Good article from PERC about this idea.
California is in the fourth year of record-setting dearth of rain, with virtually the entire state experiencing “exceptional drought.” In response, Governor Jerry Brown has mandated a 25 percent reduction in the state’s water use — a mandate that is long on directives and short on incentives. The governor proposes to reduce acreage in lawns, prohibit new homes from irrigating with potable water, and offer rebates for replacing old toilets. Nowhere to be found are increases in water prices to induce conservation.
We have a better idea.
One of the few things economists can agree on is that increasing the price of a good will decrease the quantity demanded. For this reason, virtually every policy wonk who worries about global warming agrees that pricing carbon with a revenue-neutral carbon tax is a way to get us out of our cars and onto our bikes. Similarly, water-policy analysts agree that California’s thirst for water won’t be significantly reduced until consumers are faced with a more realistic price for the “clear gold.”
In that spirit, we propose a revenue-neutral tax on all organic products — food, linens, clothing, pillows, tobacco, etc.
How will taxing organic products help to conserve water? The answer is that organic agriculture uses more of critical inputs — labor, land, and water — than conventional agriculture. Taxation would reduce the demand for water-wasting organic products relative to non-organic alternatives, and thereby reduce some of the pressure on California’s dwindling water supplies.
Consider the inefficiency of organic agriculture. A 30-year side-by-side trial comparing yields per acre of organic versus conventional practices by the Rodale Institute (whose motto is, “organic pioneers since 1947”) contends that organic and conventional plots produce equal yields. But at the 20-year point of the Rodale study, Alex Avery, the director of research and education at the Hudson Institute’s Center for Global Food Issues, used Rodale’s own data to impeach that claim. His analysis concluded that conventional agriculture beat organic handily in “total system yields” (by 30 percent), nitrogen efficiency (by 60 percent), and labor (by 35 percent).
The U.S. Department of Agriculture’s (USDA) 2008 Organic Production Survey of all 14,450 organic farms in the United States, covering a combined 4.1 million acres, found that organic corn yields are 30 percent lower than conventional corn yields; organic rice yields, 41 percent lower than conventional rice yields; organic spring wheat, 53 percent lower; organic tangerines, 48 percent lower; and organic lettuce, 70 percent lower.
Organic agriculture is particularly insidious because it bans the cultivation of crop varieties crafted with molecular genetic-modification techniques, which are particularly relevant during droughts. Not only do genetically engineered crops offer higher yields with less use of insecticides, but they can be crafted to withstand droughts, and to be irrigable with lower-quality (such as brackish) water. For example, a decade ago Egyptian researchers showed that transferring a single gene from barley to wheat allows the wheat to get by with only one-eighth as much irrigation as conventional wheat, surviving on meager rainfall alone. Similar genetic modification has created drought-tolerant corn varieties, and more crops are in the pipeline.
Retrieved May 22, 2015 from http://www.perc.org/articles/how-taxing-organic-products-could-solve-california-s-water-shortage