Ari M. Michelsen

The economic value of water in agriculture: concepts and policy applications☆

The design of institutions that maximizes waters beneficial use in the face of growing demands for scarce and random supplies is the central policy issue in dry places. Information on waters economic value enables decision makers to make informed choices on water development, conservation, allocation, and use when growing demands for all uses are made in the face of increased scarcity. Conceptually correct and empirically accurate estimates of the economic value of water are essential for rational allocation of scarce water across locations, uses, users, and time periods. This review article raises several issues that must be considered in deriving accurate estimates of the economic value of water. These include establishing common denominators for water values in quantity, time, location and quality; identifying the point of view from which values are measured; distinguishing the period of adjustment over which values are estimated; and accounting for the difference between total, average, and incremental values of water. We illustrate values of water for agricultural use, based on a recent drought policy analysis of the Rio Grande Basin.

Expectations in Water-right Prices

Water markets are increasingly being used and promoted as an economically efficient means to transfer water rights. Knowledge of water-right price determinants and trends is important in developing markets, and in evaluating the comparative benefits and costs of water supply alternatives. Potential determinants of homogeneous water-right prices are identified, and a two-equation model based on rational expectations theory is developed. The model is tested using empirical evidence from the established market for Colorado-Big Thompson water rights. The model results support observations that returns to water in irrigation do not adequately explain the level of water-right prices. Socioeconomic and speculative factors are found to explain successfully the variations in historical prices, and appear to play a substantial role in water-right price formation. These findings have important implications in assessing the benefits of proposed water-transfer policies.

Featured collection introduction: Water for megacities - challenges and solutions

The Earth has entered into Anthropocene, a new epoch dominated by people. The world’s urban population has grown more than four times during the past 60 years to 3.9 billion. Today, more people are living in the cities than in the countryside in most nations. Cities are growing bigger and faster than ever before (United Nations, 2014). Cities that have a population >10 million are commonly considered as megacities as defined by UN-HABITAT (Li et al., 2015b). Globally, there are about 28 megacities with approximately 13% of the world’s urban population (United Nations, 2014). Most of these megacities are found in Asia. By 2030 the world is projected to have 41 megacities with cities in Africa and Asia growing the fastest (United Nations, 2014). Megacities face many emerging challenges, from economic development and social stability to environmental changes in the 21st Century. Obviously, many of the water resource challenges in megacities are rooted in the rapid rise in competing water demands by people for multiple uses. Water problems arise when water demand cannot be met by water supply due to either natural (e.g., surface or groundwater exhaustion), socioeconomic (e.g., financial and governance), water quality, or environmental constraints. Meeting rapidly growing water demand in megacities often means sacrificing the environment such as water quality degradation, ecosystem damage, and/or unsustainable water use such as groundwater depletion and salt water intrusion. Competing water use by irrigated agriculture, thermoelectric power generation, and industrial and residential water use are common causes of water shortages for megacities, especially in arid or semiarid regions or during extreme drought years. Water pollution alone from megacities can turn a “water rich” city into a “water poor” one as demonstrated by megacities in many developing countries. Climate change affects water availability everywhere, but megacities are most vulnerable simply because of the large water demand by people (Li et al., 2015a, b). Growing extreme weather events (e.g., hurricane, droughts, and floods) associated with climate change and variability pose some of the biggest challenges to water supply infrastructures in megacities. It is

Challenges and Opportunities for Water of the Rio Grande

The Rio Grande has headwaters in Colorado, flows through New Mexico, and serves as the United States.–Mexico border in Texas, emptying into the Gulf of Mexico. Snow melt in Colorado and northern New Mexico constitutes the water river supply for New Mexico and the El Paso region, whereas summer monsoonal flow from the Rio Conchos in Mexico and tributaries, including the Pecos River, provides the Rio Grande flow for southern Texas. The region is mostly semiarid with frequent long-term drought periods but is also characterized by a substantial irrigated agriculture sector and a rapidly growing population. International treaties and interstate compacts provide the rules for allocation of Rio Grande waters between the United States and Mexico and among Colorado, New Mexico, and Texas. Water rights in Texas have been adjudicated, but the adjudication process was based on a wet period; hence, contemporary Rio Grande water rights are overallocated. Issues related to the waters of the Rio Grande include: frequent drought, increased municipal demand caused by a rapidly increasing population, supply variability, underdeliveries from Mexico, increasing salinity, inefficient delivery systems, health issues of the population, no economic/financial incentives for farmers to conserve, and water is not typically priced for efficiency. Stakeholders are interested in identifying solutions to limited water supplies while there is increasing demand. There are several activities in place addressing Rio Grande-related water needs, including enhancing delivery distribution efficiency of raw water, conversion of rights from agriculture to urban, improving both agricultural irrigation field distribution and urban use efficiency, developments in desalination, and litigation. None of the solutions are easy or inexpensive, but there are encouraging cooperative attitudes between stakeholders.

Rapid Economic Assessment of Flood-control Failure along the Rio Grande: A Case Study

Recent flood events along the international border between the USA and Mexico resulted in significant economic damage and loss of human life. The International Boundary and Water Commission, the agency responsible for monitoring US–Mexican flood control levees, had requested funding for maintenance and improvement of these levees. However, the Office of Management and Budget requires agencies to provide benefits or in this case avoided loss estimates to justify the budget request. Due to severe time constraints in the budgetary process there was a need for a rapid assessment of the potential economic impacts from a failure of this ageing flood-control infrastructure. The economic losses avoided by four major flood-control projects on the Rio Grande were estimated using an innovative combination of satellite imagery, geographic information systems, and economic methods. The control projects apply to about 547 km (340 miles) of levees from Caballo Reservoir in New Mexico to Brownsville, Texas, and include several million people, extensive industry, and agricultural production. High resolution imagery was used to identify and quantify potential flood inundation areas, types of land use, and impacts of flood-control infrastructure failure. Value estimates of residential, industrial, and commercial property, and agricultural production at risk were developed from property assessment data, crop enterprise budgets, census data, and community leaders. Damage factors accounting for flood inundation levels and building contents were then used to develop gross economic losses avoided by flood-control infrastructure for each of the different property and land use types in each project area. The baseline analysis indicates that the four projects cumulatively prevent one time losses of US

The USGS Water Availability and Use Science Program: Needs, Establishment, and Goals of a Water Census†

322.9 million in flood-control protection.

Statistical Analysis of Flow Exchange and Salt Loading between the Rio Grande and Underlying Aquifers

Many reports have recognized the need for a national water census for the United States and have called upon the U.S. Geological Survey to undertake this challenge. For example, the National Science and Technology Council stated: “The United States has a strong need for an ongoing census of water that describes the status of our Nations water resource at any point in time and identifies trends over time.” Responding to the need for this information, the U.S. Congress established the SECURE Water Act. The directives are to provide a more accurate assessment of the status of the water resources of the United States; determine the quantity of water available for beneficial uses; identify long-term trends in water availability; assist in determination of the quality of the water resources; and develop the basis for an improved ability to forecast the availability of water for future economic, energy production, and environmental uses. This article provides summary and new information on the process and progress on work to estimate water budget components nationwide, involvement of stakeholder interests, efforts to examine water-use characteristics throughout the Nation, studies of water availability in geographically focused areas and the initiation of methods to provide open access to existing and new water resources information contributing to Open Water Data Initiative (OWDI) efforts and objectives.

Data collection for cooperative water resources modeling in the Lower Rio Grande Basin, Fort Quitman to the Gulf of Mexico.

This paper provides statistical analysis of flow exchange and salt loading between the Rio Grande and underlying aquifers for the Rio Grande Project Area, extending from Caballo Reservoir in New Mexico, continuing through the urbanized areas of Las Cruces, New Mexico and El Paso, Texas to Fort Quitman, Texas. The authors analyzed the river flow, TDS and salt loading at selected three segments of the river reach and associated underlying aquifers. The total salt loading within each segment was computed to determine exchange of salt loading between the river and underlying aquifers. The salt concentrations continue to increase downstream, up to 3,200 mg/L on average at Fort Quitman during irrigation season, approximately five times higher than the water TDS released from the Caballo Reservoir. This is due to the river collecting irrigation return flows, municipal wastewater discharge and natural discharge of saline groundwater. Salt exchange patterns between the river and underlying aquifers were also identified.

Institutional Innovations for Coping with Severe and Sustained Drought in an International Basin

Water resource scarcity around the world is driving the need for the development of simulation models that can assist in water resources management. Transboundary water resources are receiving special attention because of the potential for conflict over scarce shared water resources. The Rio Grande/Rio Bravo along the U.S./Mexican border is an example of a scarce, transboundary water resource over which conflict has already begun. The data collection and modeling effort described in this report aims at developing methods for international collaboration, data collection, data integration and modeling for simulating geographically large and diverse international watersheds, with a special focus on the Rio Grande/Rio Bravo. This report describes the basin, and the data collected. This data collection effort was spatially aggregated across five reaches consisting of Fort Quitman to Presidio, the Rio Conchos, Presidio to Amistad Dam, Amistad Dam to Falcon Dam, and Falcon Dam to the Gulf of Mexico. This report represents a nine-month effort made in FY04, during which time the model was not completed.

Conflicts and Cooperation: Water Resources Planning in Far West Texas

The Rio Grande is the fifth longest river in North America, forming a nearly 2,000 kilometer international border between Texas and Mexico on its way to the Gulf of Mexico. The basin faces the same problems confronted by many arid regions where water is over allocated, there are growing competing international demands, and river flows and uses are vulnerable to drought and climate change. Currently in the third year of severe drought, irrigation and municipal water diversions have been severely curtailed, extensive river channel diversions threaten endangered species, and reservoir storage has been virtually depleted. A central challenge in these settings is development of policies which efficiently and equitably allocate Basin water resources between the multitude of competing uses across political and institutional jurisdictions. We have developed an integrated hydrologic-economic model for the upper half of the Basin to test whether innovative policy adjustments in water management and allocation could substantially reduce these damages. Compared to existing institutions, we find that future drought damages could be reduced by