Specific Objectives of the Project
Objective 1: Conduct 4 surveys on California institutions and how the drought changed their behavior:
1) A survey at the water district level on sources of water (surface, ground, and purchased), pricing and allocation of water, and water use by farmers in the three years prior to the drought and during the drought;
2) A survey at the county/farm level on farmers’ technology choice and adoption and their changes in practices in response to the drought;
3) A survey obtaining data from the Department of Water Resources (DWR) and the Bureau of Reclamation on allocation of water to different projects and activities;
4) A survey obtaining data from the State on production and earnings of different crops in different counties.

Objective 2: Expand the conceptual framework on optimal management and utilization of water under climate change to interpret possible outcomes of the drought as described below.

Objective 3: Analyze the data to assess how the drought affected crop production and water use patterns within and between sectors, and obtain estimates of the economic impact of the drought.

Objective 4: Using the expanded conceptual framework and the empirical estimates, analyze policy implications for the California water system to adapt to climate change.

Objective 5: Produce an outreach program to disseminate findings.

Project Report/Summary of Results
California agriculture experienced high profits during the drought period, reaching record earnings. The main driver was high output prices and in some cases higher yields, especially in crops irrigated with subsurface drip irrigation (with the drought, weeds couldn’t survive). California farmers adapted to the drought by fallowing close to 1 million acres of land (out of close to 10 million of acres total).

However, the drought was a period of transition where the acreage associated with high value crops increased, while the acreage of lower value crops, like cotton and grains, declined. The high earnings of agricultural production were also associated with water transfers at very high prices (up to $1,000 per acre foot in some regions). Another response to the drought was a significant increase in groundwater use, which have threatened the long-term viability of some groundwater aquifers.

A third mechanism of adaptation was a further increase in use of drip irrigation and other conservation technologies as well as increased reliance on irrigation scheduling and automated and optimized irrigation systems. Forty percent of the agricultural land in California uses drip irrigation and a significant percentage of this use is subsurface drip systems. We estimate that the use of water conservation technologies increases gross and net income of California agriculture by 2.6-7.4%.

Our research suggests that to maintain sustainability of California’s water supply, groundwater use must be regulated based on sound economic and hydrological principles. Further, the use of recycled water can increase supply by up to 3 million acre feet of water, out of a current total use of 44 million acre feet per year. The challenge is to develop a sound conveyance system. In addition, the use of desalination is warranted. Finally, there is much more room to improve water pricing.