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Water and sustainable economics: Can we get it right?

We need a balance between economics, environment and social justice


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Economics tends to fluctuate with the different “seasons” of the business cycle. More attention should be placed on longer lifecycles that take us from birth to growth to maturity to decline and eventually death over decades and centuries. The challenge in the long term is to discover regenerative opportunities to promote our intergenerational economic health and well-being.

This is where sustainable economics comes in. Most pundits of sustainability reference the triple bottom-line where we find balance between the realms of economics, environment and social justice. The perspective is that persistent growth is a fallacy if we destroy the environment or fail to sustain the standards of living achieved. On the political side, while capitalism and free markets may reward success, such structure can concentrate economic power, thereby hindering democracy or some sense of reasonable wealth distribution.

Looking at Colorado water, our state’s scarcest resource, provides a good example of sustainable economics. Resource abundance results in common goods where there is no problem sharing. We all just take a bit from the commons. But as scarcity emerges, so do new ethics and laws. Originally, miners and farmers agreed the first to use water in a given place had senior rights, which continued as long as they made beneficial use of the water. This was identical to mining claims – work the claim or lose it. It gave birth to the law of prior appropriation.

As Colorado’s economy moved to urban centers, first-in-time water rights were purchased and sold on the market. This is critical for economic growth, as it allows a resource to migrate to whomever values it the most. Urban economies generate more wealth, income, and jobs per acre foot of water use than agriculture and other uses, so it was a good market outcome that water be reallocated to urban areas.

Much of the reallocated water has moved from west of the Continental Divide, where 70 percent of precipitation falls, to the Front Range, which accounts for more than 80 percent of the state’s economy. Despite population growth from 800,000 people in 1910 to more than 5 million today, just under 90 percent of the state’s water is still withdrawn and 56 percent consumed for agricultural purposes as compared to 7 percent for urban use.

Colorado’s population will continue to grow, and water dynamics are shifting throughout the Colorado River Basin from the Rockies to the Gulf of California thanks to climate change and population growth throughout the region. How will we provide water sustainably in the face of these changes? If we let the market dictate, water will flow to the most economically productive use.

If we let national politics rule, Colorado could lose out to California. To address these issues, Colorado has developed its first statewide water plan. One of its measurable goals is to eliminate the forecasted urban water shortage in Colorado by 2030. This should assist in maintaining a sustainable future. It requires collaborative action between urbanites, ranchers, farmers, recreationalists and environmentalists. Even with a good plan, collaboration is easier said than done as resource scarcity naturally promotes conflict.

Major stakeholders need to take a more regional and balanced approach to water and implement the initiatives outlined in the Colorado Water Plan. Agricultural leasing of water rights certainly makes sense. It can help save the family farm, which battles demographic changes as much as water supplies. Fortunately, the 1922 Colorado River Compact does not mandate a use it or lose it restriction, as Colorado still does not use all of the water allocated under the compact. But old agreements change and Colorado needs to be proactive.

The heavy reliance of many suburban areas on ground water needs to change to renewable water. This requires more pipelines and water storage. While it sounds good on the surface, reusing water to the point of extinction should be reserved as a crisis strategy. All water interests, including urban, agriculture, environmental and recreation need to maximize innovation and think in terms of conservation, water sharing, and commit to long-term cooperation in order to hit the sustainable sweet spot.

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Tom Binnings

Tom Binnings is a senior partner at Summit Economics in Colorado Springs. He has more than 30 years of experience in project management, economic and market research, real estate development, business analytics and strategic planning. He can be reached at (719) 471-0000 or tbinnings@comcast.net.

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