Public Spending and Water Scarcity: An Empirical Analysis of USBR Investments in the Colorado River Basin

Abstract

Rigid historical agreements, rapid population growth, and the accelerating impacts of climate change have significantly increased the complexity of water management and importance of water in the Colorado River Basin, leading to persistent and at times severe water supply shortages. Various policy interventions aim to address this challenge, with federal government funding for supply and demand management being a key component, as seen in initiatives such as compensated conservation programs. Utilizing data from the US Bureau of Reclamation, a primary source of funding for the basin water efficiency and management, we analyze the distribution of these funds, ex-ante estimated water savings, and estimate the cost of water saved. Our analysis covers 462 projects across 10 programs from 2004 to 2024, spanning over 200 locations across the seven states that share the Basin water. The total funding for these efficiency programs amounts to approximately $1.08 billion (2023 constant dollars). Our analysis indicates that approximately 81% of the funds are allocated to projects aimed at reducing water demand, and about 19% are allocated to projects that augment water supply. In terms of geographic distribution, 5.7% of funds went to the Upper Basin states, 75.5% to the Lower Basin states, and 18.8% to Tribal areas. Across all projects, the estimated cost of water saved ranged widely, from approximately $385 to $2444 per acre-foot saved.