California Water Restrictions - Emily Lundberg

This week, California Governor Jerry Brown announced mandatory water restriction policy. For the past three years, the state of California has been in a draught, raising questions about the availability of fresh drinking water down the road. The lack of snow this winter due to the absence of the La Nina weather phenomenon left little hope of nature running its course and solving the problem on its own. Over the next nine months, California cities are trying to reduce water consumption by 25 percent. To enforce this new policy, the Governor Brown has instructed local water agencies to adjust their billing rates and discourage water waste. Whether this policy will actually be enforced or not is a large concern. The water agencies must provide enough incentive to decrease consumption by 25 percent, a large cut in current usage patterns.

Although the California mandate does not specifically spell out exact restrictions on water usage for agriculture, there will surely be spillover economic effects into California’s agriculture industry. Despite labor issues and negative effects from regulations, the dairy industry has been able to lower costs and compete by growing feed locally. Growing feed, however, requires more water than typical vegetables or trees. Under the new water restrictions, dairy producers will have to choose to either cut supply and reduce their herd or increase input prices by buying feed from other states. Reducing herd size surely will impact wholesale and retail dairy prices as other producers will not be able to increase supply fast enough to meet consumer demand. Loss of market share for the CA dairy industry can have negative spillover effects on labor (farmers, farm workers) transportation, and other industries involved in getting dairy products to the consumer. These same implications can be discussed for the meat industry and wine industry in California.

Although a limited irrigation scenario causes producers to incur losses and requires strict enforcement to be successful, I do believe this policy to be least costly in the short run. This policy, however, will not reduce groundwater consumption over time. Water saved today will be used down the road, exhausting the resource. An alternative policy should be considered that could have more effective long-run implications.