Monday, November 28, 2011

Cost-Benefit Analysis and the Co-Equal Goals

Cost-benefit analysis is the scientifically accepted approach to weighing the merits of complex public works projects like a $12+ billion isolated water conveyance facility in the Delta or several billion dollars invested in creating tidal marsh and other habitat in the Delta. 

The Delta Reform Act creates a very different framework for evaluating Delta plans, the co-equal goals of water supply reliability and protecting, restoring and enhancing the Delta ecosystem.  Cost-benefit analysis is inconsistent with the co-equal goals, because the co-equal goals single out two of the many types of societal benefits produced by the Delta and requires they be placed ahead of others, whereas cost-benefit analysis measures and considers all potential benefits in a consistent way.  The economic considerations that are left out of the co-equal goals are considerable, and in total greatly exceed the value of water supply reliability (as demonstrated by DWR's own DRMS risk analysis for those who read beyond the executive summary). 

I have been calling for a cost-benefit analysis of these projects since I first got involved in Delta water issues over 3 years ago, and have been encouraged to see it promoted recently from some seemingly unlikely sources, the 5 Delta Counties Coalition as well as a large group of mostly local environmental groups.  I say "unlikely sources" because one might intuitively think that a cost-benefit analysis would show the overwhelming economic value of Delta conveyance to the larger southern California economy, and therefore it would be a tool to show why the local opposition should lose to further the greater economic good. 

If a good cost-benefit analysis were to show that were truly the case and not just a political campaign, I would switch my position of opposition to large, isolated conveyance facility  in the face of the overwhelming statewide economic interest.  The fact that such an analysis does not exist (even one sponsored by water exporters) despite the enormous spending on research and planning for the Delta is pretty interesting.  Even more interesting is that the California Resources Agency has apparantly responded to the Delta Counties' request for formal cost-benefit analysis by stating they aren't going to do it because it is not required by law.  That's a pretty weak excuse in my opinion, since they are supposed to act in the best interests of the State and say they are committed to a science-driven process. It seems to me those guiding principles would compel one to conduct the scientifically accepted analysis that determines whether a project is in the best interest of the state.  Even if the law does not require you to follow the result (for good reasons in some cases such as impacts on disadvantaged communities), the analysis would still be incredibly informative.

I have quieted down on this point this year as I have come to accept the co-equal goals as law and have been working on the Delta Protection Commission's Economic Sustainability Plan.  I think the co-equal goal framework could lead to a good outcome if the constraint on the pursuit of the co-equal goals is taken seriously. ("The coequal goals shall be achieved in a manner that protects and enhances the unique cultural, recreational, natural resource, and agricultural values of the Delta as an evolving place.")  The intent of the Economic Sustainability Plan is to be consistent with the co-equal goal framework, not cost-benefit analysis.  (Although I think there is plenty of evidence to suggest it the ESP would prove superior to BDCP type plan on benefit-cost criteria, that was not the focus.)

Since the BDCP and Stewardship Council have been avoiding the question of cost-benefit analysis for a long time, I was really surprised that the Stewardship Council newsletter summary of the Delta Science Program's independent review of the ESP focused on the following quote from the review panel chair, “This report provides a good starting point to conduct a comprehensive cost-benefit analysis, but its recommendations are not well supported because the report is not itself a cost-benefit analysis.” 

I agree with the criticism, but it is not a valid reason for the Stewardship Council to reject the recommendations in the ESP.  The ESP is guided by the co-equal goals, not a cost-benefit framework.  As discussed above, those two analytical frameworks are incompatible.  The Science Program review panel stated that we addressed the co-equal goals later in the review in response to the direct question. 

Overall, the independent review of the ESP was positive.  More on that later.

[Update:  I originally misused the term ISB (Independent Science Board) in the above paragraphs and confusing the Delta Science Program with the ISB.  The Delta Science Program convened a panel of independent experts to review the ESP.  Those experts are not the ISB which is a standing board of academic scientists.  I have edited the post to fix it, and my apology for the original mix up.]

1 comment:

  1. Even worse, remember that member agencies of MWD get an average of 50% of their water from MWD. They claim 20 million "customers" but those 20 million get varying amounts of water from MWD, which gets its water from the SWP and Colorado River (often 50/50), so NOW you're talking 25% of those 20 million. Now that's $2,000 per capita.

    I wonder what these report writers are smoking...