Do do you pay for the water you use? The answer may seem like an obvious “yes” – you probably get a water bill every month, charging you a cent or two for every gallon that comes out of your home’s faucets. In the United States, an average family of four, consuming 100 gallons of water each per day, paid $73 per month for water in 2019 (which represents large variations between states and cities). But these dollar and gallon amounts are almost completely divorced from the true impact of our lives on the world’s water resources.
For one thing, residential water prices in the United States are largely based on delivery costs, with utilities charging for the cost of getting water to you, not the actual resource. More importantly, your residential water use is only a tiny fraction of the water that goes into the products and infrastructure that make your life possible. Depending on where they operate, companies that use this water to make their products pay next to nothing for it, or they may only pay for the right to use a water source, not the actual volume of it. water they use. When this indirect water use is taken into account, the average US resident consumes nearly 2,000 gallons of water every day, according to estimates from water monitoring campaign group the Water Footprint Network.
“We still operate the global economy with fresh water largely as a free resource,” says Johan Rockström, co-director of the German Potsdam Institute for Climate Impact Research and water resources specialist. It makes no sense, argues Rockström. A massive body of evidence, he explains, shows that this same global economy is disrupting the water cycle – through greenhouse gas emissions, ecosystem destruction and pollution – and thus making the resource essential. more and more rare. “We don’t integrate this into the economy, and therefore not into governance or water management either. It’s a market failure.
A water irrigation canal in Shafter, Kern County, California.
Citizen of the Planet/UCG/Universal Images Group/Getty Images
Price-in the environment
The solution to this disconnect may lie in a global water market, in which companies or governments trade credits for water use or do things that affect the water supply, effectively paying a price unified for fresh water. Water experts argue that such a system, echoing the way some regions trade credits for carbon dioxide emissions, would encourage businesses to reduce their water use. It could also incorporate economic incentives to protect a healthy water cycle, such as offering a country like Brazil payments if it protects the Amazon rainforest, whose trees generate large amounts of rainfall in South America. by evapotranspiration.
Rockström says a water market is one of the ideas in a “very early phase” of discussion in the Commission on saving water, which was launched last week with him as the one of its co-chairs. The initiative aims to persuade policymakers and businesses to rethink global water management and will present its recommendations at a UN Water Summit in New York in March 2023.
Water is the final front in economists’ confrontation with market capitalism’s inability to take into account both its impact on the environment and its dependence on favorable environmental conditions. This process was launched in 2006 by a report commissioned by the UK government to assess the economic costs of climate change. Economist Nicholas Stern calculated that not tackling climate change would reduce about 20% of annual global GDP per capita, and that the real economic cost of emitting one metric ton of carbon dioxide was 85 dollars. Stern’s ideas (along with a burgeoning field of climate economics research) have encouraged governments representing 46 nations to introduce carbon emissions markets or carbon taxes.
More recently, hundreds of programs around the world have attempted to address the economic cost of nature destruction by introducing so-called ‘payments for ecosystem services’. For example, farmers are paid in the UK to reclaim or reforest a certain amount of their land, to reflect the economic value of things like biodiversity and natural defenses against flooding.
Rockström says a water market – or other mechanism for regulating water use – could combine elements of the carbon and ecosystem services approach: it could put a value on a cubic meter freshwater and provide incentives, such as paying landowners who protect forests. that help trigger rainfall, while inflicting penalties such as billing companies that use excessive amounts of water.
A dried up canal May 21, 2022 in the village of Badokhar, Uttar Pradesh, India, during a severe heatwave that brought drought conditions to large swathes of India’s agricultural heartland.
Ritesh Shukla—Getty Images
As a concept, water markets have been around for some time. A few places already have some form of water market: the most well-established is in Australia’s Murray-Darling Basin, where authorities operate a cap-and-trade system. Water trading also takes place in a handful of irrigation districts in the western states of the United States. But according to a 2021 UN report, the small scale of existing water markets and the “lack of standardized valuation approaches lead to considerable divergence in water values,” undermining their impact. on water efficiency.
In 2014, a group of US-based economists said a regional water exchange system was key to addressing growing water scarcity in the American West. They pointed out that, despite the grueling drought that year, growers of alfalfa – “a low-value, water-intensive crop” – had produced enough crops to export millions of tons to Asian countries. , while growers of higher-value crops had been forced to leave hundreds of thousands of acres of land fallow. “If there were ways to trade water, some farmers might reduce production of more water-intensive, lower-value crops and rent or sell the conserved water to desperate fruit and nut growers or to thirsty cities,” the researchers wrote in a the wall street journal editorial at the time.
Global water flows
To be truly effective, however, a water market may need to be global, says Rockström. This is partly because of the way water is produced: hydrologists are increasingly convinced that the main driver of precipitation in many parts of the world is not the ocean, as previously thought, but terrestrial ecosystems that may span multiple regions. Argentine farmers depend on “flying rivers” – large swaths of moist air – produced by the Amazon rainforest in Brazil, and India relies heavily on the stable melt season in the Tibetan highlands for its rains.
Water is also used internationally; countries are already “virtually” exchanging large amounts of water embodied in products. Chile, for example, uses a lot of water to grow avocados, which it then ships to the UK, while denim manufacturers in China use water to process jeans before shipping them to India. The volume of water exchanged nearly doubled between 1986 and 2007. A 2020 study Nature predicts that it will triple again between 2010 and 2100, as climate change will force increasingly water-stressed countries to rely on imports of water-intensive products.
It would be controversial to put a price on these virtual water flows. If industries pay more for water, they will pass this increased cost on to consumers in the form of higher prices. This would have a particular impact on food, the production of which accounts for 70% of global freshwater use. Any water market mechanism should find ways to protect the poorest countries, and the poorest people in rich countries, from the impact of such price increases. (The EU is currently tackling this issue in relation to carbon; the bloc’s parliament is debating a “social climate fund” to help vulnerable households cope with carbon-related price increases, using money generated from its emissions trading system and other sources.)
Despite the complications, Rockström says failing to review the economy’s relationship to water will cost us more in the long run. The World Bank estimates that a “business as usual” water management scenario will lead to GDP losses of up to 10% per year in some regions by 2050. “As long as we have these market failures, we will continue to destroy the functioning of the Earth system. And in the end, we will have so much water scarcity that we will have an increase in food prices anyway,” says Rockström. “We have to find a smart way to do it.”
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