Smart Market for Groundwater?

Another call for water markets to save the day - this time "Smart Markets" from the University of Canterbury.  Claiming to be a "triple win" situation.  The developers say:  "The “smart market” consists of a daily or weekly auction in which commercial users could trade water, cleared by a computer model. The computer model balances water in the catchment over time, ensuring rivers have flows and aquifers have sustainable levels."  What's a commercial user going to do if no water is available that week?  I guess he either raises his offer price or forgoes the use of water - hardly viable options for municipal water providers and many others.

They go on to say:  "Groundwater is even more complex due to underground flows and more serious due to over-allocated catchments. The new work solves all these problems in one stroke."  Great writing - makes one believe that solving these problems in one stroke is painless and easy as pie.  The market simply prices out enough people that sustainability is achieved.  It will be no less painful than any other method of achieving sustainability.  Besides, I still contend that purely allowing water to go to the highest bidder will affect agriculture (food production) unless other conditions are applied to compensate.  Currently ag use is the majority use in most areas with the least ability to compete in a market situation against municipalities and industry.  The triple win for water supply looks to me to be a tripling in everyone's grocery bills.

As always, maybe I'm missing the point completely, but achieving sustainability by any means is a daunting social, economic, legal and hydrologic task.  Markets usually address just the economics and hydrology of this problem and tend to ignore the social and legal aspects (trouble ahead?).  I'm just not convinced they are the best way in any situation but for the simplest of cases - small area, limited number of use types, not severly overappropriated, etc.

Ag Water Conservation?

Been reading a lot about water conservation lately where some claim the solution is as simple as controlling price – raise the price and conservation will occur. This seems logical for some situations – most notably for domestic and industrial uses which are supplied by a common water system under a common water right that is controlled by someone else who is responsible for both the delivery system and the new conservation ethic. Easy as pie and quite frankly you meet two goals at once. Not only do you encourage less water use, but you also gain the capital to maintain and eventually replace the delivery system for the common good (as long as you don’t price yourself out of the market).

But my concern is conservation in an irrigated ag setting - a compilation of thousands of individual delivery systems controlled by the thousands of water right owners using the water for individual profit motives and answerable to no one as long as they don’t exceed their water right. The most obvious way to control the price of ag water would be a mandated government severance tax on water (either via traditional means or being couched in terms of a pump tax, water right maintenance fee or whatever). But since the government doesn’t have any system to maintain, the only reason to impose such a severance tax on ag would be to use less water as a means to conserve. This will also reduce production and economic returns.

If “conservation” is defined as either maintaining current production with less inputs, or, increasing production with the same inputs (both increases in efficiency) then the severance tax is wrong because it will do neither. Yes, I know what you’re thinking – just increase the efficiency of the ag water use and conservation (less water use) happens automatically - without a severance tax or any other stimulus. Our experience has been that it costs so much money to increase ag water use efficiency that the producers are obligated to increase production to pay for it, and the exact opposite of water conservation occurs in nearly all cases – they consumptively use more water. I have discussed this issue before here.

Anyway, I’m asking all the water-mavens out there to offer ideas on “conserving” irrigation ag water – using market stimuli or otherwise – that does not also unreasonably impact the local economy. Email me here if you would rather not respond blog-publicly.