Cost-Effectiveness Analysis and a Border Region: A Critical Analysis

Dr. James F. Booker

Siena College

New York, U.S.A.

Prepared for the International Society of Ecological Economics Biennial Conference,

Montreal July 11-14, 2004.

or

How can an ugly duckling

be made respectable?

source: U.S. Department of Interior

source: Los Alamos National Laboratory

Outline

• Institutional background

• Physical setting

• Uncovering techniques to bias a cost-effectiveness analysis

• Cost-effectiveness applied effectively

Background

• U.S. obligation to deliver Colorado River flows to Mexico (Mexican Water Treaty of 1944).

• Obligation to count only decent quality water (Minute No. 242, 1973).

Source: Harding, et al., 1995

The U.S. strategy for meeting Minute 242:Colorado River Basin Salinity Control Act (1974)

• Construct “bypass” for agricultural drainage– accomplished quickly and still in operation– restored one part of the Colorado River Delta,

the Cienega de Santa Clara.

• Construct the Yuma Desalting Plant to desalt the drainage water– first operated in 1990 after 14 years of construction.– cost of $258 million– shut down almost immediately due to high costs and technical difficulties.

Cienega de Santa Clara map. Diane Sylvain

What’s Wrong with the Bypass?

• U.S. cannot receive credit for the water under the 1944 Treaty with Mexico.

• Desalting plant would produce water near the quality of Colorado River water for delivery to Mexico – thus allowing more water use in the U.S.

Current Context

• 4th year of severe drought in the Colorado River Basin

Lake Powell (Living Rivers)

Lake Mead (NASA Earth Observatory)

• 50% of basin storage depleted

The main point:

Yuma Desalting Plant is a

water supply project .

source: Los Alamos National Laboratory

source: Cohen and Henges-Jeck

How an ugly duckling can be made respectable..

source: U.S. Bureau of Reclamation

How to manipulate cost-effectiveness analyses:

1. Use sunk costs to justify more costs.

2. Combine the ugly duckling and the swan.

3. Leave out relevant (though perhaps non-quantifiable) costs.

U.S. Department of Interior Analysis (2003)

U.S. Department of Interior Analysis (2002)

U.S. Department of Interior Analysis (2002)

An alternative cost-effectiveness analysis

Conclusions

• Ecological economists should be prepared to do cost benefit and cost-effectiveness analyses in order to influence policy.

• When done correctly, building on neoclassical approaches will identify the ugly ducklings.