Has California considered replacing water subsidies with direct agricultural subsidies?

The Politicus
May 11, 2022 06:37 PM 0 Answers
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In California, farmers get access to cheap water that they have to use for farming or else they lose all rights to it. There appear to be two political reasons for this:

  1. to encourage agriculture, and
  2. to maintain water rights status quo

The problem is that use-it-or-lose-it encourages water waste. Surely farmers would have greater incentive to conserve water if they paid the same water price as everyone else. For example, suppose that I am a farmer. 10 of my sprinkler heads are broken and are expected to waste 1AF over their remaining life. Replacing these heads will save 1AF but will cost $2K of labor and materials. If I pay $1K/AF for water, I will not fix the heads because the net cost to me of doing so is $1K (I spent $2K on labor to save $1K on water). But if I pay $8K/AF for water, I will fix the heads because the net savings to me is $6K.

In light of this, has any research organization or government entity studied moving California from water subsidies to direct agricultural subsidies? In other words, address political concern #1 by paying farmers for actual output produced, rather than for water consumed. ("actual output produced" is however the voters want to define it. Just so long as it's based on actual farming output rather than the water used. Heck, pay almond growers $5/pound if that's what we want. We can put the last Italian almond farmer out of business and give California farmers the full incentive to save water. Win-win!)

And political concern #2 could be addressed by transitioning to the new system in a way that immediately compensates everyone involved according to what is changing for them. For example:

  1. The state buys up farmers' restricted discount rights at the current market price (which reflects both the fact that the water is restricted to agriculture only, and the value of the discount) on the existing agricultural water access markets.
  2. The state removes the restrictions and discounts on the water rights, resells the unrestricted water to farmers and urban districts -- at great profit -- and applies the proceeds towards part 3.
  3. The state pays all farmers for actual farming output that is not based on the legacy, restricted, discounted water, according to the desired subsidy effect.

Due to current rights structures, "the state" here may mean some combination of California, US Bureau of Reclamation, CVP, CWP, etc.

Recently there has been renewed interest in reducing water waste. So has the state considered any kind of plan to move from use-it-or-lose-it water subsidies to an unrestricted water market combined with direct agricultural subsidies? If not, what are the political facts working against such proposals?

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  • May 11, 2022