Let market-based incentives play a role in solving water shortages
By Melinda E. Taylor and Jeremy M. Brown
February 2, 2013
The Texas Supreme Court once observed that “(the) story of water law in Texas is also the story of its droughts.” It should not be surprising, then, that with the state in the midst of a difficult drought and long-term supply shortages looming, a new chapter is being added to the story of Texas water law.
The Legislature is considering bills to finance water infrastructure. The Supreme Court has agreed to hear an interstate dispute over rights to water in the Red River basin and is considering a complaint Texas filed against New Mexico over Rio Grande water. These developments – together with local disputes brewing over rights to water from the Brazos and Colorado rivers – have the potential to reshape Texas water law.
Thinking about conservation has, of course, evolved over time. Conservation of in-stream flows – necessary for healthy rivers and estuaries – would have been considered “waste” a few decades ago. Since the 1990s, state and local governments have pursued an admirable and increasingly aggressive form of conservation intended to make water use more efficient.
These efforts have yielded significant benefits. A report last year from the Alliance for Water Efficiency and the Environmental Law Institute ranked Texas and California as having the best water conservation laws and policies in the country.
Without these, the 2011 drought would have wrung that much more pain, and the supply shortfalls the State Water Development Board has predicted would be that much more ominous. Still, for all of this progress, Texas has room for improvement.
Many state leaders regard the 2012 State Water Plan as a starting point for policy discussions and a blueprint for operational solutions. The plan includes many new dams and reservoirs but relies on conservation and reuse for about a third of the additional supplies needed by 2060. That number underestimates the importance of conservation.
Conservation strategies are more cost-effective than new infrastructure, but even they come with financing challenges. The strategies are often achieved through many diffused small-scale projects and management practices. But individual property owners have little reason apart from general public-spiritedness to implement such practices unless required or incentivized to do so. Market barriers such as extended payback periods for conservation investments and split incentives between landlords and tenants might discourage property owners from making the upfront outlays needed to meaningfully improve conservation.
Given the wariness of many Texans toward governmental regulations, conservation cannot thrive on mandates alone. Instead, lawmakers should allow the market to provide economic incentives that encourage conservation.
Across the country, state and local governments have pioneered innovative programs that address market barriers in the context of energy efficiency and conservation. In policy circles, contractual tax assessments – often referred to as Property Assessed Clean Energy, or PACE, – and utility on-bill financing have attracted broad and growing bipartisan support. The Legislature may facilitate these policies by, among other things, expanding existing PACE statutes to encompass water and allowing liens to run with utility meters.
This session, the Legislature has the opportunity to achieve the water security for Texas and to ensure that inadequate water supplies do not sabotage an economic engine that other states have long marveled at and envied.
But to truly act upon this opportunity, the Legislature must double down on its commitment to conservation and consider creative, market-based solutions. That will require crafting a suite of policies that is as intricate and flexible as water usage itself. Fortunately, lawmakers can include policies like PACE and on-bill financing that fit with the free enterprise ethos and property rights tradition of Texas.