Projects Funded for David Sunding

2016-2017

Estimating the Agricultural Supply Response from Drought on the Extensive Margin in the Sacramento and San Joaquin Valley

2015-2016

An Empirical Model of Crop Choice in the San Joaquin Valley for Policy Analysis

Abstract

Specific Objectives of the Project

The objective of this paper was to empirically estimate surface water elasticities for 52 irrigation districts south of the San Joaquin and Sacramento River Delta by observing districts' land-use responses to the reductions in contract allocations from the Central Valley Project (CVP) and State Water Project (SWP) during drought years.

Project Report/Summary of Results

California has experienced four major droughts over the course of the last forty years, and is currently in the fifth year of a severe drought. Emergency drought policies enacted during times of drought restrict access to cheap surface water supplies, which requires farming operations in the agricultural sector to change their cropping decisions, and utilize more expensive groundwater supplies to adapt to the lack of surface water availability. Understanding how surface water availability affects the intensive and extensive margin for agriculture, in other words cropping intensity and crop choice. This paper estimates the impact of drought on the intensive margin for agriculture.

This paper finds that fallowing supply response elasticities range from 0 to -5.9. These reductions in irrigated land could for lack of access to water or due to the decision to sell water through transfers to other districts. Supply elasticities for deciduous trees are smaller than those for grain, truck, and pasture land-uses. Supply elasticities for grain acreage range from -7.6 to 1.0, which is evidence of a heterogeneous grain acreage response to drought-induced delivery reductions.

The model presented in this paper will be used for policy simulation to inform and guide policymakers on how to design a more refined allocation mechanism, and to obtain necessary reductions in surface water consumption while minimizing the welfare impacts to farmers and environmental impacts from future droughts. Additionally, this work has potential to inform water transfer negotiations between irrigation districts to minimize welfare losses during future droughts. The main contribution of this work is that it is driven by the actual decisions of the landowner responding to drought policy.

2014-2015

California Urban Water Demand: Estimating the Effects of Price & Nonprice Conservation

Abstract

Specific Objectives of the Project
The objective of the project was three-fold. First, we constructed a novel panel data set tracking urban water retailers’ price schedules, water demands, non-price conservation activities and other demand factors. Second, we estimated the price elasticity of demand; the wide coverage of retailers across the state allowed for estimating spatial heterogeneity in price elasticities. Third, we used these estimates to evaluate the potential reliability benefits of alternative water supply investments.

Summary of Results
We estimate water supply reliability benefits by evaluating welfare losses from annual water supply disruptions that are mediated through urban water utilities with substantial fixed costs. Our analysis considers spatially heterogeneous water demand functions and encompasses two features not typically addressed in the literature on water shortages: (i) welfare changes are measured from baseline water rates that are not allocatively efficient; and (ii) welfare losses are compounded by the need for water utilities to recover fixed costs. We exploit panel data on California urban water suppliers over the period 1996-2009 to estimate regional price elasticities of residential water demand. We use our estimates to examine the welfare consequences of an annual water supply disruption in California. The estimated welfare loss ranges from an average of $1,500 per acre-foot under a 10% shortage to over $5,000 per acre-foot under a 30% shortage in water supply. The spatial distribution of welfare impacts exhibits substantial variation across regions, which highlights the need to consider decentralized impacts of water supply disruptions in the design of efficient rationing rules. These results inform benefits analyses of water supply infrastructure/ conveyance projects that serve both urban and agricultural users, most notably the Bay Delta Conservation Plan.

2010-2011

The Impacts of Federal and State Water Deliveries on Employment in California's Agricultural Sector

2008-2009

Economics of Aquifer Storage and Recovery in the San Bernardino and Antelope Valley Groundwater Basins

Abstract

The project lead to the development of a stochastic dynamic programming algorithm for operation of a groundwater storage facility. The features of the program allow for spatial and temporal arbitrage. That is, the groundwater storage facility connects two parallel canals,and has the capacity to store significant amounts of water for several years. The model is solved using Approximate Dynamic Programming (Powell, 2007).

Publications, Working Papers, or Reports Resulting from the Project:

“The Value of Groundwater Storage with Spatial and Temporal Arbitrage.” With Newsha Ajami and David Zilberman. “Economic Value of Improved Water Forecasts.” With Newsha Ajami and George Hornberger. Water Resources Research (2009): revise and resubmit.

2005-2006

Third Party Impacts of Water Transfers: Evidence from the Imperial Valley-San Diego Water Transfer

2004-2005

Environmental Regulation and the Housing Industry in California

2003-2004

Estimation of Agricultural Water Demand Using Panel Data: Results of a Natural Experiment in Water Rate Reform

2002-2003

Health Risk Tradeoffs in Pesticide Regulation

2001-2002

Increasing California Water Supplies through Joint Operation of Surface and Groundwater Storage Facilities

1998-1999

The Economics of Precision Agriculture with Application to California