Submitted by guest blogger on Sat, 10/24/2015

By Vanja Westerberg of IUCN’s Global Economics and Social Science Programme.

Kicking off the recent 16th annual Biodiversity and Economics for Conservation (BIOECON) 2014 conference, keynote speaker, Professor Salzman, took us through a fascinating history of drinking water, showing the way in which societies have attempted to supply it in time and space. But for whom, in what quantity, when and at what price, if any, should potable water be supplied?

Traditional Jewish and Islamic law prioritised access according to use – the highest priority was given to drinking water, then irrigation and then grazing within any one community. Overriding this hierarchy was anyone in dire need for water, regardless of his social caste or the community he belonged to.

So-called ‘rights-to-water’ are also enshrined in sharing norms in African cultures, Bihar Indian and Australian aboriginal water laws, and elsewhere. Today, the ‘rights to water’ doctrine is upheld by a perception that water is a public good that should be held in public trust.

 IUCN Photo Library/© Johannes Roesler

Children taking delivery of drinking water brought in by truck. Photo: IUCN Photo Library/© Johannes Roesler

Evidence suggests that rights-based or common property regimes can stay in place for a long time. But when pressures from urbanisation and population grow and industrial or agricultural demands increase, there is serious rivalry in consumption. Under these circumstances, water supply may instead be viewed as a private good – something that has to be paid for in order to inject the capital needed for large-scale expensive infrastructure and delivery. In ancient Rome, a tax, the vectigal, on domestic consumption of water funded the operation of the Roman water system for centuries. It co-existed with a water-by-right regime, whereby citizens could gather water for domestic uses in public basins.

Rights versus pricing, why does it matter?

Viewing water as a public good or a ‘human right’ would suggest that the government should be involved in the development and allocation of water. Public water allocation rules tend to be more pre-occupied with equity, sovereignty and concern for satisfying the greater public good. For this same reason, prices under public water allocation rules rarely represent either the cost of water supply or its value to the user. In many parts of the world therefore, the challenge of financing improvement in water delivery remains unmet.

Another problem is that when prices are too low, water is wasted. But because the users of water within a river basin are interdependent, excessive withdrawals by one user will reduce the availability of water and increase pumping costs and repair costs for all users. There may also be impacts on human health or aquatic ecosystems, with reductions in the quantity and quality of water, for example, affecting downstream fishing communities.

Ultimately, overuse or lack of cost recovery contradicts the broader goals of social equity. For these reasons, economists often call for Marginal Cost pricing as a water allocation mechanism. Marginal Cost pricing involves setting the price of a unit of water to equal the costof supplying an extra unit of water. Under this scheme, water charges typically include collection, treatment and distribution to customers, while overuse can be averted by letting prices rise to reflect the relative scarcity of water or to account for negative environmental impacts of water abstraction.

On this basis, there is a growing interest in valuing the true cost of water abstraction, not solely to cover operation and maintenance costs, but also to internalise the costs of adversely impacting freshwater ecosystems or public health. To date, there is little experience with social cost pricing in water allocation mechanisms. But we do know that when Marginal Cost Pricing is applied, the high cost of expanding capacity (new reservoirs and pipes, for example) will lead to a swift rise in water charges.

Such a scenario was witnessed in Bolivia in 2000, when a concession for water and wastewater services in Cochabamba was licensed to an international private consortium. The sharp rise in costs to households and fear over loss of entitlements led to violent protests. The concession was terminated and the government resumed control over the water supply. Similar experiences have been witnessed elsewhere.

Surely, as Professor Salzman argues, if water access is based purely on ability to pay as opposed to willingness to pay, there is a real risk of denying some segments of society access to adequate quantities of clean drinking water.

Experience suggests that the pursuit of efficiency in water allocation without considering equity will be a short-lived effort. But pursuing equity in the absence of efficiency may lead to groundwater depletion rates that exceed recharge rates. When aquifers run dry, how can rights to water be met? Maybe we can learn something from ancient Rome, or from contemporary ‘hybrid’ water allocation mechanisms. Indeed, the long-lived nature of rights-based approaches across cultures and time strongly suggest that rights-to-water should be a core aspect of privatisation efforts or other water allocation approaches.

It is estimated that about 1.5 billion people today live in areas seriously affected by water scarcity and that the number may increase to almost 4 billion by 2050. To meet one of the biggest challenges of the 21st century, it is critical that water management policies are framed to help unlock affordable supply in developing countries, for example, through cost-effective ecosystem restoration, while promoting the long-term ethic of saving water resources through technology or behavioural change. This is a mission to which IUCN is dedicated.

Find out more about what IUCN is doing on sustainable water management.

A resolution on the human right to water and sanitation was adopted at the 2012 IUCN World Conservation Congress.