After three years of punishing drought the heavens finally opened up this week and have given us some much needed relief here in California. The rain comes curtesy of a tropical weather system from Hawaii we like to call the Pineapple Express. If we’re lucky we’ll get sufficient snowpack in the mountains this winter to fill the reservoirs with runoff this spring. Of course, now we’re getting massive floods and erosion as the sun baked earth struggles to absorb the deluge. Inevitably there’s talk of Climate Change.
For the record I’m ambivalent about the Climate Change debate, not because I question the science one way or another, but because I’m convinced that no one will ever do anything about it. Or more precisely, lots of people will do all sorts of things about Climate Change, but not in the way the current conversation might suggest. There will never be enough political will to persuade people to change their behavior based on a vague threat that is scheduled to affect other people far away at some unspecified future date. That’s a non-starter. There will never be any kind of universal preemptive national or international action devoted to addressing the issue. Full stop. So let’s not waste time spinning our wheels on this one – pro or con.
Aside from any Climate Change effects (real or imagined) there’s the fact that there are many more people around now than there used to be. There were 98,000,000 people in the United States the year I was born. Now there are over 320,000,000. All those new people now live somewhere – many in flood plains, low lying coastal areas, deserts, mountains, forests… and all those places are subject to the usual cycles of natural disasters even without any human tinkering with the atmosphere.
The real meat of the matter will be dealt with as we all individually adapt and respond in fits and starts. The primary institution to “encourage” our behavior change will be the insurance industry. They are, in fact, the branch of society that methodically calculates risk and puts a clear dollar value on it based on real events and an actual balance sheet. At a certain point the recurrent floods, fires, tornados, and other events will prompt Swiss Re, Lloyds, Prudential, and Allianz to start drawing red lines on the map and they’ll begin denying coverage or jacking up premiums to painful levels. No insurance? HSBC and Deutsche Bank aren’t going to be granting mortgages in those zones. No finance means no resale value except whatever buyers are able and willing to pay cash. Or buyers will add in the exceptionally high cost of insurance and take that amount off the top of the purchase price. And don’t try and float a municipal bond in one of these regions either – whether a low lying flood plain or a high desert with a dwindling water supply.
No doubt the government (local, state, and federal) will exert pressure on insurance carriers to provide coverage no matter what the risks. Or perhaps a national policy will be adopted to force everyone to buy insurance whether they think they need it or not in order to help broaden the risk pool to cover costs across the board. Those procedures will hold up for a while in some places, but not others. Long before any actual damage caused by a shift in climate occurs there will be a collective recognition of the potential lost equity to investors. The herd will stampede to places perceived to be more secure and prices will be bid up. Stable areas will attract the well-heeled while more volatile territory will host the fair-to-middling. It makes no difference if the shifts are due to natural cycles or if they’re human-induced. The result in the market will be identical.
Last month a friend and I drove down the Central Valley from San Francisco to Los Angeles and I took some photos along the way. Drought or no drought the inland part of California between the coastal mountains to the west and the Sierra Nevada to the east is a desert and always has been. Some years are wetter and greener than others, but the soil is poor and the baseline is dry grasslands, scrub, and tumbleweeds.
But if water is brought in from hundreds of miles away via massive public irrigation projects that employ dams, reservoirs, aqueducts, pumping stations, and huge subsidies to keep all that water cheap for the end user… the desert blooms with all manner of wonderful produce. 80% of the water used in California is used for agriculture.
Drive up and down the state for five or six hours and you’ll see a cavalcade of signs denouncing various political figures who stand between farmers and the cheap water needed to grow crops in the desert. This November a statewide ballot initiative passed that authorized $7.12 billion in general obligation bonds to fund improvements to water supply infrastructure projects. In theory that money will go to all sorts of things including conservation and efficiency efforts, wildlife preservation, and so on. But if you read the fine print and observe the political process most of that money will go to dams and storage projects and will keep end users from absorbing the true cost of that very expensive water.
Now, my grandma used to say, “Don’t complain about the food with your mouth full.” Farmers feed the rest of us – everyday. No farmers, no food. And if the cost of inputs like water are too expensive or physically unavailable then we’re all in trouble come dinner time. But the politics of water in the arid west are insane. Some parcels of land have an ironclad legal guarantee of a generous supply of ridiculously cheap water that must be provided by the state no matter what. Other parcels have no water rights whatsoever. Other places have private or public wells that compete with their neighbors. The deeper the well the more access to water in a depleting aquifer. Deep wells cost a lot of money so it’s a race to the bottom that tends to be won by whoever has the deeper pockets. One large well-capitalized grower can suck a nearby town dry. Any attempt to overhaul this hodgepodge with a rational water policy is fought tooth and nail by multiple vested interests who load up on lawyers, lobbyists and campaign contributions. So the path we’ve settled on is a huge taxpayer funded subsidy and a whole lot of debt.
A market approach would be to calculate how much it actually costs to deliver an acre foot of water to a particular location and charge the end user accordingly. Growing cotton (a very thirsty commodity crop) in the desert may not make sense. Perhaps pistachios (a high value crop on drip irrigation) might. But that hard core capitalist system would effectively put a lot of farmers out of business.
A “socialist” approach would be to say that a stable food supply is important for all of us so we should provide water at a subsidized price to all farmers and then require them to use that precious water judiciously. At the moment we split the difference by heavily subsidizing some farmers while starving others altogether – with all kinds of unfortunate consequences and at great public expense.
In a world rocked by longer droughts, more frequent storms and floods, and all sorts of economic repercussions this is not a good plan. But I don’t expect any radical changes any time soon.