Buying Water for the Environment: A Hydro-Economic Analysis of Salton Sea Inflows

Abstract As societies confront greater levels of water scarcity, conflict follows. Water transfers are increasing with irrigation water regularly considered in such discussions given it often comprises the bulk of water rights within a particular region, especially in water scarce environments. Here we analyze the impacts of three widely considered and implemented strategies to purchase water from irrigated agriculture—land fallowing, improvements in irrigation efficiency, and direct leasing. Our empirical application involves water transfers from Colorado River water rights holders to the Salton Sea, a critical ecological resource that has been in decline for many decades, with environmental damages estimated in the tens of billions of dollars. We develop a regional hydro-economic model that accounts for essential field-level agro-hydrologic processes related to crop production, irrigation, and salinity to evaluate the cost-effectiveness of these three programs. Results indicate that both fallow and direct water lease programs are capable of generating significant environmental water flows with relatively small decreases in agricultural production and no appreciable decrease in grower profits. Because these policies focus on a single input (applied water) rather than overall inflows to the Sea, the direct lease program—which is the most cost-effective approach for generating water conservation— may result in less inflows into the Sea than a land fallowing program.