California Drought

How Drought Impacts the Golden State’s Economy

Besides the devastating effects of fire, which is also largely affected by drought, California’s economy is impacted by lack of water in a myriad of ways. According to a Brookings University article, “Water supply, including surface water found in streams, rivers, lakes, or reservoirs, as well as groundwater stored in underground aquifers, remains mostly dependent on climate patterns. In certain regions—in particular the Colorado River Basin, which supplies much of the West’s water—demand has outpaced the average supply of water. Innovative solutions—such as the processes of reclaiming and desalinating water… account for only a minor share of America’s water supply. Moreover, water supply is further challenged by increased climate variability, which directly impacts the reliability of water supply and calls into question the adequacy of our nation’s water infrastructure, much of which was designed to accommodate climatic projections that are increasingly obsolete.”

“In certain regions—demand has outpaced the average supply of water.”

The United States as a whole has seen and dealt with periods of episodic drought many times throughout its history and prehistory. Recall the impact of the Dust Bowl drought of the 1930’s, exacerbated by the widespread mismanagement of agricultural practices that caused severe dust storms across the Midwest. The Dust Bowl, in tandem with the catastrophic stock market crash of 1929 led to the Great Depression, a 10-year period in US history that nearly leveled the nation’s economy. Our current drought predominantly covers the arid regions of “the West,” which includes California, Arizona, Nevada, Utah, New Mexico and Colorado. Oregon, Washington and parts of Idaho and Texas are also now included in that category, yet the country as a whole finds itself in the midst of ongoing challenging drought and climatic conditions.

California on the Drought Spectrum

Despite what seems to be crippling drought in 2017/2018, current California drought levels remain within historical limits of past drought periods. The majority of California’s water comes from the Colorado River basin, which is allocated by the Metropolitican Water District of Southern California – an organization that owns priority water rights for the Colorado River. Lake Mead, created by the development of Hoover Dam is California’s primary water reservoir. The Sierra Nevada mountains and their watershed also provide a significant amount of water in the form of snowmelt, which drains to both the Sacramento and San Joaquin Rivers, as well as many other smaller tributaries throughout the state. Currently, key reservoirs such as Mead and Powell sit at record low levels, which have politicians and economists alike wondering over the sustainability of our collective and regional water infrastructure.

The Economic Impact of California Drought Conditions

One of the hardest hit industries during a period of severe drought is the agricultural sector, which loses billions in revenue each year as agricultural activity is limited due to dwindling water supplies. Since California is the nation’s largest producer of food (according to the US Department of Agriculture, in 2015, California produced over 1/3 of the country’s vegetables and over 2/3 of the country’s fruit and nuts) when agricultural production is impacted, the price of food goes up across the country. Roughly 80% of California’s fresh water goes to Ag, with the remaining 20% allocated for urban consumption. Growing fruit, nuts and alfalfa takes a significant slice of the water pie, while the energy sector, which relies heavily on water for the production of oil, gas and hydroelectric power is also impacted. Tourism and recreation are significant contributors to California’s overall economy and drought impacts such industries as fishing, water sports like white water rafting, standup paddle boarding and kayaking, and entire economies built around winter sports such as skiing and snowboarding.

Something to Celebrate

Monitoring climatic trends, there seems to be no immediate end to the upward climb in temperatures across the state, and California’s water reserves will no doubt continue to be impacted. But despite the somber news of California drought, there are reasons to celebrate:

• Innovations in solar and wind energy technology are lessening our reliance upon hydroelectric and fossil fuel generated energy.
• Some farmers are developing agricultural methods to increase crop yield while minimizing water use.
• Landscaping practices lean more and more in the direction of xeriscape – landscaping that requires little to no irrigation.
• Desalinization efforts such as the Claude “Bud” Lewis Carlsbad Desalinization Plant are generating millions of gallons of fresh water daily from the sea, serving roughly 400,000 people in San Diego County.
• Water reclamation efforts clean and repurpose waste water for various uses, such as landscaping.
• Water use appliances continue to trend towards higher and higher levels of conservation.

The Bottom Line

An exact dollar amount is difficult to come by when trying to ascertain the impact of California drought on the economy because there are so many different factors to consider. Besides the impact on agriculture, urban centers, energy development, and tourism, an article by the Pacific Institute adopted a different stance altogether, stating that, “Many of the most severe effects of…the drought have been in those sectors that are not adequately evaluated by economic measures – the State’s ecological resources: its fish, wildlife, forests, and natural ecosystems.” It will be interesting to see how the state evolves over the next few years to meet its growing water needs with reserves that may potentially continue to dwindle.

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