Environmental Economics Analysis: Essay

An Examination of the Environmental Economics Employed in The Great Divide: The Destiny of the West is Written in the Headwaters of Colorado

By Bailey Farris

May 1, 2017

Professor Daley

Environmental Economics BUEC 390

 

Environmental economics focuses on examining both the ecological and economic value of natural and economic capital, while addressing issues of resource scarcity, generational usage, and resource allocation. Shaping market forces through regulation to sustainable natural limits, outside of the private market equilibrium, environmental economics also understands that markets play a key economic role and cannot be dismissed. The Great Divide: The Destiny of the West is Written in the Headwaters of Colorado (henceforth, The Great Divide) tells the natural and economic history of the water supply situation in Colorado. Seeking economic and environmental solutions to water scarcity from the headwaters that supply 18 states across the southwest and a portion of Mexico, The Great Divide incorporates many aspects of an environmental economics problem such as, but not limited to, resource scarcity, opportunity costs, supply and demand, growth, quantity restrictions, and efficiency.

Water is a limited resource with a high demand that doesn’t always align with where the supply is located. Colorado is split into the east and west by the Rocky Mountains, leaving the largest water supply to the west and greatest population to the east. As the population of Colorado and the United States increases, clean water in a steady supply is a mandatory commodity, but one that is decreasing in supply. With a demand throughout the southwest, and a supply stemming from the headwaters of Colorado, the state has experimented with many methods to regulate usage and tradeoffs. Water has been diverted and irrigated from the original river path, allowing populations to expand, and resources to flow farther from their origin spurred by the Gold Rush. Taking a lesson from the citizens of Mesa Verde and other Native Americans, today’s citizens need to understand preservation, stewardship, and not to waste in order for the current water supply to continue to be available in the future. Unfortunately, the first to gain access to a resource are often the last to gain rights. Learning from their methods, settlers and generations moving forward have regulated water use right out of the hands of the natives.

Some of the biggest water uses in Colorado are agriculture, industrial manufacturing, recreation, drinking, and personal lawn maintenance. When scarcity is introduced to the system, these uses become tradeoffs. A trade off, like a compromise, can be decided through analyzing the costs and benefits of uses, or valuing a water resource in different activities. However the trade off is evaluated, this implies that there are competing potential uses of water that cannot exist fully together. In this case study, not only are there competing uses that must be dictated, but also competing states and stakeholders. At a private market equilibrium, water prices would skyrocket as supply decreased and demand increased, the individual could be cut out while states, jobs, and industry would compete for this commodity. Nature would lose, and in the end, so would the people of the United States.

Historically, senior and junior rights determined who had what access to the water. Those who first acted to divert water had first claims, and highest quantity claims, trickling down the chain to junior rights through the stakeholders. In a time of drought, these water property rights determined a lot. Known as “The Colorado Doctrine”, this is one of the first ways that policy was instated to regulate water use in Colorado established in the 1800s. Critics say that this method discourages saving water, as those who don’t use up their quantity allotted risk losing the water to the next level claim. Environmental economics begs the question, what is this water worth? Is it worth collapsing the natural system that humans have cultivated from the dry land? Would there be more worth in trading the land back to it’s natural state? With populations rising, the agriculture is an important feature of the Colorado plains, and this well established system now hosts a delicate ecosystem. Depleting the water source would destroy all of the above. Depletion isn’t the only risk to the system though, so is industrialization.

With primary property rights belonging to those working in rural agriculture, as populations expand in nearby urban cities, there is a “buy and dry” risk of population rise. Since most senior rights are held by rural citizens, cities can purchase water supply rights from these rural zones, stealing the water from the land to city operations and life support, leaving the rural land dry. Instead, public policy hopes to implement a water rights leasing program, instead of permanently tradable permits, where rural farmers can lease their water rights for x amount of time to cities, for compensation, but still hold the water rights to the land. This could help balance tradeoffs between economics and the population while still giving the environment a chance to hold its value. This leasing system isn’t the only thing that the government has pushed to spread the water wealth. Multiple projects, such as the Blue River Decree, Colorado River Compact, and New Deal Era. These plans seek to unite the east and west sides of the Divide in order to give them power in working together for the benefit of Colorado’s resources as they’re dispersed through the states. In more recent times, looking at the costs and benefits of ecosystem service conservation for future generation use, the Inter Basin Compact Committee comprised of 9 basin groups has been formed to plan how balancing nature, industry, and agriculture will be regulated moving forward. Uniting these groups will help represent many needs, along with environmental costs, and help find an adjusted social equilibrium for market demand of the water resource at stake.

Water allocation as climate change and population expansion increase needs to be regulated, otherwise people overexploit in ways such as drawing from natural aquifers and bedrock meant to restore the system. The private market has failed to take care of natural resources for future resource and at a sustainable level. In order to keep water quality, a public good, and water quantity accessible, the market needs to continue being regulated. Early Coloradians set the path for property rights, and now is time to adjust these methods for an expanding population with higher demands, less resource access, and more tradeoffs to account for. Environmental economics allows citizens to take all of these aspects into account, unlike a regular economic analysis. Environmentalists and water management are coming together, while technology such as dams, pipelines, and water recycling help reduce scarcity strains. In order to economically protect the industrial and population future, along with agriculture and nature, The Great Divide points out that 25-35% of water needs have to be set aside for preservation. In-stream flow laws and irrigation have to balance urban life support. Beyond the factors that sum up environmental economics, The Great Divide is an example of environmental economics through the failure of the market structure due to a lack of natural capital evaluation and looking towards the future.

 

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