Tuesday, July 20, 2010

The Cost of AB 32 vs Delta Levee Failure

Quiz: Choose the smaller amount of money?
A.  $4 billion to $34 billion
B.  $0 to $1.6 billion

If you answered that A is a smaller number, Congratulations!  You can get a job analyzing environmental policy for the state of California.   If you answered B is lower, you might be pretty upset since A is clearly 20 times larger.  But in California environmental policy, the amount of costs don't matter, it is the issue.

If we are talking about global warming, any cost to reduce greenhouse gases is modest and small.
If we are talking about water supply, any disruption has catastrophic costs.

An open letter from economists released yesterday calls the cost of AB 32 on California "modest."  The Air Resources Board has also called the cost small.  So what is small?  According to the ARBs latest analysis that most economists think is the best standard, the annual cost in 2020 will range between $4 billion and $34 billion.

What about the scenario of the Delta earthquake that floods 30 islands, etc?  We are always told that this would be catastrophic for the California economy, a "$40 billion disaster."  According to the analysis from URS corporation done for the Department of Water Resources (look at figure 6a if you want 1 picture), the range of expected 25 year cumulative costs is between $0 and $40 billion.  The midpoint (50% exceedance probability) looks to be $15 billion cumulative over 25 years.    On an annual basis, the midpoint is $0.6 billion with a range from $0 to $1.6 billion.

Obviously, it isn't a perfect comparison, one event is the estimated cost of doing something (AB 32), whereas the other is the estimated cost if we do nothing in the Delta.  There are other key differences too.

Still, the differences between the adjectives that are used is very revealing.  AB 32 is small and modest, whereas not "fixing" the Delta in the way preferred by water exporters will cause "catastrophe", the economy to "run dry", and cut off the economys "lifeblood." 

(last sentence deleted due to error.  ARB/AB 32 is not funded by the state General Fund)


  1. Links to that letter/those reports, if you have 'em? I'm curious enough to read the originals.

    I know you don't trust their analyses, but I saw a couple slides on the costs of ending Delta exports from the PPIC and Ms. Hanak recently. There weren't staggering. I think she said the job loss in the SJV from ending Delta exports was 40,000 jobs up to some higher number, which made me laugh, because that's what was once attributed to the pumping restrictions alone. Hopefully they'll release those soon.


  2. Links added, you can find the detailed economic report on the DRMS website for DWR.

    Actually, I am glad to hear Ms. Hanak say 40,000 jobs for ending Delta exports. Their 2008 report said over 100,000 jobs lost and was based on the same flawed modeling approach that I was criticizing last year. So, 40,000 is a considerable downward revision for them. I would consider that to be in the reasonable range, if perhaps on the high end of reasonable.

    Now, if they can just conduct a reasonable scenario as opposed to saying the choice is between a giant PC, and a total loss of all Delta water deliveries in every year. It would seem to me that the long-run choice is more like 4-5 MAF of Delta water deliveries in a typical year with occasionally lower amounts and the possibility of a total cut off for a year or two if there is a catastrophic event. That's costly, but not the same as 0 deliveries every year.

  3. Thanks. I'll check those out.

    (That's my recollection of slides that went past quickly while I wasn't taking notes. We should wait for them to release their work, of course.)


  4. Also, a bit besides the point, but I'll say it anyway. The reason for a giant PC (say, 15,000cfs) is so that it can drink great gulps during floods. That'd be super useful, because flood water would otherwise go out to sea (and there will be more floods). Floods are generally a time when you can take water without other environmental consequences (like entraining fish or heating up the remaining river). A small PC (say 3,000cfs) wouldn't have those advantages.

    BUT, DWR has such a bad reputation (for cause) that no one believes that the full capacity (15,000 cfs) would only run during floods. They look at the Sacramento River (17-18,000cfs on a summer day) and think the canal is meant to drink the whole river dry. Which means that a potentially useful engineering solution gets huge political resistance. (Which is a shame, but also entirely self-created by DWR.)


  5. The comparison is false because man-caused global warming is a hoax, as shown by Climategate, whereas the Delta has real problems that need to be fixed.

  6. Trager, you are talking about benefits, and I am just comparing costs here.

    These costs are comparable, because they are reasonable estimates of macro losses to the California economy.