To cope with extreme heat and drought conditions, farmers often tap into the groundwater lying deep below their land for irrigation. But now, more groundwater is being used than is naturally recharged, leading to a water crisis that is forcing some states to take policy action—including charging for water use. California, one of the world’s most valuable agricultural regions, is one such state. They recently instituted what stands to be one of the most consequential groundwater regulations worldwide: the Sustainable Groundwater Management Act. The Act is designed to achieve state-wide groundwater sustainability by 2042, which will require reducing groundwater pumping by 19 percent on average. Local implementing agencies have discretion and may achieve these reductions through various policy mechanisms, including taxes and fees, pumping restrictions, and/or conservation incentives. More than half are choosing some form of a price on groundwater.
Harris Public Policy’s Fiona Burlig and her co-authors Louis Preonas (University of Maryland) and Matt Woerman (Colorado State University) studied how farmers respond when the water they’ve been using for free (other than the cost of pumping) costs money. They find that farmers meaningfully reduce groundwater use when its price rises. Looking specifically at the California policy, they find that meeting California’s goals of reducing groundwater pumping by 19 percent would require a groundwater pumping tax of about 60 percent, or nearly $30/acre-foot of water on average. Such a stringent tax would cause nearly 9 percent of cropland to be switched to alternate uses that require less water—including a 24 percent decline in fruit and nut perennials and a 50 percent increase in land not used for growing. Farmers also increase annual crops because they tend to require less water.
The researchers view these as positive changes because they lead farmers to treat water as a commodity that should be conserved, changing how or what farmers grow in a way that is more suitable to the land conditions and natural resources available. At the same time, it does underscore the challenges California and regions around the world will face in balancing the need for water conservation and food supplies in a world impacted by climate change.
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