James F. Booker

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.

Economic Impacts of Instream Flow Protection for the Rio Grande Silvery Minnow in the Rio Grande Basin

The United States Endangered Species Act (ESA) prohibits federal actions that jeopardize the existence of any endangered species. The U.S. Supreme Court has affirmed that the language of the ESA and its amendments allows few exceptions to the need to give endangered species highest priority. This article estimates economic impacts associated with one method for increasing instream flows to protect critical habitat requirements of the endangered Rio Grande Silvery Minnow. One proposal for providing minimum streamflows to protect the Silvery Minnow from extinction would guarantee annual year-round streamflows of at least 50 cubic feet per second in the San Acacia reach of New Mexicos Rio Grande. These added flows can be produced through reduced surface diversions by cities and irrigators in central New Mexico low flow dry years when streamflows would otherwise fall below the minnows required level. Using a 44-year forecast of future basin streamflows, our results show that central New Mexico agricultural users suffer economic damages, New Mexico water users as a whole do not incur damages from reductions in streamflow depletions needed to support the minnows habitat. Surprisingly, that policy produces benefits to downstream users, producing average annual benefits of

How to Assess Agricultural Water Productivity? Looking for Water in the Agricultural Productivity and Efficiency Literature

200,000 per year for southern New Mexico agriculture, about the same per for west Texas agriculture, and over

Water Productivity in Agriculture: Looking for Water in the Agricultural Productivity and Efficiency Literature

1million for El Paso municipal and industrial water users. Economic impacts of guaranteeing instream flow protection for the minnow are highest in drought years.

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

Given population and income growth, it is widely expected that the agricultural sector will have to expand the use of water for irrigation to meet rising food demand; at the same time, the competition for water resources is growing in many regions. As a response, it is increasingly recommended that efforts should focus on improving water productivity in agriculture, and significant public and private investments are being made with this goal in mind. Yet most public communications are vague on the meaning of agricultural water productivity, and on what should be done to improve it. They also tend to emphasize water as if it were the only input that mattered. This paper presents findings from a first attempt to survey the agricultural productivity and efficiency literature with regard to the explicit inclusion of water aspects in productivity and efficiency measurements, with the aim of contributing to the discussion on how to assess and possibly improve agricultural water productivity. The focus is on studies applying single-factor productivity measures, total factor productivity indices, frontier models, and deductive models that incorporate water. A key finding is that most studies either incorporate field- and basin-level aspects but focus only on a single input (water), or they apply a multi-factor approach but do not tackle the basin level. It seems that no study on agricultural water productivity has yet presented an approach that accounts for multiple inputs and basin-level issues. However, deductive methods do provide the flexibility to overcome many of the limitations of the other methods.

Integrated economic, hydrologic, and institutional analysis of policy responses to mitigate drought impacts in Rio Grande Basin

Expectations are that the agricultural sector will have to expand the use of water for irrigation to meet rising food demand, given population and income growth. At the same time, the competition for water resources is growing in many regions. Increasing water productivity in agriculture is widely seen as a critical response to help address these challenges. Yet much of the public debate is vague on the meaning of agricultural water productivity—often emphasizing “more crop per drop” as if water were the only input that mattered—, and approaches for assessing and increasing water productivity are seldom addressed systematically. This paper discusses conceptual issues that should be kept in mind when assessing agricultural water productivity, and presents findings from what may be the first survey of the agricultural productivity and efficiency literature with regard to the explicit inclusion of water aspects in productivity and efficiency measurements. The survey includes studies applying single-factor productivity measures, total factor productivity indices, frontier models, and deductive models. A key finding is that most studies either incorporate field- and basin-level aspects but focus only on a single input (water), or they apply a multi-factor approach but do not tackle the basin-level aspects. It seems that no study on agricultural water productivity has yet presented an approach that accounts for multiple inputs and basin-level issues. However, deductive methods provide the flexibility to overcome some of the limitations of the other methods.

Economic impact of alternative policy responses to prolonged and severe drought in the Rio Grande Basin

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

ECONOMICS AND THE MODELING OF WATER RESOURCES AND POLICIES

7.4 to

ECONOMIC COSTS AND BENEFITS OF INSTREAM FLOW PROTECTION FOR ENDANGERED SPECIES IN AN INTERNATIONAL BASIN

11.8 million per year through intra-Compact and interstate water markets, respectively, that would extend across current water management jurisdictions. Benefits of market transfers are primarily concentrated in municipal sectors by reducing costly pumping of depletable, low quality groundwater, while costs excluding transfer compensation payments are concentrated in agricultural sectors. Many of the benefits of these alternative water management policies are not limited to drought but also apply to other hydrologic conditions.