Steven Solomon
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If successful, the South-to-North Water Diversion Project could vault China beyond the immediate peril posed by its water-scarcity crisis. But it is unlikely to solve China’s longer-term crisis for an obvious reason—the Yangtze itself is already becoming overtaxed and doesn’t have enough surplus to send north to keep pace for long with China’s rapid modernization. It postpones, but does not constitute a direct response to, the fundamental problem of China’s freshwater security and ecosystem depletion.
Meanwhile, global warming lurks as a potential environmental Hiroshima over China’s total water supply. Glaciers in the Tibetan plateau that are the source of its major rivers are rapidly melting, as they are across the Himalayas. All of China’s giant dam and water transfer schemes could be transformed overnight into an epic boondoggle if disappearing glaciers render them all wrong sized for the new, more extreme seasonal climate patterns. China is not alone in facing the global warming threat, but the sheer scale of its gamble on the success of its large dams and water transfer schemes means that it has more at stake than everyone else. No one knows for certain how much time China has before it feels the full brunt of its climate change reckoning. But the Intergovernmental Panel on Climate Change estimated that by 2035, global warming is likely to result in the melting away of enough of the glaciers to cause the nation’s freshwater supply to fall as much as a third below its farming needs—about the same time frame that China’s other water environmental crises are expected to climax.
China’s future hinges heavily upon how it meets its water and environmental crises. The twentieth-century restoration of its illustrious, old civilization and its rising superpower status both depend upon it. One possible political outgrowth is that the nation’s grassroots environmentalist movement may emerge as an enduring domestic force that nudges the government in a more liberal democratic, responsive direction. On the other hand, it is equally possible that the environmentalist pressures might provoke an authoritarian backlash that collides violently with the inexorable, immediate need to provide vast new supplies of water and other resources to meet the material expectations of a billion and a half people. Whether China succeeds or fails in meeting its water challenges, the outcome will be felt internationally and leave indelible impressions on the history of the twenty-first century.
While water scarcity and ecosystem depletion is a vulnerability for fast-growing, water-stressed giants China and India, it is simultaneously delivering to the relatively water-wealthy, liberal industrial democracies of the West a renewed strategic opportunity to revive their own waning leadership status in the changing world order. In an age of scarcity in which freshwater is becoming the new oil, the industrial democracies enjoy an enormous comparative resource advantage that they have yet to fully recognize or exploit.
CHAPTER SEVENTEEN
Opportunity from Scarcity: The New Politics of Water in the Industrial Democracies
The headline scarcity crises among the world’s demographically stressed, water poor overshadows one tantalizing, emerging trend in the relatively water-wealthy, industrial democracies—an unprecedented, sharp productivity gain in the use of existing freshwater supplies. This new development is being driven by the growing engagement of market forces as fresh, clean water resources run short and pollution regulations firm up. It offers an alternative, beacon path for alleviating the water crisis—and a pathway for the Western-led market democracies to relaunch their global leadership. Generations of water resource underpricing and inefficient political management have led to colossal waste in every society’s use of water—and therefore created correspondingly huge opportunities to increase effective total water supply by using those current resources more productively. For example, each North American uses two and a half times more renewable freshwater than the world average—and could unleash a proportionately prodigious new supply to productive uses simply by adopting readily available, high-efficiency practices and technologies. Tapping such already available supplies, moreover, comes at a lower environmental cost than any incremental new supply that can be extracted from nature or reallocated among river basins.
The democracies born in ancient Greece and Western traditions enjoy greater leeway to pursue improved efficiency solutions to their water shortages because, in the main, they have more favorable water profiles, competent governing mechanisms, and many fewer demographic burdens on their resources than the world’s water Have-Nots. Most have renewable water supplies that are ample, available year-round on a predictable basis, and fairly easily accessible. Rain-fed agriculture is widespread and provides a reliable natural food base. While America’s groundwater use is large and growing in some major regions, the nation is not excessively dependent upon it for irrigation to feed itself as are India, Pakistan, China, and countries in the Middle East. Water infrastructures, while in many cases obsolete, leaky, and in need of overhaul, are comprehensive and functional. Industrial and urban water pollution is regulated and monitored. Although the industrial democracies’ overall relative population size is shrinking to only one-ninth of humanity, their comparative hydrological resource advantages help put them in a good position to make the breakthrough innovations to meet the era’s defining challenge of augmenting the productive supply of freshwater in an environmentally sustainable and economically vibrant manner. As with other water breakthroughs in history, doing so would leverage their wealth and influence in the new century’s global order.
Indeed, by aggressively reallocating its current supplies using existing technologies, America is well positioned to not only remain the world’s leading food exporter, but also to free up water resources to boost its energy output, accelerate industrial production, and maintain robust growth in its services and urban economies. The comparative impact upon a world economy and political order constrained by water resource scarcity is potentially akin to the advantages gained from the early, large discoveries and production of oil in the twentieth century.
The remarkable increase in water productivity under way in the advanced industrial democracies represents a startling historic break in the correlation between absolute water withdrawals and economic and population growth. After three centuries of increasing twice as fast as world population, average water withdrawals per person are declining in many advanced democracies without any slowdown in economic growth. American water withdrawals peaked in 1980, and declined about 10 percent by 2000; in the same period, the nation’s population expanded by 25 percent and the economy continued on its long-term growth trajectory. From 1900 to 1970, U.S. water productivity per cubic meter withdrawn had remained relatively constant at about $6.50 of gross domestic product; by 2000 it had soared toward $15. Japan’s economic productivity per unit of water increased fourfold between 1965 and 1989. The pattern was similar in much of Europe and Australia.
The sudden upsurge in water productivity is a market response to the economic incentives created by the combination of growing water shortages and water pollution regulations that came into force from the 1970s with the environmental movement. The environmental golden rule of thumb is that users have to discharge water to the ecosystem in the same pristine condition as they have taken it from nature. Led by thermal electric power plants, industry, and cities, large water users soon realized that they could save money on pollution cleanup by using less water overall through more efficient conservation and recycling technologies.
Gradually, the first generation of government environmental rules are being refined into a subtler, soft-path efficiency approach more attuned to ecosystem needs and services. In messy, pluralistic Western democratic style, government officials, market participants, and environmentalists are often working together as constituent representatives in devising solutions tailored to specific user needs and conditions, including appropriate scaling. Small-scale, ecosystem-friendly solutions are preferred when feasible. The European Union’s Framework Directive on water policy (2000), for instance, expressly discouraged new dams where eco
nomically and environmentally viable alternatives existed; dams are also starting to be removed and replaced by wetlands restoration and reforestation in America. Legislatures and courts for the first time are granting ecosystems a legal entitlement to a sustainable share of contested water supplies. Creative concepts of valuing provision of ecosystem services are also being devised so that environmental regulations can be fulfilled and exchanged in a more flexible, market-oriented manner. Greater attention is being focused on suppler efficiency measures, such as water consumption—that is, water that is used and lost for other purposes such as irrigation water—instead of simpler, gross withdrawals, which fail to capture the productivity of recycling water for multiple uses or treated releases that are reused again by others downstream. Intermediation mechanisms are being launched, often supported by governments, to help users sell their annual water rights at premiums to other, presumably more efficient, users.
As water grows scarce and soft-path regulatory approaches take form, a market price and a marketplace for water services are coming into existence. A few businesses are pioneering measurements of their water-use “footprints,” a parallel of the carbon footprint tool gaining traction to help each entity reduce its contribution to global warming. Business enterprises are making major investments in water to compete for market share and profits. In vague outline is the embryonic contour of an artificially grafted, long-missing Invisible Green Hand mechanism that fully prices in the cost of utilizing and restoring water resources and that can enlist the historically prodigious forces of private market wealth creation in the provision of a sustainable environment. It is still early days. Large, crucial sectors, notably agriculture, remain heavily subsidized, lightly regulated for pollution, and insulated from market forces. Development is occurring locally, and sporadically, in response to needs as they arise. The change faces strong entrenched and ideological opposition on all sides. Hard-path approaches to moving, storing, draining, and cleaning water still prevail overall within the slow-changing governing water bureaucracy. At the same time, traditional environmentalists remain suspicious of any treatment of water as an economic good. They fear it may lead to its being governed solely as a profane commodity, according to dictates of market forces with inequitable outcomes and without regard to its inherently priceless and sacred value to nature and human life. But between these two poles, something novel is taking hold.
One place where the combination of water shortage, ecosystem protection, and market responses has been catalyzing a more productive use of existing freshwater is in America’s arid Southwest. At the dawn of each new era of water history, societies face the classic transitional problem of how to reallocate water resources from old uses to newer, more productive ones. By the end of the twentieth century, America’s Southwest water productivity gap had become enormous between its privileged farming businesses that were still guzzling from the trough of socialized irrigation water from the bygone age of government dams and the modern West of dynamic cities and high-tech industries. The same volume of water—250 million gallons per year—could support 10 agricultural workers or 100,000 high-tech jobs; California’s agribusinesses were using 80 percent of the state’s scarce available freshwater but producing just 3 percent of its economic output. Within agriculture, too, water was being inefficiently consumed in one region by water-thirsty, low-value crops like rice and alfalfa, while high-value fruit and nut trees were being cut back in another place for lack of water. The essential problem, even in the arid Southwest, is not that absolute water availability is too scarce to sustain robust economic growth, but rather that regulated water is both too cheap and vested in less efficient users and thus impedes the simple market price incentive mechanism that would otherwise reallocate it toward more productive uses.
In few places was the disparity greater than among the 400 farm agribusiness descendants of Southern California’s Imperial Valley water district who consumed 70 percent of California’s 4.4 million acre-foot allocation of Colorado River water under the 1922 compact at the delivery cost of only about $15 an acre-foot, and the 17 million thirsty Southern California coastal dwellers who were paying 15 to 20 times more to meet their much more modest needs. Imperial Valley’s water surfeit, furthermore, encouraged particularly profligate farming practices, including the desert planting of water-thirsty crops, and the consumption of twice as much water per acre as other California farmers.
Such an enormous disparity between the farm and city price of water and the formation of a political alliance of city, industrial, and environmentalist interests with the clout to offset the farmers’ historical dominance within California’s hardball water politics, did not escape the notice of the billionaire Bass brothers, scion investors of one of Texas’s oil empires. In the early 1990s, the Basses invested about $80 million of their $7 billion fortune to buy up 40,000 acres of Imperial Valley farmland—and the water rights that were conferred with it. Reminiscent of William Mulholland’s deception in purchasing Owens Valley land to gain access to its river water in the infamous Los Angeles water grab earlier in the century, they avowed to farmers wary of losing their water rights that they wanted the land merely to raise cattle and not to speculate on water.
Soon enough, though, the Basses managed to persuade the cooperatively owned Imperial Valley water district that its best interest lay in selling San Diego 200,000 acre-feet of its 3.1 million acre-feet entitlement each year starting at $233 per acre-foot—a markup of nearly 20 times its own subsidized effective cost—for an immense, cumulative profit of more than $3 billion over seventy-five years. The plan, moreover, called for Imperial Valley to invest a slice of these profits in water efficiency improvements intended to save at least as much water as it was selling to the city, so that in practice it wouldn’t lose any of its precious Colorado River water at all. Despite the farmers’ exorbitant profit, San Diego liked the deal because it provided an independent water source and a one-third savings over what it was then being forced to pay to the powerful, Los Angeles–dominated Southern California water authority.
Although applauded by federal and state regulators, environmentalists, and most nonfarm participants because it finally began the transfer of water from agriculture to the cities, the deal got bogged down in the internecine battles between California water authorities and other interests. As the millennium approached, the proposed water sale became engulfed entirely in the larger regional crisis on the Colorado: Diminished by drought, full allocation draws by fast-growing Arizona and Nevada, and the fact that the river’s average annual volume was less than the 1922 compact had estimated, the Colorado basin was fast running out of enough total water to supply everyone’s existing needs. Storage in Lake Mead was dwindling to alarmingly low levels. Without major modifications, the iconic Hoover Dam and other Colorado water infrastructure, would have sufficed for less than a single century.
In late 1999, U.S. secretary of the interior Bruce Babbitt, backed by the other Colorado basin states, issued the first-ever ultimatum to California to end its decades of river overdrafts, then running about 800,000 acre-feet per year, and to live within its compact limit of 4.4 million acre-feet. California was given until year-end of 2002 to come up with a plan to wean itself off its Colorado overdraw by 2016. The regulators also insisted that the plan include the transfer of water from Imperial Valley to the coastal cities and to protect existing water ecosystems. Failure to devise an acceptable program, the interior secretary warned, would lead to the immediate cutoff of the excess flows.
Imperial Valley agribusinessmen furiously resisted being forced to accept the terms of a deal that they correctly foresaw would be the start of a slippery—even if lavishly gilded—slope to losing control of the virtually free irrigation water, which American taxpayers had granted their forbearers for settling the barren desert long ago. In particular, they bridled at the demands that they allocate some of their water to preserve the ecosystem health of the Salton Sea, the inland lake that had forme
d when the Colorado River flooded its levees in 1905, and that was replenished only by the runoff from the valley’s 82-mile All-American Canal and 1,700 miles of irrigation ditches.
When the December 31, 2002, deadline passed without an acceptable plan, the unthinkable happened: At 8:00 a.m. on New Year’s Day 2003, the new interior secretary, Gale Norton, stood by the pledge of her predecessor from the opposition Democratic administration, and switched off three of the eight pumps controlling the flow from the Colorado into the 242-mile-long aqueduct to Southern California. At the turn of the spigot, Imperial Valley lost as much water as it was to have sold to the cities—without any compensation. Still the farmers did not buckle. Then, in August 2003, the Interior Department’s Bureau of Reclamation increased the pressure by releasing a study that concluded that in response to the drought the government could cut off water to Imperial Valley because farmers were using it wastefully—the whispered amount of the waste was 30 percent. Playing “good cop” to the Fed’s “bad cop,” the California state government stepped forward and offered to share some of the water and infrastructure cost burden to preserve the Salton Sea.
Within two months, in October 2003, the agribusinessmen of Imperial Valley capitulated. The ceremonial signing of the landmark agreement to transfer Colorado River water to San Diego and other cities was held at the Hoover Dam. In all, 500,000 acre-feet per year, or one-sixth of Imperial Valley’s water, would be reallocated. An estimated 30 million acre-feet—some two years’ annual flow of the Colorado River—would move from primarily agricultural to urban uses over seventy-five years. No one doubted that further calls on agricultural water lay ahead as the New West continued to rise.
Despite the multibillions of dollars of profit they would receive for selling a fraction of their taxpayer-subsidized water, some bitter Imperial Valley farmers felt cheated. “They should pay $800 an acre-foot versus $250,” complained farmer Mike Morgan. “The greatest water heist ever is going on right under your feet.” Others, however, promptly got over their grievances and moved forward to recoup much of the water lost to the sale by improving existing water productivity through investments in repairing leaky irrigation networks and in new technologies, such as high-tech satellite sensors to monitor crop and soil moisture and activate precision watering devices. In fact, the only big losers from the Imperial Valley water deal were Mexican farmers, who for decades had been pumping up groundwater that had leaked from the irrigation ditches on the American side of the border. They now suddenly found their wells running dry due to the Californians’ more-efficient irrigation methods. Ever lucky, Imperial Valley soon stumbled upon another potential bonanza under the Salton Sea’s southwest corner—a large geothermal field that could significantly boost California’s renewable electricity production.