Economics and Inter-Disciplinary Research: California’s Delta Problems Richard Howitt AERO Conference, UC Davis October

Information Needs for Inter- Disciplinary studies Agricultural &Resource Economics research is driven by public policy questions Many agricultural public policy problems have environmental motivation Linkage between data sets from different disciplines is neccessary Visualization of time and space relationships between environmental and economic processes GIS as an integration mechanism

The Delta as Critical Water Supply Infrastructure Water supply to 23 million 50% annual runoff of California, 40% surface area 7.5 MAF export/year 1800 in-Delta diversions 250 ag discharge sites 1100 miles of levees

The Problem: The Delta is a dynamic landscape undergoing significant change at multiple scales There is a high probability that abrupt change will take place in the next 50 years, disrupting ecosystem services All current planning efforts predicated on the flawed assumption that the Delta is, or can be made to be, a fixed hydrologic, ecologic and physical landscape

Current Focus on Levees

Impacts of Levee Failures Draws salt water into the Delta: Big Gulp Changes tidal prism, leading to further intrusion of salt water into Delta Shuts down the CVP, SWP and Contra Costa Canal Potential to disrupt all environmental services June 29

Day 2 Impacts of Levee Failures Draws salt water into the Delta: Big Gulp Changes tidal prism, leading to further intrusion of salt water into Delta Shuts down the CVP, SWP and Contra Costa Canal Potential to disrupt all environmental services

Day 14 Impacts of Levee Failures Draws salt water into the Delta: Big Gulp Changes tidal prism, leading to further intrusion of salt water into Delta Shuts down the CVP, SWP and Contra Costa Canal Potential to disrupt all environmental services

Day 31 Impacts of Levee Failures Draws salt water into the Delta: Big Gulp Changes tidal prism, leading to further intrusion of salt water into Delta Shuts down the CVP, SWP and Contra Costa Canal Potential to disrupt all environmental services

Day 45 Impacts of Levee Failures Draws salt water into the Delta: Big Gulp Changes tidal prism, leading to further intrusion of salt water into Delta Shuts down the CVP, SWP and Contra Costa Canal Potential to disrupt all environmental services

Day 62 C. Schmutte Impacts of Levee Failures Draws salt water into the Delta: Big Gulp Changes tidal prism, leading to further intrusion of salt water into Delta Shuts down the CVP, SWP and Contra Costa Canal Potential to disrupt all environmental services

A System Undergoing Constant, Rapid Change Subsidence Sea Level Seismicity Sedimentation Climate Change Hydrology Land Use Invasive Species

16 Islands fill Shut down of all water projects Loss of 2 major highways, railroad, gas and oil pipelines, 2 ports 85,000 acres farmland lost, homes Permanent loss of some islands Increased dependence on low-quality San Joaquin Water 5-year costs exceed $40B (low) The DWR Disaster Scenario: 6.5 magnitude quake on the Hayward-Calaveras Fault L. Snow

Abrupt Change in 50 Years: Remote or Real? P = 1-[1-1/T] n 100-year earthquake = year flood event = year earthquake AND flood = year earthquake OR flood =.64 It is a 2-in-3 probability that abrupt change will occur in the Delta in the next 50 years

Agricultural Land Use

Environmental Islands (<5%ag)

% Base land and profits

Ag Production Model RevenueCost j: Crop index g: Region index i: Input index p jg : Selling price of crop j in region g  ijg,  ijg : Cost function parameters

Yield Reduction by Salinity (Salinity indirectly measured as Electrical Conductivity, EC)

Sacramento-San Joaquin River Delta Peripheral Canal

Changes in Current Delta Planning Need a dynamic approach since we are faced with dynamic exogenous drivers. Need trade-offs rather than consensus. Mitigation based on opportunity cost & environmental costs. The “Beneficiary pays” principle can be implemented through user financing. Project sizing and financing must be decided simultaneously One cost allocation method is Ramsey pricing.

Jones Tract Economics June 3rd 2004 flooding event during spring tide 11,000 acre island, subsided to ft. below MSL Single breach, but near loss of other levees $44 million for levee repair and pump-out Total land purchase value $28 million Shut-down of water supply infrastructure

Some Delta Management Alternatives Fluctuating Salinity & Year Round Exports –New Peripheral Canal –Island Aqueduct Reduced Exports –Opportunistic exports –Gradually Abandon the Delta levees

Triangulating a Delta Solution Abandoned Delta Restored Delta Fortress Delta Solution Area  Subsidence  Sea Level Rise  Seismicity  Runoff Change  Invasive Species  Urbanization/Population  Water Supply  Farming  Native Biodiversity  Transportation  Recreation  Runoff Disposal

Book: “Envisioning Futures for the Sacramento-San Joaquin Delta” Public Policy Research Institute, San Francisco

A Spatial Econometric Approach to Estimation of Salinity Effects Three cross section field level GIS overlays of crop, soil class, salinity depth and concentration- About 45,000 fields Estimate the extensive margin adjustment to salinity Fit a multivariate logit model to estimate the probability of observing a given crop on a field Calculate the marginal probability as a function of salinity Use cost and return data to calculate the marginal salinity cost

Conclusions Agricultural policy research will increasingly include environmental goals Models and data needs will shift toward more integrated physical data Online data sets with spatial and temporal referencing will be required Primary economic data is getting more costly, and scarcer? Geo-referenced physical data is getting much more available and cheaper Specialized agricultural and resource libraries will adapt- possibly as regionally focused nodes in an integrated information network.