The contrast to poor countries is stark. The United Nations Development Programme estimates that there are over one billion people with inadequate access to water and over two billion who lack basic sanitation. Huge differences exist because of geography (some places are much drier than others), size of the population and income (richer people can afford to access more water and treat it to a higher quality).
Benin — a West African country — has an estimated annual per capita withdrawal of 15 kL of water while the US withdrawal is 1,600 kL. Thus, on average, every American uses, for all purposes, more water in a week than a resident of Benin does in one year. Differences in water consumption are also reflected in terms of water quality. The Food and Agriculture Organization of the United Nations estimates that about 3,800 children die every day — almost exclusively in poor countries ― as a direct result of unsafe drinking water and lack of proper sanitation. Despite these alarming statistics, water access has increased dramatically over the past few decades with the proportion of those with access to potable water more than doubling between 1970 and 2000. If the targets of the Millennium Development Goals for 2015 are met then 1.5 billion more people will benefit from improved water supply, but this will require very large investments in water infrastructure to be realised.
A growing world population expected to rise by more than one billion in the next 50 years, even under with low growth forecasts, will exacerbate water shortages. Climate change will also have important impacts on water supplies and will make some dry areas even drier, such as south-east Australia. Increased evaporation and transpiration associated with higher temperatures will make it increasingly difficult to adapt to these changes. To the extent that climate becomes more variable with greater extremes of rainfall and temperature existing chronic water shortages may become acute in low-rainfall periods. Apart from the difficulties to water users, this will impose increasing costs on the environment as consumption will rise as a proportion of the amount of water available.
Technical and supply ‘fixes’ can help mitigate increased water scarcity and include water diversions from wetter to drier areas, improved water conservation and water efficiency, especially in agriculture that accounts for about 70% of global water use, and ‘drought proof’ water supplies in the form of desalination and potable water recycling. Such fixes, however, pose their own problems. Diverting water from one area or catchment to another, as is happening in China, is expensive and in many places of the world there are few locations where water is available without imposing substantial costs on users from where the water is being supplied, and also on the environment. Improved technical water efficiency that reduces seepage will also lower return flows and thus, the amount of water available to downstream users and for the environment. Desalination is costly and only economically viable in coastal, urban areas where consumers can afford to pay high volumetric water prices.
The supply approach to water scarcity is not sufficient, and in some cases may not be necessary. Changing water demand and consumption practices, however, is required. A key way to improve water outcomes is to ensure that water prices reflect the value of water in use, and also non-use. In many parts of the world this will require a substantial increase in the price charged to users because water consumers often do not pay the full cost of water delivery and large subsidies are often provided to farmers in the form of below cost pricing for water. These subsidies are very large and are estimated to be as much as US$60 billion per year globally.
Higher per unit charges of water will encourage water conservation and efficiency, and also investment to increase and improve existing supplies. Increased volumetric prices may seem inequitable, but it is the poorest in poor countries that have limited or no access to potable, piped water and suffer the most from the inadequate and underpriced water services. Thus, paradoxically, water reform that includes higher prices and promotes greater access and better delivery coupled with ways to ease the burden of higher water charges for the poorest households can be a genuine ‘win-win’.
The coming decades will see a fundamental shift in how water is managed. Business as usual will simply not be good enough to face the challenges of increasing water security. Careful consideration of both the supply and demand, and use and non-use, of water is required. Anything less than an integrated approach to water reform will not deliver the outcomes we need in a water-scarce world.
This essay borrows from the introduction to Economics of Water Resources, edited by R. Quentin Grafton, published by Edward Elgar, 2009, and is also featured in the APEC Economies Newsletter January/February 2010 edition.
R. Quentin Grafton is Director, Centre for Water Economics, Environment, and Policy (CWEEP), Crawford School of Economics and Government, at the Australian National University.
Quentin Grafton will be one of the speakers at the first Crawford Policy Forum on Tuesday, 16th February. Further information can be found here.