A Sustainable Economic Plan for the Colorado River, By Doug Cardell Ph.D.

Securing the Lifeline: A Sustainable Economic Plan for the Colorado River| July 4th, 2025

The Colorado River, once a mighty artery of the American West, now faces historic overuse and depletion. Spanning seven U.S. states and Mexico, the river supplies water to nearly 40 million people, supports a $1.4 trillion economy, and irrigates 5.5 million acres of farmland. Yet, years of drought, over-allocation, and mismanagement have pushed the river to the brink of crisis. To avert ecological and economic disaster, a sustainable and economically rational plan must balance competing interests through market-based incentives, technology, tiered allocations, and enforceable conservation benchmarks.

Current water allocations under the Law of the River do not reflect scarcity or value. This error encourages overuse and punishes conservation. A more rational system involves tiered water pricing—a plan that prices basic, essential use affordably, but excess use incurs higher marginal costs. This structure aligns prices with actual water scarcity and opportunity cost, encouraging households, farmers, and cities to economize water use.

In agriculture—where nearly 80% of Colorado River water is used—a modest price increase on water beyond a threshold allocation could encourage investment in efficient irrigation systems (like drip irrigation) and lower-value crop substitution (e.g., switching from alfalfa to drought-resistant alternatives).

Allowing the buying, leasing, and/or transferring of water rights across state and sectoral lines would create greater efficiency by reallocating water to its most productive use. A regulated interstate water trading market that includes transparent pricing and limits to prevent monopolization would reduce political gridlock and incentivize conservation.

For example, a farmer with surplus water rights could lease them to a municipality during a dry year. Australia has successfully piloted these markets and demonstrated that they can reduce the economic cost of water shortages while preserving equity through structured rules and caps.

To reduce dependence on the Colorado River, federal and state governments should co-fund advanced water recycling (“purple pipe”) systems in cities and expand desalination infrastructure where feasible, particularly in coastal states.

Although desalination is energy-intensive, combining it with renewable energy sources and using brine byproducts for industrial purposes can improve its viability. A federal investment strategy—modeled after infrastructure grants—can help localities adopt these technologies without increasing debt burdens, creating a long-term buffer against river depletion.

A sound plan must eliminate federal subsidies that reward excessive water use and instead promote water conservation and soil restoration. Currently, many subsidies encourage the cultivation of thirsty crops in arid regions, exacerbating river stress.

Redirecting these subsidies toward the adoption of drought-resistant crops, regenerative farming practices, and on-farm water-saving technologies will reduce agricultural demand without jeopardizing food security or livelihoods. Conservation incentive payments can help offset any short-term losses, ensuring buy-in from farming communities.

The 1922 Colorado River Compact and its successors are outdated and based on water flow estimates that were never sustainable. A new or amended agreement must:

• Account for actual average river flow (~28% lower than the Compact’s assumption).
• Include climate-adjusted allocations that vary based on annual snowpack and reservoir levels.
• Empower the Bureau of Reclamation to enforce curtailments in times of shortage.

To ensure political feasibility, water reductions should be phased, predictable, and paired with economic adjustment assistance for affected regions.

Native American tribes hold rights to over 20% of the Colorado River’s water flow, yet many lack the necessary infrastructure to utilize it fully. An economically and ethically sound plan must incorporate tribes as full partners, offering:

• Funding for pipelines, treatment facilities, and storage systems.
• Opportunities to lease or trade unused water rights.
• Inclusion in basin-wide planning and negotiations.

This approach supports tribal sovereignty while improving overall basin efficiency and flexibility.

To fund conservation, infrastructure, and emergency measures, a Colorado River Basin Resilience Fund could pool resources from federal and state governments, municipalities, private water users, and philanthropy. Linking contributions to water usage, with heavier users paying proportionally more.

This fund could issue grants or low-interest loans for:

• Upgrading urban water systems.
• Converting flood irrigation to precision systems.
• Restoring wetlands and riparian zones that improve natural water retention.

The Colorado River crisis is a long, slow train wreck that demands economically sound, cooperative, and forward-looking solutions. By aligning incentives with conservation, modernizing water governance, investing in alternative sources, and respecting all stakeholders, this plan preserves the river while protecting the livelihoods and economies that depend on it.

The future of the West depends not on resisting change but on embracing it with intelligence, investment, and a shared commitment to sustainable prosperity.