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The Value Of The Colorado River In Dollars And Cents

The Value Of The Colorado River In Dollars And Cents
The Value Of The Colorado River In Dollars And Cents
The Value Of The Colorado River In Dollars And Cents GUESTS:Ann Tartre, director of corporate partnership for the group that commissioned the study called Protect the Flows, a coalition of businesses that depend on the Colorado River. Tim James, an economics professor at Arizona State University who led the study on the economics of the Colorado River.

Maureen Cavanaugh: Out top story on Midday Edition, a new report confirms in stock detail, our region’s dependence on water from the Colorado River. It tells us that a reduction of just 10 percent of water from the Colorado would cause us billions of dollars and millions of jobs. The problem is that the Colorado River flow is in decline and with rising population projections the seven states that depend on the river as a significant water source could be in big trouble. Joining me to talk about the report are my guests, Ann Tartre, is Director of Corporate Partnerships for the group that commissioned the study Protect the Flows is a coalition of businesses that depend on the Colorado and Ann welcome to the program. Ann Tartre: Thanks for having me Maureen. Maureen Cavanaugh: Tim James is an economics professor at Arizona State University who led the study. Tim welcome to the program. Tim James: Good morning, afternoon, whatever it is. Maureen Cavanaugh: It’s the afternoon and thank you for being here. Now Ann, first of all remind us about the condition of the Colorado River. How has drought and overuse affected the river? Ann Tartre: There are some pretty significant challenges on the Colorado River right now. The US Bureau of Reclamation did a study a couple of years ago that shows that demand for the water from the river is already outstripping supply. The reservoirs along the river at historic lows, we’re seeing if they get much lower in Lake Mead, for example, the Hoover Dam may not be able to generate power any longer which is pretty major issue for our region and last year and the year before the Colorado River was named the most endangered river in the US. So there’s some pretty significant challenges facing in the river. Maureen Cavanaugh: Now Ann, I think most people in the Southwest and in Southern California already know that we depend on water from the Colorado River. So what did this study want to find out? Ann Tartre: Well, we do know we rely on the river for drinking water, for irrigating and agriculture etc but we want to actually put an economic value on that and quantify the value to the region’s economy to all seven states that the river provides water to including Southern California and really call more attention to the importance of the river as an economic driver for our economies and for our business sectors. Maureen Cavanaugh: So to take this idea that we really rely on the river and actually put it into dollars and cents. Ann Tartre: That’s right. Maureen Cavanaugh: Tim you were asked to find out how much of a loss the region would sustain without water from the Colorado River. How much less water, what are the various scenarios that you used to come up with these numbers. Tim James: Maybe I could backtrack a little bit so people can understand how this actually works. So what we do is we take a year, year’s economic activity and that is like our base year assuming that the river is flowing as it is and then what we have done is we figured out using a kind method of economic accounting how much less would be produced in terms of all the goods and services for all of the seven basin states, for that year if we reduced the river flow from between ten to a hundred percent. If we go with a hundred percent which would be the catastrophic end of the river you know really the Cormac McCarthy version of the world if you like. We would end up with a loss of about 1.4 trillion for the region as a whole and California is about 650 billion, I think in terms of losses of very significant and what we would basically saying for Southern California would be that you would lose approximately 55 to 56 percent of economic activity of the river no longer was flowing at all and then you can do pro rata versions of that so a 10 percent in flow constraining the level of production in different sectors would mean one-tenth of that so you would probably lose 65/66 billion dollars’ worth of activity. We are talking significant amounts here because the western Southern California in particular relies very heavily on the Colorado River system, it’s Colorado River rights, in order to be a significant input in the production process. Maureen Cavanaugh: How did you actually quantify, how these jobs and economies are dependent on water from the Colorado. For instance, Tim it’s easy to understand how less water affects agriculture but how does it affects real estate, how does it affect health care? Tim James: Well, for the uninitiated it’s a bit of a boring economic, the snapshot is basically like taking a picture of the economy and tracking all the inter-linkages between things, it’s actually called an input-output table. So what we do is we split up activity into 50 odd sectors and then for each sector we don’t just estimate the effect on that sector of curtailing the amount of water that would be available for them. We also then track how reduced production from that sector would affect all the other sectors so we’re trying to get a more complete picture of what goes on to if I could give you an example. Maureen Cavanaugh: Sure please. Tim James: Agriculture isn’t huge in terms of its value, economic value, but it is a significant draw of input from other sectors and so if you said let’s say that there was going to be much less significant agricultural activity it was going to decrease by 50 percent that would mean that people would not then need to buy tractors, agriculture machinery, they wouldn’t need so much labor, they wouldn’t need cars, they wouldn’t need banking, finances and finance insurance services. All those things would be reduced in terms of their demand for them and that’s really what we are trying to do here is estimate the total impact of reducing the water availability by tracking its influence across the entire economy by looking at the inter-linkages between things which you don’t get if you just look at single factors. Maureen Cavanaugh: Right. Tim James: You are not really getting a true picture and that’s why the number is so big really, it’s because it’s truly changing into account the impact of getting rid of activities in agriculture or some of the mining industries and then tracking through the effects of that into other sector. Maureen Cavanaugh: And let me just repeat those numbers for the entire, all of the basin states that you look at, Tim, the annual economic impact of the Colorado River is 1.4 trillion dollars, 800 billion income and 16 million jobs that’s in all seven states. Tim, do you know what the numbers look like for just Southern California? Tim James: So Southern California I think if the river disappeared completely our estimate would cost about 650 billion dollars’ worth of economic activity. It would cost about 7 million jobs and labor income which is a component in economic activity would be reduced by about 406 billion. It would decimate, you know Southern California pretty much. Maureen Cavanaugh: Now Ann, we already told this upfront about the effect that we’re seeing in the Colorado River sort of shrinking, I mean there is not as much water there, there is not as much water in the reservoirs, do we know what kind of an impact we have already seen on the drought, on the shrinking Colorado River on our economy? Ann Tartre: I think we have seen some numbers coming out saying that the agriculture sector has already suffered in California and other areas. I don’t have those numbers at my fingertips. Maureen Cavanaugh: Sure. Ann Tartre: But I know that it has. Other sectors like the recreation economy have also suffered due to the lack of lower river levels. Maureen Cavanaugh: So, thinking that someone looking at this study and seeing this dramatic numbers and I mean as Tim was just saying, it would decimate Southern California if indeed that vales so to speak was completely shut off, but how likely a 10 percent reduction and/or 20 percent reduction on the Colorado River water? Ann Tartre: Well, this study doesn’t really make an estimate about that although there are scenarios being put out there by different entities and agencies saying a 10 to 20 percent reduction with climate change is probably likely at some point in the century. So we know if the climate change models are right that the basin region will become hotter and drier overtime. So we think there’s a good possibility that river will be reduced. Maureen Cavanaugh: And which industries would be most affected by a reduction in the river water? Ann Tartre: Here in Southern California, the top five lists includes the real estate and rental industry, technology companies, it’s finance and insurance, it’s professional scientific entities and as well as retail entities. Maureen Cavanaugh: Pretty much across the board. Ann Tartre: It really is across the board. Maureen Cavanaugh: Let me ask you both this, let me start with you Tim because I know that you did this as a project and you handled that numbers. Well what do you see this final report ask¸ is it a warning, a planning document how would you characterize it? Tim James: So just to answer that question, I have kind of partly answered the question I think you just asked Ann. Maureen Cavanaugh: Sure. Time James: In the same answer, I’m about to do another study on Kansas and it’s a similar kind of study but they posed the questions sort of the other way round. They are reaching the maximum amount of water in terms of consumption that they could supply. And so they are interested in what their economy might look like in 50 years’ time if there is no more water available to them. So you could sort of like to look at the question you just asked and say well so supposed we don’t really suffer any reduction in terms of the flow of the Colorado River but we carry on consuming water and population increases and the demands of industry increased over the next 50 years or so how are we going to be able to supply the needs of those people going forward and I think that’s really one of the things that you would start thinking about on the basis of the numbers in here because what it’s really telling you is that if you listened to what Ann just said about the sectors affected it’s not immediately obvious to the casual observer why water would be a particularly important thing in terms of real estate, rental, public administration, you would think more intuitive they would be agriculture, mining or electricity. Those kind of things would be more heavily impacted and what we’re really trying to point out here is the impact on us is going to be ubiquitous in terms of economic activity and one of the things we need to do is start planning for the future, for the expected growth to make sure that we use water as efficiently as we possibly can and that we start thinking about conservation and having an appropriate funds available for infrastructure development to make sure that we do not suffer any real constraint in terms of consumption as far as that’s possible going forward. Maureen Cavanaugh: Tim makes an excellent point in that even if there wasn’t any reduction in actual water flow which of course we have been seeing in the years, in the previous years is the increase in population, the increase in economic activity, is going to takes the river even more just so we could very well see a 10 percent reduction without even any less water. How do you see this report Ann, is it a warning? Ann Tartre: Yes, I do think it’s a warning and it’s a good starting place to help us think about how do we want to use this resource more efficiently and wisely and I think what’s really striking is we already have, Protect the Flows has about 1200 businesses already who are committed to reducing their water footprint and advocating for water efficiency and stewardship and some companies right in this region have been able to reduce their water footprints by 50 percent over the last five years and they are doing it voluntarily because they know this is a risk to them, they see the risk and they are also saving money while they are doing it. So there are some solutions, the good news is there are some solutions that can already be implemented fairly quickly and actually saved companies’ money. Maureen Cavanaugh: Can you tell us a little bit more about that and maybe give us a few examples of how businesses are seeing this problem and are reducing their water use? Ann Tartre: Sure, we have got businesses in every sector here in this region in San Diego and around the basin that are using water, looking at their cleaning processes for example and figuring out how can they use less water to clean or cooling processes within their manufacturing plants currently using water that could actually use air to cool and so that would have reduced their water use significantly. AT & T has done a study showing that if they change out some cooling towers in their facilities, they will save 40 percent of their water use which is pretty significant. Life Technologies here in San Diego County has reduced their water by 50 percent over five years by changes and processes, changing out landscape to a more territorial landscape using more recycled water so there is a lot of options for companies to do that. Maureen Cavanaugh: Considering the scope of this problem though, do you see that business voluntarily doing this is going to be enough, are we going to need some policy changes, governmental policy changes that look at these numbers and look at what’s actually happening and requires this kind of conservation. Ann Tartre: I think we need both policy and direct action by the business community so we think there’s a lot more opportunity in the business sectors to get rid of some of the waste for practices and we’re seeing more and more companies jump on board but certainly we need policy makers to be partners in this and think about ways that they can incentivize businesses more to do more around this, ensure that we are enhancing water recycling and reuse practices something that’s happening here in San Diego County which is good news. So there are definitely ways that policy makers need to address this as well. Maureen Cavanaugh: Tim, I know this is an unusual question for an economics professor but were you surprised by what you came up with when you were running these numbers? Tim James: I wasn’t but for a straightforward reason. About a year ago, we did something very similar based on Central Arizona Project so we’d estimate the economic value to Arizona of the Central Arizona Project which draws water from the Colorado River and it came up with a number for 2013, I think, which said that it was contributing, it was the basis of more than 50 percent of the economic activity in the state of Arizona so it didn’t surprise me at all when we did the thing for the entire seven states and we came up with sort of an even bigger number because what we’re doing there, we’re also tracking the interrelationships among the economies of the western states. So that didn’t surprise me at all. Can I sort of go back to the question you asked Ann, I am a big believer in incentives that’s what economist sort of like play round with a lot and I think you can answer some of the problems here not only by thinking about directives but also by using the market mechanism and one of the things that’s apparent to me this might seem unpalatable to people but I’m from Wales originally which probably has maybe 20 times as much rainfall as Arizona does in a year and water is more expensive in Wales than is in Arizona and that’s just seems to me to be totally perverse. If you increase the price of something generally speaking people are more careful about using it and that might be the way to go here I think. Maureen Cavanaugh: I want to thank you both so much. This is an interesting and fascinating new look at the way we use water. I have been speaking with Ann Tartre, she is Director of Corporate Partnerships for Protect the Flows that’s a coalition of businesses that depend on the Colorado and Tim James, an economics professor at Arizona State University. Thank you both very much. Ann Tartre: Thanks Maureen. Tim James: Thank you. Maureen Cavanaugh: Coming up a new the PBS series presents humans and wildlife together creating a new wild. It’s 12:21, you are listening KPBS Midday Edition.

A report released in January confirms California's dependence on the Colorado River.

The study, commissioned by business group Protect The Flows and led by Arizona State University economist Tim James, found a reduction of just 10 percent of water from the Colorado River would cost billions of dollars and millions of jobs. The study's authors estimate that the river is responsible for generating $1.4 trillion in economic activity, $800 billion in wages and 16 million jobs.

James told KPBS Midday Edition on Tuesday that he examined which industries were directly and indirectly tied to the river. For example, he looked at how agriculture relies on the water and which industries then rely on agriculture.


He estimates that Southern California would see a 55 percent to 60 percent drop in economic activity if the Colorado River ran out of water.

"We're talking significant amounts here, because the West — and in Southern California, in particular — rely heavily on the Colorado River," James said.

Ann Tartre, director of corporate partnership for Protect the Flows, said the demand for water currently outweighs supply. In 2013, advocacy organization American Rivers named the Colorado River the country's most endangered river.

"We're seeing if it (water levels) gets much lower, the Hoover Dam may not be able to generate power any longer," Tartre said. "There's some pretty significant challenges facing the river."

Colorado River - America's Most Endangered River 2013