolonged battle over flows in the Apalachicola River. Excessive groundwater pumping is causing water levels in wells to plummet and springs to dry up. As I explain in my book, “Unquenchable: America’s Water Crisis and What To Do About It,” farmers are competing with cities for water.
I see progress in protecting rivers and taking down dams, in using water markets to move farmers away from flood irrigation, in reforming our energy mix to favor natural gas and renewables over coal, in incentivizing conservation with higher prices and rebate programs, in engineers and inventors creating LED bulbs and digital agriculture, in expanding reuse programs, and in educating people about the finite quality and immense value of our water resources.
The genius of toilet to tap
The genius of toilet to tap T he city of Los Angeles' Hyperion Water Reclamation Plant has long symbolized the absurdity of water policy in the American West. Although the plant generates a volume of water equal to the seventh largest river in the United States, until recently, the city of Los Angeles dumped every drop into the Pacific Ocean.
The worsening conditions are forcing Californians to confront a fundamental divide: Rural Northern California is home to the bulk of the state’s water supplies — in reservoirs and underground — and yet much of it is piped south to thirsty cities and farms located on inhospitable lands.
San Diego water officials have said that state-mandated cutbacks this time would be an unfair punishment for residents of a region who have already ponied up for higher water bills and willingly changed their habits to save water.
Previously dependant on out of state sources, San Diego has purchcased water from farmers in the IMperial Valley and developed its own new water sources through desalination.
In 1996, the San Diego County Water Authority struck a landmark agreement to buy water from farmers in the Imperial Valley, in California’s southeastern corner, that heralded the beginning of the region’s water divorce from Los Angeles.
Over the following two decades, the agency took on a series of significant — and expensive — infrastructure projects aimed at establishing more diverse sources of water, more places to keep it and more ways to move it around the county.
Quenching San Diego’s Thirst With Seawater - The New York Times - Photos of the Carlsbad desalination plan.
Videos & Podcasts
Water's Cheap... Should It Be? : The Indicator from Planet Money
As we grapple with the climate crisis, there's less and less water to go around. But in the U.S. water is cheaper than dirt. Today on the show, the reason we're willing to flush something so valuable down the drain.
GLENNON: No, we're not paying for anything. That's one of the big problems in water. You're not paying anything for water. You may have a bill from a water department, or there may be something from your condo, your apartment association - or not. I mean, water is so undervalued that, in many places, people don't even - landlords don't even try to collect it from individual units.
HERSHIPS: For context, Robert says bottled water can cost up to a thousand times more than tap. And, fun fact, 25% of the time, bottled water is tap water. And to confuse things even more, Robert says in apartment buildings, often, there's just one meter for the whole building. So, Darian, you could turn your tap on and leave it on for, like, a month, and there's another problem.
GLENNON: Even your landlord, who's paying the ultimate bill - your landlord is simply paying for the utility to provide clean water. It's the cost of service. There's no premium added for the water itself.
A proposed water sale pits communities along the Colorado River against central Arizona's rapidly growing cities and is setting the stage for future...
Transcript & Highlights
Robert Glennon on Water Scarcity
Robert Glennon on Water Scarcity SUMMARY KEYWORDS water, farmers, people, government, waste, system, robert, rights, buy, beneficial, market, arizona, written, golf course, bob, incandescent light bulbs, oil, problem, owns, turn Bob Zadek 00:00 This morning's guest is an expert on something...
Bob Zadek: We think I think I am buying water, the water that's piped into my home, and once it's in my home, nobody we're going to we may get to showerheads in a moment. If we want to have a diversion coming attractions, but put subject to a conversation about showerheads and low flush toilets. I get to use the water anyway that I want. In fact, I can turn on my tap Let it flow right down the drain and go to bed. I'm not going to go to prison. once I buy something, I am free to do with it, anything that I wish in my home. the problem is that water for most people is so inexpensive, that it seems like it's free. Well, once something is free, it's devalued. therefore people don't take care of it. don't preserve it. Because after all, it's free. At the most people, it seems limitless. yeah, so let's, let's what tell me about pricing Glennon: Yeah, we're spoiled. we wake up in the morning, we turn on tap and outcomes as much water as want to less than we pay for cell phone service. Okay, but television. Most of us we think of water, what's the hot, hot, cold Levers as you started the opening list. We think of it as we do the air, that it's infinite and inexhaustible. in fact, water is quite finite and quite exhaustible may come to a surprise as a surprise to your listeners. we don't pay a penny for even though we write a check to the water department of the water company, we only pay for the cost of service. That's the standard, that the utility can charge municipal users for the water that they provide. it's the cost of pumping the water, treating the water, delivering the water, cleansing the water, all those kinds of items, but there's nothing for water itself, the water is free.
Of course, the absence of any system where people can own water as much as we can attribute ownership because water, it moves around as well fungible, but we have no system in this country and never did to establish a market price for water. That's what is missing.
"People don't waste water if they paid enough for it."
...someone said, Well, you're not recognizing the human right to water, you're letting corporations buy and sell water rights. That's evil personified. if we take the human right to water off the table, then I hope we can have adult conversation about how to price the other 99% of the water that we use. that I think is important.
BZ: You have expressed the concern that in a pure market based system, farmers would be priced out of the market, they would be outbid by urban communities by city dwellers. who desperately need the water obviously for their lives, and they would pay anything. Farmers you fear have a cap how much they can afford to pay before their crops become an economic. you have expressed worry about farmers being priced out of the market. I had a little underlining there and highlighter, because I don't understand that point. let me just raise my question if I may, a farmer can't be priced out of the market. Because a farmer would simply pass through the cost of the almond or you written about alfalfa, we may get to talk about alfalfa, if we have time. the farmer would simply, if he's if the farmer is paying market rate, ie a much higher price for water, then the almonds would cost much more. … t worst, a farmer would discover for the first time an almond grower in California, that ad is growing almonds in California may be a bad economic idea and a misuse of resources. What's wrong with the market telling a farmer, you're in the wrong business go somewhere else?
tell us what that might look like. If people and it might be individuals as well, conceivably, homeowners could be provided with economic incentives, not to use water, which is just another way of homeowner selling their rights to water, they would use less and make money. to further encourage reducing consumption and allowing the market to influence behavior much better than by mandate. tell us what that system might look like, because it warms our libertarian hearts to find market based solutions, because that means the solution is freely negotiated exchanges between consenting adults.
what we don't want what we really don't want Bob is just a buy up and dry up. that has happened in places like utheast Colorado, and the agricultural community has a long memory and they saw what happened there and enough for interest from Denver came in to buy up water rights. pretty soon there was just nothing left to support the the infrastructure, and the whole system collapsed to its own weight.
why would you use drinking quality water to flush away human waste? I've long considered. You want to waste stupid use of water
That food disposal if you use it two minutes a day, by the end of the month may consume as much as 150 gallons of water just to get rid of food scraps. turn the food scraps in the garbage or put them in the compost. Or your listeners could turn off a light. A single 60 watt incandescent bulb that burns for 12 hours a day will consume by the end of the year as much as 6300 gallons of water. turn off a light or even better install an LED light which uses 1/6 of the energy once six o'clock.
Oh, my goodness. Well, well, Robert, we are you have given us all inspiration. By the way. You mentioned incandescent light bulbs, they don't exist anymore. I have. I have a store I have 162 incandescent light bulbs that I bought before they made it a capital offense to use incandescent lights, but you showed your age by referring to incandescent light bulbs. Nobody in the audience even knows what that is funny