Running on Empty: Climate Change and the Future of the Colorado River Basin

Amid growing pressures from climate change and population growth, water availability in the Colorado River Basin is declining while demand continues to rise. At the Water Dialogue Lab at the University of California, Riverside (UCR), Prof Mehdi Nemati and his colleagues, Dr Daniel Crespo, Prof Ariel Dinar, and Ms Paloma Avila from UCR’s School of Public Policy, along with Mr Zachary Frankel and Mr Nicholas Halberg from the Utah Rivers Council, have developed integrated models to assess changes in water availability, use, and associated economic values across the Basin. Their research evaluates the effects of climate change and policy interventions on both physical water supply and economic outcomes. Their findings highlight the need for adaptive planning, improved economic resilience, and policy reforms to ensure long-term sustainability in the region.

Climate change poses a global threat, but dry regions with already limited water face especially severe impacts. Agriculture is particularly at risk, as crops often depend on stable precipitation patterns, consistent temperatures, and reliable irrigation. As the climate shifts, these conditions grow increasingly unpredictable. Rising temperatures, changing precipitation, and evaporation patterns strain natural water systems and farmland. Crops now require more water to grow, but inconsistent precipitation and declining soil moisture make planning difficult, which adds to water stress and threatens local food security.

Shifts in how water moves—how much of it is used, stored in soil, evaporated, or falls as rain—ripple through the agricultural system. This uncertainty complicates decision-making for both farmers and policymakers. Water regulations often add to the challenge, as they don’t reflect current supply conditions. At the same time, water demand continues to rise due to increasing temperatures and population growth.

Researchers and water managers must identify who and what are most vulnerable—specific sectors, users, regions, and crops—and develop more efficient and adaptable water strategies. These actions are essential to safeguard both rural and urban communities, as well as the environment that depends on shared, limited water resources, and to support the development of efficient policies that address the impacts of climate change.

The Colorado River Basin: Vital Water in a Warming Climate

In recent decades, average temperatures increased by about 2.5°F (almost 1.4°C) in the Basin. This warming has reduced water availability and made severe droughts more frequent. Combined with unsustainable water use, it has pushed reservoir levels at Lake Powell and Lake Mead to historic lows. This has direct consequences for the populations, industries, and the environment that rely on the water of the Colorado River Basin (CRB). The CRB supplies drinking water to 40 million people across seven U.S. states—Colorado, New Mexico, Utah, and Wyoming (Upper Basin), and Arizona, California, and Nevada (Lower Basin)—as well as Mexico. It irrigates 2.2 million acres of farmland that support over 39 different crops. CRB also supports recreational and environmental water needs, in addition to generating electricity through hydropower.

Emergency conservation efforts are underway, but they reveal deeper problems: current water management strategies can’t meet today’s demands or future climate pressures. The system is at risk of collapse, which could trigger economic losses, water disputes, and ecosystem damage. A major issue is that outdated water allocation agreements don’t reflect the Basin’s actual conditions. Understanding the impacts of changes and the complex interactions among social, economic, hydrological, and policy components of the system is crucial to developing effective policies.

First Integrated Model Developed for the Whole CRB

Prof Mehdi Nemati and his colleagues at the University of California, Riverside, and the Utah Rivers Council have studied baseline water use across the CRB, disaggregated by sector, state, and user group. Using advanced modelling techniques, the team developed the first integrated model that combines both hydrological and economic data (known as a hydro-economic model) to explore the impact of multiple future scenarios. This model illustrates how the agricultural sector responds to different climate change scenarios, how the economic value of water changes across the Basin, and how conservation investments and the policy framework are strained under a changing climate.

Importantly, they present a comparative perspective across sectors and states rather than focusing on a single group, which allows the team to evaluate complex interactions across the Basin.

Assessing the Economic Value of Water in the CRB

The team developed a detailed model to better understand the value of water in the CRB, as it faces rising pressure from climate change, population growth, and outdated water allocation rules. Their model includes nearly 400 cities, major irrigation areas, and most of the Basin’s hydropower systems. It estimates that current water use across the region provides $20.6 billion in annual economic benefits—most of which ($18.3 billion) come from urban use.

The team found that while agriculture accounts for 85% of the water use, it generates only about 7% of the total economic benefit in the Basin. In contrast, cities, which use far less water, contribute nearly 90% of the total benefits. This gap reflects how water supports low-value crops such as hay and alfalfa in agriculture, compared to higher-value urban uses. Hydropower contributes a small share of the benefit but plays a broader role in water storage and flood control.

The team highlights that water is not currently allocated based on its most valuable use. Differences in irrigation methods, crop types, and water prices across regions influence the efficiency of use. The Lower Basin, including California and Arizona, tends to use water more productively than the Upper Basin.

The team argues that more flexible policies—such as water trading, allowing cities to buy water from farms—could improve efficiency and reduce pressure on stressed urban centres. However, they caution that reforms must consider side effects, such as impacts on ecosystems and downstream users.

Impact of Climate Change on Water Use and Availability

The team warns that failure to plan for a river system with much less water is a key challenge in the CRB today. At the heart of this system is a collection of treaties, laws, and court rulings known as the ‘Law of the River’, which began with the 1922 Colorado River Compact. This agreement allocated water between seven U.S. states, Mexico, Native American tribes, and for environmental needs. However, the original agreement was based on overly optimistic water flow estimates and excluded key groups such as tribes and environmental interests.

Over the past century, layers of policy—such as the 1944 treaty with Mexico and multiple Supreme Court decisions—have shaped how water is shared. Yet, as the team explains, these 20th-century frameworks are now faltering. Climate change has already reduced the river’s flow by about 20%, and scientists warn this could worsen. Despite several recent attempts to adapt—such as the 2007 Interim Guidelines and the 2019 Drought Contingency Plans—these measures have repeatedly underestimated the speed and severity of the river’s decline.

Inequalities in the system also persist. Native American tribes, despite having some of the oldest legal rights to the water, face complex barriers in accessing it. Meanwhile, some fast-growing urban areas receive disproportionately small water allocations based on outdated assumptions.

Federal Water Conservation Investments in the CRB

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. The team analysed how the US Bureau of Reclamation (USBR), the primary source of funding for the basin water management, funds water conservation in the CRB. They examined 462 USBR-funded conservation projects in the CRB between 2004 and 2024. They found that $1.08 billion (in 2023 dollars) was allocated across two categories: 81% of the funding supported demand-side management projects, while approximately 19% funded supply-side initiatives.

On the demand side, funding was allocated to municipal and industrial projects ($493 million), agriculture ($311 million), and infrastructure ($62 million). On the supply side, investments included reuse ($77 million), local supply ($75 million), desalination ($50 million), and environmental projects ($17 million). Regarding geographic distribution, 5.7% of the funding was allocated to locations in the Upper Basin, 75.5% was directed to the Lower Basin, and 18.8% was designated for Tribal areas, some of which extend across both sub-basins. California alone received nearly half of the total funding, much of it supporting irrigation efficiency and long-term infrastructure improvements.

Reuse and agricultural projects were the most cost-effective, averaging $385 to $417 per acre-foot saved. Local supply projects are the most expensive, averaging $2,444 per acre-foot saved. The team emphasises that while a wide mix of conservation strategies is essential, future federal investment should focus on cost-effective projects—particularly in agriculture—to get the best return. They also highlight that simply saving water isn’t enough. Without clear policies to manage how that saved water is used, efficiency gains could lead to increased consumption elsewhere.

Climate Change Impacts on Agriculture in the CRB

The research team tested nine different climate scenarios, reflecting reduced river inflows and increased water demand by crops and simulating how these pressures might reshape farming over the next 30 years. As climate stress increases, total farmland shrinks—particularly for water-hungry crops like alfalfa and hay. These crops currently dominate the Basin but have relatively low economic returns. Under severe conditions, land used for farming could decline by up to 13%. The Basin also becomes less flexible, with fewer opportunities to recover during wet years. However, higher-value crops, such as vegetables and fruit trees, would remain relatively stable, as farmers prioritize their limited water supply to protect more profitable crops.

Irrigation methods could also shift. Flood irrigation, which uses large volumes of water, sees the sharpest decline. Drip irrigation, which is common for high-value crops, is the least affected. This reflects a strategic adaptation—preservation of economic returns by focusing on crops and methods that make the most efficient use of water.

Economically, even small annual declines in monetary returns of around 4% add up. Depending on the scenario, total losses could range from $440 million to $1.47 billion over three decades. States like Wyoming, Utah, and Colorado—heavily reliant on low-value crops—stand to lose the most. In contrast, California and Arizona fare better due to their greater share of high-value, water-efficient agriculture.

The team emphasises that these projections assume an ideal system where water is freely reallocated to maximise overall benefit. In reality, the rigid water rights system limits this kind of flexibility. To manage future uncertainty and safeguard the viability of farming, the researchers urge investment in more adaptive, efficient agricultural systems—both technically and through reform of water allocation policies.

Next steps

The hydro-economic model developed by the team for the CRB provides policymakers with a tool to test future scenarios, including climate change, population growth, and changes to existing water regulations. The hydro-economic model also enables policymakers to compare the efficacy of various policy interventions being considered for addressing water resource management in the Basin. While this tool can’t change who makes decisions, it could make those decisions more transparent and better informed. The team hopes this can support more balanced, transparent, and adaptive strategies for managing one of North America’s most important and overstretched water systems.

Looking ahead, the researchers stress that bold, forward-thinking policies are urgently needed. Without them, old agreements will continue to buckle under new and intensifying realities.