The University of California, Davis and University of California, Merced released an economic report on the future of water in California, May 13. The report found that projected declines in the state’s water supplies could result in the fallowing of up to 3 million acres of farmland, the loss of 67,000 jobs statewide and lasting damage to California’s agricultural and rural communities if no action is taken.
“We’ve done the math — and the costs of inaction are high economically and environmentally,” said Jay Lund, professor of civil and environmental engineering at UC Davis and the report’s primary researcher, in a news release from CA Water for All.
“California urgently needs a long-term, statewide strategy to prepare for growing water challenges ahead.”
The report and its findings
The report, Inaction’s Economic Cost for California’s Water Supply Challenges, came from UC Davis’ Lund and Alvar Escriva-Bou, and UC Merced’s Josué Medellín-Azuara. It builds on previous research led by Lund in 2024 that found California’s water supplies will decline by 4.6 to 9 million acre feet per year, representing 12% to 25% of current water use totals. The report contextualizes this volume as representing roughly 1.5 to 3 million acres of irrigated land or 50% to 90% of urban water use.
The report focuses on trying to put a price on such water supply declines. Under a “likely future” where California’s water supply declines by 5 maf annually, the report estimates that the state will lose $1.8 to $4.4 billion from its economy annually in direct losses, $1.8 to $2.2 billion of that coming from direct impacts to agriculture. In a “worse future,” where California’s water supply declines by 9.5 maf annually, those projected economic losses jump to $7 to $14.5 billion overall and $3.7 to $11.1 billion from agriculture in direct impacts.
The report explored the economic impact of several different scenarios. This included versions of the two future scenarios where all water losses were borne by agricultural users alone, rather than by both agricultural and urban users. Those scenarios returned the greatest projected loss of jobs to the state.
A scenario where both agricultural and urban water users lost 1 maf per year across the three major areas of the state — the Sacramento Valley, the Bay Area plus the Southern Central Valley, and Southern California — saw the largest projected economic losses to the state at $39.5 billion annually. These extreme estimations came with the note that 1 maf of loss to urban water use in the Sacramento Valley exceeds all of the region’s current water use, “so losses are immense.”
“Without improvements in management or infrastructure, these [water] shortages would cause direct economic losses of $1.8 to $11 billion per year, and total economic losses of $3.4 to $14.5 billion per year with up to 67,000 jobs statewide,” the report concluded.
How California got to this point
The report was commissioned by the California Municipal Utilities Association, a coalition of — among other utility groups — water district general managers and water industry experts from across the state.
Craig Miller — general manager for the Western Municipal Water District and board president of CMUA and part of CA Water For All — called the report a macroeconomic look at California’s water situation. He put the report in context, saying, “[9 million acre feet] is a hard number for the public and the legislators to really get their arms around. So, we commissioned the researchers to go back and find out what the cost is to the fourth largest economy in the world — the state of California — if we don’t get our act together and generate the water supply we need by 2050.”
Miller said that the need for the economic report was in part born out of frustration over existing efforts not making progress on California’s water needs. He explained that water policy in California going back to the 1970s placed the responsibility to create needed local water supplies on the shoulders of local water districts.
“That is a very expensive solution to the state’s water problem,” he said. “Western Municipal Water District can’t build a reservoir in the Sierras to capture 3 million acre feet of water, for example, but the state of California can.”
This local focus also gave rise to what Miller described as a castle mentality, where each water district proverbially built walls around its territory and local water concerns.
“Now, all of a sudden, we’re realizing that we don’t have enough water in the castle for all of the people who live within the walls,” he summarized. “We have to get out of that mentality that it’s our castle versus the rest of the world.”
The state’s recent focus on water conservation efforts and water recycling misses the mark on current needs too, Miller said.
“There’s been a lot of action and discussion in the last decade about conservation and water recycling being the answers to our water supply challenges in this state,” he explained. “We formed this group of water managers from across the state because, as the people who serve water to the 40 million residents of the state and ag customers, we know that that is really incorrect. There needs to be more water supply.”
The future for California water
The report cites several potential tools to reduce the economic impact of the projected declines in water supplies. Generally, these tools fell into the categories of water supply augmentations, demand management and government and policy innovations. Overall, however, it stressed the need for coordination of efforts across local, regional and state stakeholders, and that such coordination represents an immense institutional challenge.
“State government leadership has historically been vital for organizing and preparing for long-term water challenges,” the report concluded on steps forward. “Renewed state leadership would certainly help in organizing and implementing collective preparation for this future.”
Miller said the easy baby steps that the state must take are developing targets for things like water needs for continued economic viability, agricultural production, environmental stability and lifestyle of its residents.
“Then, the hard work comes in: How do we build the right projects and programs to achieve those targets?” he said. “But without an aspirational target, visionary target, there’s no way a planning process is ever going to start.”
Miller said that, as a civil engineer, the need for increased water storage is an obvious central need. However, he called all potential demand management and increased availability tools important pieces of the puzzle.
“There’s plenty of water that falls on this state naturally. We are not doing a good job as a water industry and as a state to manage that water correctly,” he said. “It’s not an argument between ag or urban, north or south, environmental or agriculture. There is enough water for all uses. The big message of this whole effort is we have to get our act together and plan better and invest better in our water future.”
