California is in the middle of a quiet but high-stakes argument about what it would mean to fix our water system in a hotter, drier century, especially in the age of AI.

Echoes of this argument will resonate in everyone’s lives. One side focuses on efficiency: building more conveyance, freeing up markets and moving water to its highest-value use. The opposite side insists that any reform must start from justice: the human right to safe water, tribal rights and the support to those communities already living with contamination and scarcity.

A major new working paper from the National Bureau of Economic Research, “Measuring Water Misallocation in California,” speaks directly to this debate. Via detailed empirical work, it shows that California’s water system is ill-suited to the climate realities ahead.

Using extensive satellite imagery, crop evapotranspiration data and field-level planting decisions, the authors mapped the productivity of water across the state’s irrigated lands. Results show that water is consistently more valuable south of the Sacramento-San Joaquin Delta than north of it.

And yet legal and physical constraints make it hard to move water across this chokepoint. The paper documents that annual water trading is negligible — usually less than 1% of total use even in severe droughts. The authors also show that, because so much water is locked into long-lived orchards and vineyards, very little can be reallocated in any given year without major economic losses.

These findings describe not just inefficiency but also the rigidity of a system that should adapt more flexibly under climate stress.

For climate justice advocates, these findings quantify what many frontline communities have already experienced: that California’s water rules are not flexible or responsive enough to share risk fairly in drought. Rather, they tend to protect those with senior water rights claims and long-standing investments, while exposing everyone else to greater risk of shortages or contamination.

The paper also illustrates the limits of an efficiency-only lens, which would focus mostly on irrigators and water rights holders, infrastructure and markets. The people most visible in that analysis would be those who already have water, capital and legal recognition. Among those who are not visible in the analysis: farmworkers, rural communities with contaminated groundwater and tribes whose water claims that in some cases predate the state.

The inclusion and exclusion matters because California’s crisis is not only about misallocated acre-feet of water. It is about the fact that more than a million Californians still lack reliable access to safe drinking water, a failure CalMatters has documented in coverage of the state’s weak enforcement of its own human right to water law. Affected people are disproportionately low-income and from communities of color, often in the same regions that generate enormous agricultural value from water.

When we talk about misallocation without naming such communities, we ignore their suffering and risk treating them as an economic externality rather than a central stakeholder facing injustice that must be addressed.

The misallocation paper reminds readers that many senior water rights in California trace back to the Gold Rush and earlier land arrangements; those rights became more valuable over time because they delivered reliability, and reliability enabled investment in high-value perennial crops. In economic language, this may be seen as complementary capital and higher productivity, but in political language, it looks like a system in which inherited advantage is continuously reinforced.

Climate change in the age of AI will likely sharpen these divides. As droughts become more frequent and severe, those with older rights and deeper infrastructure will continue to receive water; those with junior rights, domestic wells or small systems will face more frequent shortages, contamination and price shocks. If we feed this hierarchy into AI models built to optimize economic efficiency without considering justice, they will only deepen these patterns.

What is the alternative? One option is to follow the “efficiency” logic as justification for expensive new conveyance like the proposed Bethany Reservoir Pumping Plant and for expanded water trading among existing rights holders. Another option is to treat the recent analysis as technical confirmation that the current system is brittle and inequitable, and use that to argue for a deeper change.

Reports like the Climate and Community Institute’s “Achieving Water Justice in California” have already outlined what that deeper change could look like: prioritizing basic human needs and ecosystem flows, legally recognizing and settling tribal water rights, democratizing water governance, and redesigning pricing and planning so that communities most exposed to climate risk are protected first, not last.

The recent paper provides a detailed map of how water, capital and infrastructure are currently entangled. If we stop at so-called efficiency, we will use that map to move more water to the same powerful actors who have always benefited. If we start from justice, we can use the same evidence to start an entirely different conversation about what California’s water system is for and whom it must serve in a warming world.

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David Sathuluri is a climate justice advocate and a researcher at Columbia University’s Lamont-Doherty Earth Observatory, where Marco Tedesco is a research professor and directs a lab on AI, climate and society.

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