Not Just Water

… also resource economics, policy analysis and why not, music!

When water fails: Economic considerations of water scarcity on food, energy and the environment (Part 3 of 3)*

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*This is the last post related with the potential effects of the current California’s drought. In this one I will claim about the necessity of multidisciplinary research proposing promising research topics, and I will develop some conclusions from the research including some global considerations. Take a look at the previous posts (First, Second).

Crossing the edges

Beyond quantification of interactions, new approaches taking advantage of the synergies of these interrelated systems and thus avoiding the implications of isolated management strategies should be implemented to improve global efficiency. There are many promising fields where scientists from different disciplines are crossing the edges, searching for integrative approaches that take the system as a whole into account.

The relationship between urban water, energy and GHG emissions (Escriva-Bou et al., ongoing research); agricultural responses to shocks in water and energy prices and/or availability (Medellin-Azuara et al., 2011); reconciliation ecology (Rosenzweig, 2003); GHG emission reduction from agricultural practices (Smith et al., 2007) or environmental policies related with water, energy and food production are some of the encouraging fields where more multidisciplinary research is needed.

Beyond California: from local conclusions to global considerations

California’s intertied water network has improved the robustness of statewide water demands and its economic profits to protect against potential short-term shocks such as the current drought and even long-term trends such as climate change which may bring uncertain effects. As has been shown, one of the main features characterizing the system is that most of the demands have diversified their water source portfolio in order to increase their economic reliability, even creating institutional tools including water markets.

But when water fails, normality is altered, hydropower generation diminishes, the agricultural sector uses more energy to pump or convey water, raising GHG emissions at the same time, and food production input costs increases. Only through urban demand-side policies can water be saved without direct costs —just a temporal loss in the living-standards utility function— and achieving a significant water-related energy and GHG emissions savings.

All those interrelations have non-trivial economic implications: from the perspective of the ordinary citizen, urban water rates would increase if DSMP are implemented, and food and energy prices would have some price effect due to reduced hydropower production and increased input costs for the food production sector; water and energy utilities will incur some extra costs because of the drought, but they will be relatively small due to improved water and energy source portfolios; from the agricultural sector, and assuming that prices will vary slightly because of the international trade, the increased input costs will cause significant economic losses and a reduction in the labor market, especially in those counties that are largely dependent on the agricultural sector; and finally accounting for statewide general consequences, GHG emissions will increase from reduced hydropower production and increased urban and agricultural pumping and conveyance, whereas the expected decrease will depend on the effectiveness of the urban conservation policies taken.

The conclusions above are strictly determined by local water, energy and food production systems present in California today, but from these arguments we might develop some final thoughts relevant for other water-stressed regions where some of the assumptions do not hold exactly as in California:

  • Less developed countries with a greater share of the gross product determined by the agricultural sector should expect larger impacts of economic and labor market losses from water scarcity.
  • Countries highly dependent on hydropower could suffer significant problems of energy supply due to water shortages, and a severe drought could imply a significant effect on final energy prices. Therefore, improvements of the energy portfolio should be a priority for countries with uncertain climate projections.
  • Agricultural regions not shaped by the international trade are expected to suffer high price volatility for food commodities.
  • Less integrated water systems or those dependent on a unique water source will be more vulnerable to droughts.

Therefore, integrated approaches are essential to assess the interrelated effects of water, food production, energy and environment systems in more vulnerable regions to minimize economic losses and potential damages.

Acknowledgements

This study has been developed as a result of a mobility stay funded by the Erasmus Mundus Programme of the European Commission under the Transatlantic Partnership for Excellence in Engineering – TEE Project.

I would like to thank my advisors Dr. Jay R. Lund (University of California, Davis) and Dr. Manuel Pulido-Velazquez (Universitat Politècnica de València), as well as Dr. Josue Medellin-Azuara as well, for their thought-provoking comments.

Finally, I want to thank specially my friend Dr. Stephen Pearce, who reviewed the final version and contributed with helpful suggestions.

References

Escriva-Bou A, Lund J, Pulido-Velazquez M (ongoing research) Modeling residential water, energy, carbon footprint and costs in California. University of California Davis.

Medellin-Azuara J, Howitt RE, MacEwan DJ, Lund JR (2011) Economic impacts of climate-related changes to California agriculture. Climatic Change 109:387-405.

Rosenzweig ML (2003) Reconciliation ecology and the future of species diversity. Oryx 37:194-205.

Smith P, Martino D, Cai ZC, Gwary D, Janzen H, Kumar P, McCarl B, Ogle S, O’Mara F, Rice C, Scholes B, Sirotenko O, Howden M, McAllister T, Pan GX, Romanenkov V, Schneider U, Towprayoon S (2007) Policy and technological constraints to implementation of greenhouse gas mitigation options in agriculture. Agr Ecosyst Environ 118:6-28.

 

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Author: Alvar Escriva-Bou

Civil engineer and resource economist focused on water and energy management. Researcher at the Public Policy Institute of California. From Fortaleny, València.

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