October 25, 2023 • 25 mins
Water is our most important resource. How do we quantify and measure it? With economics of course! This episode is a crash course into the wild world of water economics.
In this episode you will learn all about the economics of groundwater and get a snapshot of what is happening in California from Dr. Ellen Bruno. Dr. Bruno is an Assistant Professor at UC Berkeley where she focuses her time on understanding and developing market solutions to tackling this water economics issue.
You may have already heard about carbon footprints but we talk all about water footprints in this episode too! You will hear from Dr. Lara Wöhler from the Water Footprint Network all about how to calculate your own water footprint. Also get ready to be shocked at how much water it actually took to produce some of your favourite tasty treats and commonly used everyday things!
Can't wait? Check out their Water Footprint Calculator here! and you can Look Up the Water Footprint of common Items here.
The ABP is establishing a conservation Aquarium in the Prairies to help tell the Story of Water.
Disclaimer: This post contains affiliate links. If you make a purchase, I may receive a commission at no extra cost to you.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
David Evans (00:12):
I sure enjoy drinking water infrastructure
and indoor plumbing, it improvesmy quality of life tremendously,
is not something that you hearvery often. But really, it
should be. It's really somethingthat I take for granted for
sure. And I'm sure many of youdo. And as soon as you're
without it, yeah, you reallymiss it. It is an absolute
(00:34):
privilege. And the one thingthat boggles my mind when I
stopped to think about this isthis is such a valuable resource
having this water right at ourdoorstep, right in our kitchens
right in our bathrooms. But howin the world is it this cheap?
Today, we're gonna dip our toesinto the crazy fascinating,
(00:56):
sometimes boring, but reallyimportant in the world of water
economics. My goal today is foryou to be so stoked about
calculating indirect water usageand products and for monitoring
and managing groundwater usage.
not sold on that yet. Well staytuned. I'm sure we can get
(01:16):
there. All today on the what arewe doing podcast?
water we doing? And how can wedo better? Your one stop shop
(01:38):
for everything water relatedfrom discussing water, its use
and the organisms that depend onit for all the global issues
that you really never knew allhad to do with water. I'm your
(02:08):
host, David Evans from theaquatic biosphere project. And I
just want to ask you something.
What are we doing? And how canwe do better?
(02:46):
Water economics is a branch ofenvironmental economics. And it
might be quite different thanwhat you think of when you think
of economics. I mean, typicallyyou think of supply meets
demand, then that's what findsthe price point for, let's say,
a cell phone or a shirt. Butunfortunately, water is very
different than these other typesof commodities. You can't just
(03:08):
manufacture more water, orexpect it to replenish from
where it came. It's interestingbecause it's actually easier in
the third world countries toprovide everyone with cell
phones, then with safe drinkingwater. Another reason that water
economics is so confusing, isbecause it's not only surface
(03:29):
water, lakes, rivers, streamsthat you have water in. We're
also using water from deep belowthe ground groundwater. And
we're not only using water forsanitation, drinking, we're
using it for food production,oil and gas, textiles.
Everything we do uses water. Sowe need it for everything. Water
(03:50):
economists actually study how weare sharing these resources. And
if we are using them to theirfull potential, that is if we
are using them in the mostefficient way possible. Now,
what does that mean? Well, let'sask an economist.
Dr. Ellen Bruno, UC Berkele (04:06):
Let me try to explain like, you can
think of groundwater as thiscommon resource where nobody
owns it, yet everyone has accessto it. And one person's use of
it means that there's less foreveryone else now and in the
future, right. It's this dynamicresource. And so it's not just
today's pumpers. But tomorrow'spumpers.
David Evans (04:29):
This is Dr. Ellen Bruno. She's an assistant
professor of CooperativeExtension at UC Berkeley in the
Department of Agricultural andResource Economics.
Dr. Ellen Bruno, UC Berkele (04:38):
And so what that means is I get to
do fun applied research, butinstead of classroom teaching, I
do public outreach. So I try todo research that's meaningful to
the California Public. Myspecialty is on water resources,
and particularly in agriculture.
And so I study water policiesboth proposed and implemented
and potential water policies andwhat that might mean for
(04:59):
Californians,
David Evans (05:02):
Dr. Bruno studies groundwater, and I like to think
of groundwater as a bucketthat's not refilling, as soon as
you take some water out, itmeans there's less water for
everyone in the bucket. But italso means that the water level
has dropped. And that means thatit's harder for everyone to get
more water out. It just meansit's further and further away
(05:24):
from the surface. The way thateconomists talk about this is
they say there's higher costsfor everyone to access this
resource now. So for example, ifI take water out of our shared
bucket, then now it's cost youthat potential water. Now you
can't access that because I'vetaken it out. So this is what
(05:44):
economists might call a negativeexternality. Wait, why am I
explaining this? Dr. Bruno, canyou can you just take over,
Dr. Ellen Bruno, UC Berkele (05:53):
I'm using this term costs, like
pretty broadly, it includeshigher energy costs from pumping
the groundwater from below. Butit can mean other types of costs
as well, including like degradedgroundwater quality or depleted
streams, because in some cases,the groundwater and the surface
water are interconnected. And ifyou pump groundwater right next
to the stream, it's going tocome out of the stream. So that
(06:15):
can hurt the fish or other, youknow, groundwater dependent
ecosystems. And so, ideally,you're thinking about all these
potential costs, because they'reall important. And they're all,
you know, negativeexternalities, and sort of
leading to what we might callthis tragedy of the commons kind
of situation,
David Evans (06:32):
my listeners are sick of hearing me talk about
that.
Dr. Ellen Bruno, UC Berke (06:36):
Good, so they're already familiar with
it.
David Evans (06:41):
All right, in case you need a quick refresher on
the tragedy of the commons, cuethe sad music here. This is the
concept of an open accessresource that everyone has
access to. And without any rulesor regulations that you need to
follow. Everyone just acts intheir own self interest. And it
(07:01):
makes sense to go and take asmuch as you can, because if I
don't get it, then someone elsewill. This has led to a lot of
the problems, honestly, thatwe've talked about on the
podcast, the tragedy of thecommons is really a race to the
bottom, a race to catch the lastAtlantic cod off the coast of
Newfoundland, before they closethe fishery, the race to shoot
(07:25):
the last American bison before,we're not allowed to shoot
anymore. The Race to the lastdrop of groundwater. Sorry for
the sad soliloquy. So Dr. Bruno,when we find ourselves facing a
tragedy of the commonssituation, what can we actually
do?
Dr. Ellen Bruno, UC Berkeley (07:43):
In this kind of situation, we would
want to correct those negativeexternalities, it's what
economists would call a marketfailure. And one of these times
where we would want tointervene, because in the
absence of intervention, we'regetting an outcome. That's
that's suboptimal for everyone.
And so one option for that isputting an explicit price on the
water. And this sort of tax, ifit's set, right could correct
for these issues by making thegroundwater more costly and
(08:06):
causing pumpers to sort ofinternalize the negative costs
they're imposing on others, andincentivize them to pump
slightly less. But it could alsobe achieved in a different way
by for example, setting a cap onhow much groundwater could be
pumped and allowing trade of thegroundwater within that cap. And
that's an indirect way ofimposing a higher price on that
(08:30):
groundwater. And that could, intheory, you know, be designed in
such a way that you achieve anequivalent outcome.
David Evans (08:38):
So Dr. Bruno has been talking really just about
groundwater so far. And that'sbecause it is a kind of this
unregulated area withinCalifornia, in California, about
80% of all of the water usedacross the entire state is used
only for agriculture. The restof the 20% is for urban areas
drinking water, and residentsuse. Now all of this water,
(09:01):
where does it come from? So it'sa mix of surface water and
groundwater. And it changesevery year based on how much
rain, how much water there areactually in that surface water
area. So we make up thedifference with groundwater. And
it averages out to about 40% ofall of the water use across the
entire state every year is fromgroundwater. That's a lot.
Dr. Ellen Bruno, UC Berkel (09:25):
It's pretty interesting. In the state
of California, where you have abunch of the population in the
southern part of the state, youhave agriculture primarily in
the center of the state. Andthat's separate from where the
precipitation falls. So most ofour precipitation falls in the
form of snowpack in the SierraNevadas, which is not where
(09:47):
we're demanding the most of thewater and also at a different
time of year if we think abouthow agriculture is, you know,
happening in the summer, and weget the bulk of our
precipitation falling betweenDecember and March. So we've
kind of engineered our way outof this disconnect through like
this big system of canals andreservoirs that we've built. As
(10:09):
the snowpack runs off, when itwarms up in the springtime,
we're capturing that water inreservoirs, and then moving it
around the state and canals sothat agriculture can get the
water in the summer. And youknow, the thirsty Los Angeles
population can continue drinkingwater all year round.
David Evans (10:29):
Isn't it wild how much effort and planning it must
take to actually get all thiswater to where it needs to go
when it needs to get there, makesure that we have enough of it
for everyone. So it really onlymakes sense that there are costs
that are associated with that,that need to be covered by the
agricultural producer. So ifyou're a farmer in California,
(10:50):
you have to pay for that waterso that you can irrigate your
crops with it. And the price forthe surface water can vary
widely across the year,depending on how much water is
available, and how far away youare from the mountains that it
actually comes from. So thequestion that jumps to my mind
is, are farmers actually tryingto plant crops that don't need
(11:10):
as much water? Because how areyou supposed to know how much
water there's going to be nextyear and how expensive it's
going to be?
Dr. Ellen Bruno, UC Ber (11:19):
Farmers are still adapting to changing
water prices, when you'relooking at the agricultural
landscape and looking at changesin it over time. It's very hard
to say how much of that is dueto changing water prices?
Because agriculture Yeah, asadapting to all sorts of market
forces, like probably more sothe price of the crops that
they're growing, and Californiacrops are shipped all over the
(11:42):
world, like these are globalmarkets. And they're driven by a
global supply and demand forcesI have working on on one study,
and we've been studying howwater prices are affecting
California agriculture, likespecifically from this this
question of land use. And we'rejust looking at a very small
area on the California coast.
But it's this really uniquesetting where we observe a price
(12:05):
increase that we can sort ofcredibly separate from the other
economic forces that areaffecting land use, we've
observed that farmers do in factshift to their crop mix in
response to a rising waterprice. And this is intuitive if
we assume farmers are profitmaximizers, and they're going to
(12:25):
adjust their operations inresponse to higher prices, than
we would expect them to shiftcrops, you know, to growing ones
that yield a higher profit peracre foot of water required to
grow those crops. But yeah, likeI said, when you're looking at
sort of statewide, or, ornationwide, you know, on these
bigger scales, there's so manyother forces driving the crop
(12:45):
choice that it's really hard totease out, you know, what's
happening due to like changes inthe water landscape.
David Evans (12:53):
So yes, the price of water does have an effect.
But it's one effect. There'smany other complicating effects.
So it's really hard to figureout what's having the biggest
influence on what's beingplanted, but it is there it is
there. So what if you are afarmer that needs a lot of water
to water, your crops? Are youjust going to be planting crops
(13:16):
and then not sleeping at night,because you're so worried about
how much the price couldincrease, and then you're not
going to make a profit off ofthose crops. That's why there's
a new financial instrument thatCalifornia has started, the
first of its kind in the worldto help protect California
farmers from the volatile watermarket.
Dr. Ellen Bruno, UC Berkeley (13:36):
I think it was in December of
2020, the CME Group launched theworld's first futures market for
water. And what this is, is afinancial instrument that's
intended to help farmers likeBuffer water price risk. So it's
really about risk. And it'sessentially a form of insurance.
And it's it's different than,you know, what we've been
(13:59):
talking about so far in terms ofa market for the physical water.
So as we all know, the AmericanWest has always been plagued
with oscillating periods of dryand wet years. And this creates,
you know, variability in theprice of water from year to
year. And so it makes sensewater users are naturally facing
(14:19):
a certain amount of risk anduncertainty. So this financial
instrument is intended to helpthem reduce this risk associated
with the price. And so in afutures market, participants can
trade contracts that lock in thesale of a commodity on a
specified future date, at aprice that you set today. And so
(14:40):
it gives you that assurance thatyou're gonna get it in the
future at a certain price thatyou know, you're going to be
good with, and that helps withplanning, for example, and if
you're particularly when you'rethinking about, Okay, do I want
to plant a almond orchard thatcan be productive for 20 to 30
years, you know, what's theprice of water gonna be in 10 or
(15:01):
20 years.
David Evans (15:04):
So no water features does not mean that you
have to go out and purchase allthe water you're going to need
in 30 years right now, it's notgoing to save you that much
money. I mean, hopefully. Andreally, it only locks you in at
that price, it doesn't mean thatthere's going to be truckloads
of water showing up yourdoorstep in 30 years, water
futures was really designed foragriculture and planning for the
(15:26):
future. Because agriculture usesa lot of water to be able to
produce everything it makessense. But everything we do, or
buy, uses water in some way aswell. Have you ever really
thought about how much watergoes into random products that
you would buy on a daily basis?
Or every once in a while? Like,how much water does it take to
(15:47):
make a mug or the headphonesthat I'm wearing? Or the t shirt
that I'm wearing? How much waterdoes it take to make a t shirt?
Dr. Lara Wohler, Water Foot (15:56):
For t shirt of 250 gram we estimate
about 2500 liters of waterfootprint. So that's an insane
amount of indirect water usealong the production chain?
Yeah.
David Evans (16:10):
Well, thankfully, I had Dr. Laura on speed dial so I
can ask her that question. Thisis Dr. Laura Waller. She's part
of the Water Footprint Networkteam that helps to coordinate
this work and coordinate waterfootprint calculation. She also
does this on the side of doingher own postdoctoral research,
looking at how pharmaceuticalsfrom livestock and from humans
(16:31):
affect water bodies as well.
Okay, I may have gotten a bitahead of myself here. Dr. Laura,
do you mind just explaining whata water footprint is.
Dr. Lara Wohler, Water Footp (16:40):
So basically, in the water
footprint is an indicator offreshwater use. And I think if
we usually think about wateruse, what comes to our mind is
the direct water use. So thewater we use in our everyday
life for let's say showering,cooking, flushing the toilet,
etc. But what we do with thewater footprint concept is not
(17:03):
only account for the directwater use, but also the indirect
water use. So that is basicallyaccounting for all the water
that is incorporated or used inproducts or for the production
of goods and services along theentire supply chain.
David Evans (17:21):
You might be familiar with the term carbon
footprint. And this is very,very similar to the water
footprint and what the WaterFootprint Network is trying to
calculate for each product. Socarbon footprints how much
carbon is being released to beable to allow you to buy a t
shirt or a pencil or take aflight somewhere. And then water
footprint is how much water isindirectly used to be able to
(17:45):
let you buy that T shirt pencilor to take a flight. All right.
Dr. Laura, do you mind justwalking us through an example of
what kind of indirect water usewe're talking about when you say
indirect water use and how do weget up to number of 2500 liters.
Dr. Lara Wohler, Water Foo (18:01):
Take an example of let's say a t
shirt that I'm buying here inthe Netherlands where I'm
located. So first, the cottonwould have to be produced. And
we got to use Pakistan where thecotton is slanted and also
irrigated. So water is usedduring the cotton production.
And let's say once the cotton isgrown, it's been transported to
China where the fabric isproduced. And maybe also we want
(18:25):
to have a color t shirt. Sothere's also some dyeing of the
fabric, some water pollutiontaking place, then maybe the t
shirt or the fabric is producedto Turkey where it's actually
tailored. And then from Turkey,it comes to the shop where can
buy it in the Netherlands, inall those production processes.
And also for the transport thiswater being used and or
(18:47):
polluted, let's say. So byaccounting for the water
footprint, we are actuallylooking at all these steps and
adding up the water that is usedalong the supply chain.
David Evans (18:59):
So that's how you would calculate a water
footprint for a T shirt. But youcan also do this for lots of
other things. You can calculateyour own water footprint for a
day, or a week or a year. Or youcan do it for a city or you can
do it for a country. Now youmight be thinking, well, water
is renewable, right? So why doesit matter? I mean, with a carbon
(19:23):
footprint, you don't want toproduce more carbon dioxide,
because that would be worse forclimate change. That makes
sense. But water is renewable.
It's good. It's gonna come backright in the cycle. Am I missing
something here?
Dr. Lara Wohler, Water Footpr (19:34):
I do agree with that. Yeah, from a
physical standpoint, of course,what is a renewable resource and
it doesn't get lost from theplanet, right. But that doesn't
mean that the availability isunlimited. So my colleagues
found out that around 4 billionpeople on our globe are faced
with severe water scarcity yetat least one month a year. So
(19:58):
then actually makes sense tolook at to how much water
resources to be appropriate tothe different uses for human
consumption, let's say. Andthat's, I think, where the water
footprint can be a very usefultool and seeing, okay, this is
actually the water of use inthis region for this specific
purpose. And maybe there's evenconflicting purposes in a region
(20:21):
where water is scarce already.
So it does make sense to toassess water scarcity, and was
to use even the waters. Yeah. inphysical terms, renewable? Yes.
David Evans (20:36):
Yeah, I mean, that's really important context.
And how would you know, unlessyou're actually spending all of
your time calculating waterfootprints. The good news is,
though, you can actually go ontothe water footprint networks
website and look up all of thedifferent water footprints for
anything you can basically buyin a grocery store, or 1000s of
(20:57):
different products. Sodefinitely go and check that
out. The water footprint conceptis catching on, it's actually
being implemented by some reallylarge companies, and even
countries looking at theirentire water footprint. You can
even go onto the water footprintnetworks website to calculate
your own water footprint. Now,the one place where we're
missing this link directly toconsumers is, as you've probably
(21:19):
guessed it by now, labels, howcan we convey all of these
different environmentalindicators to consumers, but the
products they're buying withoutproviding too much information?
It's just all too much. Sothat's still where we're at. But
the Water Footprint Network istrying hard to make sure that
that becomes a reality. So Iguess the final question really
(21:41):
is, is a water footprint? alwaysa bad thing?
Dr. Lara Wohler, Water Fo (21:46):
Yeah, I would say it's not at all
always bet. Really depends onthe context. So of course, I
could say if I'm choosingbetween products, and then they
have a significantly differentwater footprint. Yeah, it's
likely better to choose the onewith the lower water footprint.
(22:07):
However, I would say, you wouldalways have to look at the
context. And I could say, Yeah,well, it's definitely not a wise
idea to buy products that arevery water intensive from
regions that are deserts. Andwe're really only through
artificial irrigation. So Ithink there's a some kind of
(22:28):
common sense logics behind it.
David Evans (22:33):
Absolutely. What's that old saying? Context is
king. Okay, I'm 95%. Sure I justmade that up. So next time you
go shopping, I hope that youspend a couple of seconds to
think about how much water wasactually used to create these
products, or food items that I'mbuying right now. And let alone
(22:54):
how much water was used, but howmuch ground water was used.
Let's start talking about thatas well. Maybe one day that
would be on the packaging. Andmaybe you have a brilliant idea
on how to integrate that in. Soit's not just another symbol
that's being thrown at us whenwe go shopping these days.
(23:19):
Thank you so much for tuninginto today's episode all about
the economics of water, a bigtopic that we've just taken a
little slice of today. Thank youso much to my guest, Dr. Ellen
Bruno and Dr. Laura Waller forcoming onto the podcast and
talking about their reallyfascinating piece of this large
economics puzzle. To learn moreabout what Dr. Ellen Bruno
(23:40):
researches, you can check outher website at Ellen dash
bruneau.com. And to learn moreabout Dr. Laura's work and the
Water Footprint Network, checkout their website at Water
Footprint dot o RG. Be sure tocheck out their water footprint
calculator. It's super cool. Andthey have so many other
resources all about whateverything you can imagines
(24:02):
water footprint actually is.
I'll leave links in the shownotes to all of these great
websites. But hey, are youinterested in more their deep
dive episodes with both Dr.
Ellen and Dr. Lara will becoming out soon. I'm the host
and producer David Evans. And Ijust like to thank the rest of
the team specifically PaulPolman, Lee Burton, and the rest
of the aquatic biosphere board.
Thanks for all of your help. Andto learn more about the aquatic
(24:25):
biosphere project and what we'redoing right here in Alberta
telling the story of water, youcan check us out at aquatic
biosphere.ca. And we also havelaunched our new media company,
a b n aquatic biosphere network,which you can find at the public
place dot online and search forthe aquatic biosphere network
(24:45):
channel where we will actuallybe posting all of the video
episodes that we're going to becreating this year. So tune in.
They will be out for the nextlittle while but very excited to
start sharing video content aswell as our interviews If you
have any questions or commentsabout the show, we'd love to
hear them. Email us atconservation at aquatic
biosphere.org. Please don'tforget to like, share and
(25:09):
subscribe. Leave us a review. Itreally helps us out. Thanks and
it's been a splash
I sure enjoy drinking water infrastructure
and indoor plumbing, it improvesmy quality of life tremendously,
is not something that you hearvery often. But really, it
should be. It's really somethingthat I take for granted for
sure. And I'm sure many of youdo. And as soon as you're
without it, yeah, you reallymiss it. It is an absolute
(00:34):
privilege. And the one thingthat boggles my mind when I
stopped to think about this isthis is such a valuable resource
having this water right at ourdoorstep, right in our kitchens
right in our bathrooms. But howin the world is it this cheap?
Today, we're gonna dip our toesinto the crazy fascinating,
(00:56):
sometimes boring, but reallyimportant in the world of water
economics. My goal today is foryou to be so stoked about
calculating indirect water usageand products and for monitoring
and managing groundwater usage.
not sold on that yet. Well staytuned. I'm sure we can get
(01:16):
there. All today on the what arewe doing podcast?
water we doing? And how can wedo better? Your one stop shop
(01:38):
for everything water relatedfrom discussing water, its use
and the organisms that depend onit for all the global issues
that you really never knew allhad to do with water. I'm your
(02:08):
host, David Evans from theaquatic biosphere project. And I
just want to ask you something.
What are we doing? And how canwe do better?
(02:46):
Water economics is a branch ofenvironmental economics. And it
might be quite different thanwhat you think of when you think
of economics. I mean, typicallyyou think of supply meets
demand, then that's what findsthe price point for, let's say,
a cell phone or a shirt. Butunfortunately, water is very
different than these other typesof commodities. You can't just
(03:08):
manufacture more water, orexpect it to replenish from
where it came. It's interestingbecause it's actually easier in
the third world countries toprovide everyone with cell
phones, then with safe drinkingwater. Another reason that water
economics is so confusing, isbecause it's not only surface
(03:29):
water, lakes, rivers, streamsthat you have water in. We're
also using water from deep belowthe ground groundwater. And
we're not only using water forsanitation, drinking, we're
using it for food production,oil and gas, textiles.
Everything we do uses water. Sowe need it for everything. Water
(03:50):
economists actually study how weare sharing these resources. And
if we are using them to theirfull potential, that is if we
are using them in the mostefficient way possible. Now,
what does that mean? Well, let'sask an economist.
Dr. Ellen Bruno, UC Berkele (04:06):
Let me try to explain like, you can
think of groundwater as thiscommon resource where nobody
owns it, yet everyone has accessto it. And one person's use of
it means that there's less foreveryone else now and in the
future, right. It's this dynamicresource. And so it's not just
today's pumpers. But tomorrow'spumpers.
David Evans (04:29):
This is Dr. Ellen Bruno. She's an assistant
professor of CooperativeExtension at UC Berkeley in the
Department of Agricultural andResource Economics.
Dr. Ellen Bruno, UC Berkele (04:38):
And so what that means is I get to
do fun applied research, butinstead of classroom teaching, I
do public outreach. So I try todo research that's meaningful to
the California Public. Myspecialty is on water resources,
and particularly in agriculture.
And so I study water policiesboth proposed and implemented
and potential water policies andwhat that might mean for
(04:59):
Californians,
David Evans (05:02):
Dr. Bruno studies groundwater, and I like to think
of groundwater as a bucketthat's not refilling, as soon as
you take some water out, itmeans there's less water for
everyone in the bucket. But italso means that the water level
has dropped. And that means thatit's harder for everyone to get
more water out. It just meansit's further and further away
(05:24):
from the surface. The way thateconomists talk about this is
they say there's higher costsfor everyone to access this
resource now. So for example, ifI take water out of our shared
bucket, then now it's cost youthat potential water. Now you
can't access that because I'vetaken it out. So this is what
(05:44):
economists might call a negativeexternality. Wait, why am I
explaining this? Dr. Bruno, canyou can you just take over,
Dr. Ellen Bruno, UC Berkele (05:53):
I'm using this term costs, like
pretty broadly, it includeshigher energy costs from pumping
the groundwater from below. Butit can mean other types of costs
as well, including like degradedgroundwater quality or depleted
streams, because in some cases,the groundwater and the surface
water are interconnected. And ifyou pump groundwater right next
to the stream, it's going tocome out of the stream. So that
(06:15):
can hurt the fish or other, youknow, groundwater dependent
ecosystems. And so, ideally,you're thinking about all these
potential costs, because they'reall important. And they're all,
you know, negativeexternalities, and sort of
leading to what we might callthis tragedy of the commons kind
of situation,
David Evans (06:32):
my listeners are sick of hearing me talk about
that.
Dr. Ellen Bruno, UC Berke (06:36):
Good, so they're already familiar with
it.
David Evans (06:41):
All right, in case you need a quick refresher on
the tragedy of the commons, cuethe sad music here. This is the
concept of an open accessresource that everyone has
access to. And without any rulesor regulations that you need to
follow. Everyone just acts intheir own self interest. And it
(07:01):
makes sense to go and take asmuch as you can, because if I
don't get it, then someone elsewill. This has led to a lot of
the problems, honestly, thatwe've talked about on the
podcast, the tragedy of thecommons is really a race to the
bottom, a race to catch the lastAtlantic cod off the coast of
Newfoundland, before they closethe fishery, the race to shoot
(07:25):
the last American bison before,we're not allowed to shoot
anymore. The Race to the lastdrop of groundwater. Sorry for
the sad soliloquy. So Dr. Bruno,when we find ourselves facing a
tragedy of the commonssituation, what can we actually
do?
Dr. Ellen Bruno, UC Berkeley (07:43):
In this kind of situation, we would
want to correct those negativeexternalities, it's what
economists would call a marketfailure. And one of these times
where we would want tointervene, because in the
absence of intervention, we'regetting an outcome. That's
that's suboptimal for everyone.
And so one option for that isputting an explicit price on the
water. And this sort of tax, ifit's set, right could correct
for these issues by making thegroundwater more costly and
(08:06):
causing pumpers to sort ofinternalize the negative costs
they're imposing on others, andincentivize them to pump
slightly less. But it could alsobe achieved in a different way
by for example, setting a cap onhow much groundwater could be
pumped and allowing trade of thegroundwater within that cap. And
that's an indirect way ofimposing a higher price on that
(08:30):
groundwater. And that could, intheory, you know, be designed in
such a way that you achieve anequivalent outcome.
David Evans (08:38):
So Dr. Bruno has been talking really just about
groundwater so far. And that'sbecause it is a kind of this
unregulated area withinCalifornia, in California, about
80% of all of the water usedacross the entire state is used
only for agriculture. The restof the 20% is for urban areas
drinking water, and residentsuse. Now all of this water,
(09:01):
where does it come from? So it'sa mix of surface water and
groundwater. And it changesevery year based on how much
rain, how much water there areactually in that surface water
area. So we make up thedifference with groundwater. And
it averages out to about 40% ofall of the water use across the
entire state every year is fromgroundwater. That's a lot.
Dr. Ellen Bruno, UC Berkel (09:25):
It's pretty interesting. In the state
of California, where you have abunch of the population in the
southern part of the state, youhave agriculture primarily in
the center of the state. Andthat's separate from where the
precipitation falls. So most ofour precipitation falls in the
form of snowpack in the SierraNevadas, which is not where
(09:47):
we're demanding the most of thewater and also at a different
time of year if we think abouthow agriculture is, you know,
happening in the summer, and weget the bulk of our
precipitation falling betweenDecember and March. So we've
kind of engineered our way outof this disconnect through like
this big system of canals andreservoirs that we've built. As
(10:09):
the snowpack runs off, when itwarms up in the springtime,
we're capturing that water inreservoirs, and then moving it
around the state and canals sothat agriculture can get the
water in the summer. And youknow, the thirsty Los Angeles
population can continue drinkingwater all year round.
David Evans (10:29):
Isn't it wild how much effort and planning it must
take to actually get all thiswater to where it needs to go
when it needs to get there, makesure that we have enough of it
for everyone. So it really onlymakes sense that there are costs
that are associated with that,that need to be covered by the
agricultural producer. So ifyou're a farmer in California,
(10:50):
you have to pay for that waterso that you can irrigate your
crops with it. And the price forthe surface water can vary
widely across the year,depending on how much water is
available, and how far away youare from the mountains that it
actually comes from. So thequestion that jumps to my mind
is, are farmers actually tryingto plant crops that don't need
(11:10):
as much water? Because how areyou supposed to know how much
water there's going to be nextyear and how expensive it's
going to be?
Dr. Ellen Bruno, UC Ber (11:19):
Farmers are still adapting to changing
water prices, when you'relooking at the agricultural
landscape and looking at changesin it over time. It's very hard
to say how much of that is dueto changing water prices?
Because agriculture Yeah, asadapting to all sorts of market
forces, like probably more sothe price of the crops that
they're growing, and Californiacrops are shipped all over the
(11:42):
world, like these are globalmarkets. And they're driven by a
global supply and demand forcesI have working on on one study,
and we've been studying howwater prices are affecting
California agriculture, likespecifically from this this
question of land use. And we'rejust looking at a very small
area on the California coast.
But it's this really uniquesetting where we observe a price
(12:05):
increase that we can sort ofcredibly separate from the other
economic forces that areaffecting land use, we've
observed that farmers do in factshift to their crop mix in
response to a rising waterprice. And this is intuitive if
we assume farmers are profitmaximizers, and they're going to
(12:25):
adjust their operations inresponse to higher prices, than
we would expect them to shiftcrops, you know, to growing ones
that yield a higher profit peracre foot of water required to
grow those crops. But yeah, likeI said, when you're looking at
sort of statewide, or, ornationwide, you know, on these
bigger scales, there's so manyother forces driving the crop
(12:45):
choice that it's really hard totease out, you know, what's
happening due to like changes inthe water landscape.
David Evans (12:53):
So yes, the price of water does have an effect.
But it's one effect. There'smany other complicating effects.
So it's really hard to figureout what's having the biggest
influence on what's beingplanted, but it is there it is
there. So what if you are afarmer that needs a lot of water
to water, your crops? Are youjust going to be planting crops
(13:16):
and then not sleeping at night,because you're so worried about
how much the price couldincrease, and then you're not
going to make a profit off ofthose crops. That's why there's
a new financial instrument thatCalifornia has started, the
first of its kind in the worldto help protect California
farmers from the volatile watermarket.
Dr. Ellen Bruno, UC Berkeley (13:36):
I think it was in December of
2020, the CME Group launched theworld's first futures market for
water. And what this is, is afinancial instrument that's
intended to help farmers likeBuffer water price risk. So it's
really about risk. And it'sessentially a form of insurance.
And it's it's different than,you know, what we've been
(13:59):
talking about so far in terms ofa market for the physical water.
So as we all know, the AmericanWest has always been plagued
with oscillating periods of dryand wet years. And this creates,
you know, variability in theprice of water from year to
year. And so it makes sensewater users are naturally facing
(14:19):
a certain amount of risk anduncertainty. So this financial
instrument is intended to helpthem reduce this risk associated
with the price. And so in afutures market, participants can
trade contracts that lock in thesale of a commodity on a
specified future date, at aprice that you set today. And so
(14:40):
it gives you that assurance thatyou're gonna get it in the
future at a certain price thatyou know, you're going to be
good with, and that helps withplanning, for example, and if
you're particularly when you'rethinking about, Okay, do I want
to plant a almond orchard thatcan be productive for 20 to 30
years, you know, what's theprice of water gonna be in 10 or
(15:01):
20 years.
David Evans (15:04):
So no water features does not mean that you
have to go out and purchase allthe water you're going to need
in 30 years right now, it's notgoing to save you that much
money. I mean, hopefully. Andreally, it only locks you in at
that price, it doesn't mean thatthere's going to be truckloads
of water showing up yourdoorstep in 30 years, water
futures was really designed foragriculture and planning for the
(15:26):
future. Because agriculture usesa lot of water to be able to
produce everything it makessense. But everything we do, or
buy, uses water in some way aswell. Have you ever really
thought about how much watergoes into random products that
you would buy on a daily basis?
Or every once in a while? Like,how much water does it take to
(15:47):
make a mug or the headphonesthat I'm wearing? Or the t shirt
that I'm wearing? How much waterdoes it take to make a t shirt?
Dr. Lara Wohler, Water Foot (15:56):
For t shirt of 250 gram we estimate
about 2500 liters of waterfootprint. So that's an insane
amount of indirect water usealong the production chain?
Yeah.
David Evans (16:10):
Well, thankfully, I had Dr. Laura on speed dial so I
can ask her that question. Thisis Dr. Laura Waller. She's part
of the Water Footprint Networkteam that helps to coordinate
this work and coordinate waterfootprint calculation. She also
does this on the side of doingher own postdoctoral research,
looking at how pharmaceuticalsfrom livestock and from humans
(16:31):
affect water bodies as well.
Okay, I may have gotten a bitahead of myself here. Dr. Laura,
do you mind just explaining whata water footprint is.
Dr. Lara Wohler, Water Footp (16:40):
So basically, in the water
footprint is an indicator offreshwater use. And I think if
we usually think about wateruse, what comes to our mind is
the direct water use. So thewater we use in our everyday
life for let's say showering,cooking, flushing the toilet,
etc. But what we do with thewater footprint concept is not
(17:03):
only account for the directwater use, but also the indirect
water use. So that is basicallyaccounting for all the water
that is incorporated or used inproducts or for the production
of goods and services along theentire supply chain.
David Evans (17:21):
You might be familiar with the term carbon
footprint. And this is very,very similar to the water
footprint and what the WaterFootprint Network is trying to
calculate for each product. Socarbon footprints how much
carbon is being released to beable to allow you to buy a t
shirt or a pencil or take aflight somewhere. And then water
footprint is how much water isindirectly used to be able to
(17:45):
let you buy that T shirt pencilor to take a flight. All right.
Dr. Laura, do you mind justwalking us through an example of
what kind of indirect water usewe're talking about when you say
indirect water use and how do weget up to number of 2500 liters.
Dr. Lara Wohler, Water Foo (18:01):
Take an example of let's say a t
shirt that I'm buying here inthe Netherlands where I'm
located. So first, the cottonwould have to be produced. And
we got to use Pakistan where thecotton is slanted and also
irrigated. So water is usedduring the cotton production.
And let's say once the cotton isgrown, it's been transported to
China where the fabric isproduced. And maybe also we want
(18:25):
to have a color t shirt. Sothere's also some dyeing of the
fabric, some water pollutiontaking place, then maybe the t
shirt or the fabric is producedto Turkey where it's actually
tailored. And then from Turkey,it comes to the shop where can
buy it in the Netherlands, inall those production processes.
And also for the transport thiswater being used and or
(18:47):
polluted, let's say. So byaccounting for the water
footprint, we are actuallylooking at all these steps and
adding up the water that is usedalong the supply chain.
David Evans (18:59):
So that's how you would calculate a water
footprint for a T shirt. But youcan also do this for lots of
other things. You can calculateyour own water footprint for a
day, or a week or a year. Or youcan do it for a city or you can
do it for a country. Now youmight be thinking, well, water
is renewable, right? So why doesit matter? I mean, with a carbon
(19:23):
footprint, you don't want toproduce more carbon dioxide,
because that would be worse forclimate change. That makes
sense. But water is renewable.
It's good. It's gonna come backright in the cycle. Am I missing
something here?
Dr. Lara Wohler, Water Footpr (19:34):
I do agree with that. Yeah, from a
physical standpoint, of course,what is a renewable resource and
it doesn't get lost from theplanet, right. But that doesn't
mean that the availability isunlimited. So my colleagues
found out that around 4 billionpeople on our globe are faced
with severe water scarcity yetat least one month a year. So
(19:58):
then actually makes sense tolook at to how much water
resources to be appropriate tothe different uses for human
consumption, let's say. Andthat's, I think, where the water
footprint can be a very usefultool and seeing, okay, this is
actually the water of use inthis region for this specific
purpose. And maybe there's evenconflicting purposes in a region
(20:21):
where water is scarce already.
So it does make sense to toassess water scarcity, and was
to use even the waters. Yeah. inphysical terms, renewable? Yes.
David Evans (20:36):
Yeah, I mean, that's really important context.
And how would you know, unlessyou're actually spending all of
your time calculating waterfootprints. The good news is,
though, you can actually go ontothe water footprint networks
website and look up all of thedifferent water footprints for
anything you can basically buyin a grocery store, or 1000s of
(20:57):
different products. Sodefinitely go and check that
out. The water footprint conceptis catching on, it's actually
being implemented by some reallylarge companies, and even
countries looking at theirentire water footprint. You can
even go onto the water footprintnetworks website to calculate
your own water footprint. Now,the one place where we're
missing this link directly toconsumers is, as you've probably
(21:19):
guessed it by now, labels, howcan we convey all of these
different environmentalindicators to consumers, but the
products they're buying withoutproviding too much information?
It's just all too much. Sothat's still where we're at. But
the Water Footprint Network istrying hard to make sure that
that becomes a reality. So Iguess the final question really
(21:41):
is, is a water footprint? alwaysa bad thing?
Dr. Lara Wohler, Water Fo (21:46):
Yeah, I would say it's not at all
always bet. Really depends onthe context. So of course, I
could say if I'm choosingbetween products, and then they
have a significantly differentwater footprint. Yeah, it's
likely better to choose the onewith the lower water footprint.
(22:07):
However, I would say, you wouldalways have to look at the
context. And I could say, Yeah,well, it's definitely not a wise
idea to buy products that arevery water intensive from
regions that are deserts. Andwe're really only through
artificial irrigation. So Ithink there's a some kind of
(22:28):
common sense logics behind it.
David Evans (22:33):
Absolutely. What's that old saying? Context is
king. Okay, I'm 95%. Sure I justmade that up. So next time you
go shopping, I hope that youspend a couple of seconds to
think about how much water wasactually used to create these
products, or food items that I'mbuying right now. And let alone
(22:54):
how much water was used, but howmuch ground water was used.
Let's start talking about thatas well. Maybe one day that
would be on the packaging. Andmaybe you have a brilliant idea
on how to integrate that in. Soit's not just another symbol
that's being thrown at us whenwe go shopping these days.
(23:19):
Thank you so much for tuninginto today's episode all about
the economics of water, a bigtopic that we've just taken a
little slice of today. Thank youso much to my guest, Dr. Ellen
Bruno and Dr. Laura Waller forcoming onto the podcast and
talking about their reallyfascinating piece of this large
economics puzzle. To learn moreabout what Dr. Ellen Bruno
(23:40):
researches, you can check outher website at Ellen dash
bruneau.com. And to learn moreabout Dr. Laura's work and the
Water Footprint Network, checkout their website at Water
Footprint dot o RG. Be sure tocheck out their water footprint
calculator. It's super cool. Andthey have so many other
resources all about whateverything you can imagines
(24:02):
water footprint actually is.
I'll leave links in the shownotes to all of these great
websites. But hey, are youinterested in more their deep
dive episodes with both Dr.
Ellen and Dr. Lara will becoming out soon. I'm the host
and producer David Evans. And Ijust like to thank the rest of
the team specifically PaulPolman, Lee Burton, and the rest
of the aquatic biosphere board.
Thanks for all of your help. Andto learn more about the aquatic
(24:25):
biosphere project and what we'redoing right here in Alberta
telling the story of water, youcan check us out at aquatic
biosphere.ca. And we also havelaunched our new media company,
a b n aquatic biosphere network,which you can find at the public
place dot online and search forthe aquatic biosphere network
(24:45):
channel where we will actuallybe posting all of the video
episodes that we're going to becreating this year. So tune in.
They will be out for the nextlittle while but very excited to
start sharing video content aswell as our interviews If you
have any questions or commentsabout the show, we'd love to
hear them. Email us atconservation at aquatic
biosphere.org. Please don'tforget to like, share and
(25:09):
subscribe. Leave us a review. Itreally helps us out. Thanks and
it's been a splash
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