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Posts from December 0

California’s Cap-and-Trade Water Proposal: A Planner’s ‘Market’ (Part II: Sky high water auctions)

By Wayne Lusvardi and Charles Warren -- February 21, 2014

“The real problem is that the price of water in California, as in most of America, has virtually nothing to do with supply and demand…If water was priced to reflect scarcity, a decrease in supply would lead to an increase in price, and people would demand less… My system is designed to reduce demand rather than cover costs.” – David Zetland, The Water Shortage Myth (Forbes, 2008)

In Part I of this series we discussed how a proposed Drought Environmental Water Market does not meet the criteria of a market nor would the prices produced from such a system reflect Fair Market Value. The proposal for an environmental water market by a group of experts from the University of California, Davis, the Public Policy Institute of California and law schools at the University of California and Stanford (the “U.C.…

California’s Cap-and-Trade Water Proposal: A Planner’s ‘Market’ (Part I)

By Wayne Lusvardi and Charles Warren -- February 20, 2014

The U.C. Davis proposal to establish an environmental water market partly induced by environmental regulatory drought does not hold water.  And we find pricing environmental water sales by auctions to reflect inflated non-market prices derived from the “project influence” of inducing a water shortage as a result of the San Joaquin River Restoration Settlement Project of 2009 …. Nonetheless, we welcome the opportunity to open up a discussion of how markets might alleviate drought hardship on farmers and, wherever possible, on the environment.”

Road sign on rural highway in Kern County, California, erected in 2010:

for their State Water Allocation
but only received

35% in 2008
40% in 2009

50% in 2010
0% in 2014

Farmers Lost Over $200 million on Water Not Delivered!