Economic and Institutional Strategies | F for Adapting to Water-Resource Effects | | of Climate Change | F zi Jésea Korens | E Brans Hur | N ‘This chapter presents an overview and synthesis of policy tools that state and federal agencies can use to assist water managers in adapting to climati cally driven variability in water demand and supply. Some of these policy tools can also help address the cusrent conflicts in water demand, supply, and valuation between traditional water uses and newer, growing. uses, INCREASING CONFLICTS BETWEEN COMPETING WATER USES ff-stream water use in the United States increased over tenfold during the twentieth century in response to population and economic growth (Brown 1999), Growth is expected to continue in the western United States, and domestic and commercial demands for warer probably will continue to grow as well (Chapter 13). As domestic demand for water increases, additional sources must be acquired. Even with increased conservation and water-use efficiency, population growth will outstrip municipal allocations in a majority of the West's urban groweh areas. In many of these regions, surface supplies are fully subscribed, and growing urban demands will require transfers of ‘water ftom other users or regions. What does this mean for aquatic ecosystems? 235Perspectives on Society. nstations, and Water “Table 15.1 Teens ofesimared wnter we inthe Unled Seaes, 1950-1995 tased on Soller eta 1998, able 31, Yer SD D_DS H Poplin SLCC Boe Off-strecon uses (10° gpd) cage’ ud) 210402 MO SBS gL Runidowesie 36) 3a) 3@ 4 45) 490 SQ 7 Te A and livestock é Ieigatin 2 1 wD wm wo wom om OF Insel 7 ul we Ww om mS 29 Taal mo om RD 4 HS Ra "etodes municipal and commercial uses clades dhermodecte power poduction (cling Sueam flows have dropped as cients have demonstrated the need of cfc stream flows for support of aquatic life and the maintenance of river Tench Al ing hones and oto hve ined dean recreation and water quality that depend on flow (Gillian and Brown 1997). ‘These isnies have increased the complexity of water management and thus have raised the desirability of integrated water management and the useful nese of quasi-matket institutions a¢ the watershed level. Only by these ap- proaches can a flexible system emerge that accounts for the linkages beween upstream and downstream users, allocates the impact of minimum flow con- straints efficiently across all users, and generaces market signals that tend (© internalize conservation strategies ‘Demands for Water “The adequacy of water supply depends on the relationship of water avail ability to water use (Brown 1999). A great many competing uses exist, in~ cluding offstream uses for municipal, agriculeural, and industrial purposes ot in-stream uses such as hydropower, recreation, and environmental purposes. Policy tools that can better allow these differing demands to be met will be the focus of the second half of this chapter. Trendsin Water Use EEN Growth in coral US. water withdrawals between 1950 and 1990 consis: tently outpaced population growth (Table 15.1). The change from 1950 to 1990 (which has slowed since then) corresponds to an annual increase of 1.2 percent per yeat for population and 2.4 percent per year for withdrawal (Brown, 1999). As shown by Table 15.1, this groweh in withdrawals resulted largely 236 Economic and Instttional Strategies for Adapting to Water Resource Efocts from increases in irrigation and thermoelectric cooling, which together ac- count for 83 percent of offstream water uses in the United States. In the ‘western United States ittigated agriculture alone accounts for 80-90 percent cof withdrawals in some states (Gibbons 1986). Withdrawals for municipal use consistently increased between 1950 and 1995. Although population growth explains much of the trend, an increase in per capita use brought about by grovsth in technology and the conversion of older or rural households to complete plumbing was also important. fa the last few decades, increased use of dishwashers, washing machines, swimming Pools, and lawn sprinkler systems has added demand (Brown 1999). To ex: plain the future outlook of withdrawals for municipal uses, recent studies have mainly concentrated on population growth and rising per capita in- come. It seems likely that municipal water demand will continue to increase because of the upward trend in population, especially in the western United ‘States. If inerenses in water prices and awareness of the need for water con. servation and implementation of water-conservation programs have a larger effec than ising income, however, we could expect to sce a leveling or even a decrease in per capita demand, Reductions in per capita water use will be needed in the westera United States in part to offset the increase in popula- tion and to allow for balancing of existing and new water uses while mi mizing the need to transfer water from other uses and regions Industrial and conmercial withdrawals showed growth until 1980 (Table 15.1), but between 1980 and 1995, withdrawals for industrial uses dropped sharply. New technologies that require less water, improved plant efficen- ies, water recycling, higher energy prices, and changes in laws and regula- tions have resulted in decreased industrial water use (Solley et al. 1998). In the furure forthe industrial sector we should see a decline in total water use and use per unit of prodkiction, but change probably will occur at a slower rate than since 1980, Industrial water demand is not fixed; it has been te sponsive 0 external influences, Rural use of water is for domestic purposes and livestock. ‘The steady increase in rural use has been caused mainly by an increase in withdrawals for livestock. It is useful to consider rural and iergation water demands to- gether. Water demand for intigation rose at a steady rate until 1980, when it began to decline. Between 1950 and 1980, irigation systems expanded, but higher energy prices in the 1970s and a lange draweiown of groundwater levels in some areas increased the cost of irrigation water. In the 1980s, improved application techniques increased competition for water, and a downturn in the farm economy reduced demands for irigation water (Solley ct al. 1998) The furure may bring greater pressure to reduce water use for irigation. Studies have shown that in some areas itis more valuable and beneficial to keep a greater portion of water in streams for purposes of aesthetics, recreation, 27Perspectives on Society. situons, and Water support of fish and wildlife, and maintenance of water quality than it isto preserve irrigation uses (Ward 1987; Loomis 1987, 1994). Thus the future ‘may bring greater competition between ittigation and other uses EFFECTS OF CLIMATE CHANGE ‘ON DEMAND FOR AND SUPPLY OF WATER Changes in the spatial and temporal distributions of runoff can have pro- found social and economic consequences (Hurd et al. 1999). Anticipated greenhouse warming may significantly affect precipitation, evapotranspira- tion, stream flow, and water availability. Hydrologic changes that may ac- company global climate change are expected to have a variety of effects on ‘human sertlements and ecological systems. ‘The effects include changes in water supply and quality for drinking and for irrigation, recreational, com- mercial, nnd industrial uses; steam flows that support aquatic ecosystems, recreation, hydropower, navigation, and wastewater assimilation may change. In addition, changes may occur in the extent and productivity of wetlands with consequences for fish, wildlife, and wastewater assimilation as well as frequency and severity of floods. Regions where water resources are stressed under current climatic conditions ate likely to be the most vulnerable to changes in climate and in extreme events (Hurd et al. 1999). With the exception of hither temperatures and greater rates of evapotranspiration, however, changes in precipitation and runoff are uncertain—particularly at the regional scale, which is of greatest intetest to local water planners, utili- ties, and government agencies (Chapter 6) Frederick and Gieick (1999) describe the effects of climate change on the United States as show by two general circulation models—the Hadley and the Canadian. Estimates of change in runoff from these models are sini- lar in some cases and vastly different in others. For example, the Canadian model suggests chat average runoff will decline everywhere except California by 2030; a decline of more than 20 percent is estimated in two-thirds of the regions. In contrast, the Hadley model suggests that runoff will increase in most basins; much of the nation’s arid and semiarid regions would have considerably more water, reducing problems of water scarcity but perhaps increasing flooding. For 2090 the Hadley model shows much of the nation with even wetter conditions, whereas the Canadian model suggests further dying in the East but an increase in moisture over much of the West. Frederick and Gleick conclude that he effects of greenhouse warming on future water supplies are uncertain (cf: Chapter 6) In the Colorado River basin, Hurd et al. (199%) have measured the ‘economic effects of hypothetical changes in climate and precipitation, With a small change in temperature and a large change in precipitation, runoff increases, which leads to an increase in economic benefits. With lage in- 238 conomic an tsitutional Srteges for Adapting to Water Resource fects ‘Table 15.1—Effects of imate change on welore in the Colorado River Lin for various posse 4B 2 © aD 9 47 Municipal and tnt 3 4 1 3 5 te Hixkopower 1) 6 wD 6 or 68 Recreation 1D 10 02 05 “10 -180 -160 280 _ Salinity damage iw =] hoe ‘creases in temperature combined with small increases in precipitation, how. ever, runoff decreases, which in tum decreases economic well-being. These findings have implications not only for water supplies but also for hydro- power generation and salinity. In years when reservoirs are relatively full, (ee, 1984), increased spring flows create less hydropower value than if flows develop more gradually oF can be stored to meet summer air-conditioning demand or demands for peaking power. Table 15.2 shows the economi changes for agriculture, hydropower, salinity, municipalities and industries, and recreation under variety of climate-change scenarios. Hydropower losses could be 30 to 66 percent of total damages, as compared with agriculture at only about 7-10 percent of damages. The second-largest source of damage is increased salinity, which reduces crop production and may affect municipal and industrial water systems. For the ceneral case climate scenario (+-2.5°C, 47% precipitation), total annual costs are estimated to be about $105 mil lion, Much of the total damages is a cesul of the currently inflexible water allocation rules associated with the Colorado Compact, prior appropriation doctrine, and similar measures, which protect the senior water rights of irri- gated agriculture, In the upper basin, irrigated agriculeure is often the lowest- valued water use. If legal flexibility and economic incentives were provided to upper basin inigators, the damages from climate change could he cut by nearly half. Specifically, total damages would be estimated at $65 million per year, a $40 million per year saving with legal flexibility and economic incen- Lives to allow irigators to sell water to higher-valued users downstream. The absolute magnitude of the cost savings would be even larger with more ex- treme climare change. In the remainder of this chapter we describe several tools that would allow policy makers and managers to cope with increased variability and reduction in usiity of water supplies, Institutional changes and economic 239