California should turn to markets to solve its water woes

After a brief reprieve, California once again is entering a drought. Having just climbed out of the state’s worst drought in centuries, this news is a sober reminder that reform is urgently needed to avoid endless water wars. Thanks to population growth and climate change, the problem is not going away any time soon.

At base, the challenge is that water is scarce in the state and has been wildly overpromised. According to a 2014 study by scientists at UC Davis and UC Merced, the state has allocated five times the amount of water available in an ordinary year. Consequently, the most senior water rights holders are protected (and rightly so), but everyone else’s taps regularly run dry. In 2015, a million acres of farmland were fallowed because of drought, and endangered species regulation and groundwater basins were seriously depleted to water much of the rest.

{mosads}The state passed legislation that it hopes will promote more efficiency and ease the pain of future droughts. And, no, despite what you may have seen on the internet, it doesn’t impose $10,000 fines on homeowners for taking a shower or doing the laundry. But just because the new regime isn’t that nefarious doesn’t mean it’s the best policy.

Unfortunately, the new law doubles down on politics as the solution to water conflicts when what’s really needed are market reforms. The law calls for permanent water restrictions to be implemented through cities and water districts. Most newsworthy is the statewide target of 55 gallons per person per day for indoor water use, which will gradually decline to 50 gallons.

Cities and water agencies are left to figure out how to meet the state’s mandate, which likely will require infrastructure upgrades, efforts to promote more efficient appliances, and, perhaps, monitoring of household water use. A city or water district that fails to achieve the target can be fined, which may encourage it to impose restrictions on individual households with the intrusive snooping required to enforce such rules.

The new laws also set up requirements for other water uses, including urban outdoor use and agricultural.

Many of the steps taken under these laws to improve efficiency will be worthwhile. Water is a valuable commodity, especially in California, so steps to reduce waste can be cost-effective. And there’s little question that farmers, property owners and water districts have to adapt to the new water reality.

But using the political process to divvy costs up between different categories of water users is a clear recipe for conflict. When the next serious drought hits and difficult tradeoffs have to be made, politically driven solutions encourage urban users to lobby for a greater share of costs to fall on agriculture and vice versa. In fact, jockeying for political favor — which does nothing to solve the underlying problem — can end up costing more than simply reducing water use or implementing efficiency measures without conflict. But each side has too great an interest to lobby so that these costs can fall on someone else.

Instead of doubling down on politics, the state should be agnostic about where water savings come from. If agriculture can economize more easily that urban users, great. Ditto if the reverse. Let market prices steer water conservation efforts to where they are most cost-effective, rather than dividing water users up into discrete constituencies and having them fight each other in the political and regulatory process.

Unfortunately, the state’s arcane water laws make it difficult for competing users to bargain for water rights. Trading water is very expensive and requires time-consuming approvals from multiple government bodies.

Removing unnecessary barriers and streamlining the process to conserve water and transfer the savings to a higher value use could give California the nimble water market it needs to respond to the complex challenges it faces. A recent report by the Property and Environment Research Center and R Street Institute proposes several reforms California could pursue, most notably giving up its obsession with controlling which types of users get which water.

Mark Twain probably never said, “Whisky is for drinking; water is for fighting over,” although that quote is commonly ascribed to him. But the sentiment has accurately described California’s relationship to water for too long. Improved water markets, rather than political dictates, will reduce conflict while also freeing up water for California’s growing population and changing climate.

Jonathan Wood is an attorney at Pacific Legal Foundation, which litigates to enforce the Constitution’s guarantee of individual liberty, and an adjunct fellow at the Property and Environment Research Center (PERC), a conservation and research institute in Bozeman, Montana, dedicated to free-market environmentalism.