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October 13, 2010The New Oil
Should private companies control our most precious natural resource?
Everyone agrees that we are in the midst of a global freshwater crisis. Around the world, rivers, lakes, and aquifers are dwindling faster than Mother Nature can possibly replenish them; industrial and household chemicals are rapidly polluting what’s left. Meanwhile, global population is ticking skyward. Goldman Sachs estimates that global water consumption is doubling every 20 years, and the United Nations expects demand to outstrip supply by more than 30 percent come 2040.
Proponents of privatization say markets are the best way to solve that problem: only the invisible hand can bring supply and demand into harmony, and only market pricing will drive water use down enough to make a dent in water scarcity. But the benefits of the market come at a price. By definition, a commodity is sold to the highest bidder, not the customer with the most compelling moral claim. As the water crisis worsens, companies like True Alaska that own the rights to vast stores of water (and have the capacity to move it in bulk) won’t necessarily weigh the needs of wealthy water-guzzling companies like Coca-Cola or Nestlé against those of water-starved communities in Phoenix or Ghana; privately owned water utilities will charge what the market can bear, and spend as little as they can get away with on maintenance and environmental protection. Other commodities are subject to the same laws, of course. But with energy, or food, customers have options: they can switch from oil to natural gas, or eat more chicken and less beef. There is no substitute for water, not even Coca-Cola. And, of course, those other things don’t just fall from the sky on whoever happens to be lucky enough to be living below. “Markets don’t care about the environment,” says Olson. “And they don’t care about human rights. They care about profit.”
In the developed world—America especially—it’s easy to take water for granted. Turn on any tap, and it comes rushing out, clean and plentiful, even in the arid Southwest, where the Colorado River Basin is struggling through its 11th year of drought; in most cities a month’s supply still costs less than premium cable or a generous cell-phone plan. Many of us have no idea where our water comes from, let alone who owns it. In fact, most of us would probably agree that water is too precious for anybody to own. But the rights to divert water—from a river or lake or underground aquifer—are indeed sellable commodities; so too are the plants and pipes that process that water and deliver it to our taps. And as demand outstrips supply, those commodities are set to appreciate precipitously. According to a 2009 report by the World Bank, private investment in the water industry is set to double in the next five years; the water-supply market alone will increase by 20 percent.
Eventually, Olson worries, every last drop will be privately controlled. And when that happens, the world will find itself divided along a new set of boundaries: water haves on one side, water have-nots on the other. The winners (Canada, Alaska, Russia) and losers (India, Syria, Jordan) will be different from those of the oil conflicts of the 20th century, but the bottom line will be much the same: countries that have the means to exploit large reserves will prosper. The rest will be left to fight over ever-shrinking reserves. Some will go to war.
These days, global water barons have set their sights on a more appealing target: countries with dwindling water supplies and aging infrastructure, but better economies than Bolivia’s. “These are the countries that can afford to pay,” says Olson. “They’ve got huge infrastructure needs, shrinking water reserves, and money.”
The bottom line is this: that water is essential to life makes it no less expensive to obtain, purify, and deliver, and does nothing to change the fact that as supplies dwindle and demand grows, that expense will only increase. The World Bank has argued that higher prices are a good thing. Right now, no public utility anywhere prices water based on how scarce it is or how much it costs to deliver, and that, privatization proponents argue, is the root cause of such rampant overuse. If water costs more, they say, we will conserve it better.
The main problem with this argument is what economists call price inelasticity: no matter what water costs, we still need it to survive. So beyond trimming nonessential uses like lawn maintenance, car washing, and swimming pools, consumers really can’t reduce water consumption in proportion to rate increases. “Free-market theory works great for discretionary consumer purchases,” says Hauter. “But water is not like other commodities—it’s not something people can substitute or choose to forgo.” Dozens of studies have found that even with steep rate hikes, consumers tend to reduce water consumption by only a little, and that even in the worst cases, the crunch is disproportionately shouldered by the poor. In the string of droughts that plagued California during the 1980s, for example, doubling the price of water drove household consumption down by a third, but households earning less than $20,000 cut their consumption by half, while households earning more than $100,000 reduced use by only 10 percent.
In fact, critics say, private water companies usually have very little incentive to encourage conservation; after all, when water use falls, revenue declines.
The biggest winners of a sophisticated water market are likely to be the very few water-rich regions of the global north that can profitably move massive quantities across huge distances. Russian entrepreneurs want to sell Siberian water to China; Canadian and American ones are vying to sell Canadian water to the Southwestern U.S. So far, such bulk transfers have been impeded by the high cost of tanker ships. Now, thanks to the global recession, the tankers’ rates have dropped significantly. If the Sitka plan succeeds, other water-rich cities may soon follow.
But in between the countries that will profit from the freshwater crisis, and those that will buy their way out of it, are the countries that have neither water to sell nor money with which to buy it. In fact, if there’s one thing water has in common with oil, it’s that people will go to war over it. Already, Pakistan has accused India of diverting too much water from rivers running off the Himalayas; India, in turn, is complaining that China’s colossal diversion of rivers and aquifers near the countries’ shared border will deprive it of its fair share; and Jordan and Syria are bickering over access to flows from a dam the two countries built together.
So what do we do? On the one hand, most of the world views water as a basic human right (the U.N. General Assembly voted unanimously to affirm it as such this July). On the other, it’s becoming so expensive to obtain and supply that most governments cannot afford to shoulder the cost alone. By themselves, markets will never be able to balance these competing realities. That means state and federal governments will have to play a stronger role in managing freshwater resources. In the U.S., investing as much money in water infrastructure as the federal government has invested in other public-works projects would not only create jobs but also alleviate some of the financial pressure that has sent so many municipal governments running to private industry. That is not to say that industry doesn’t also have a role to play. With the right incentives, it can develop and supply the technology needed to make water delivery more cost-effective and environmentally sound. Ultimately both public and private entities will have to work together. And soon. Unless we manage our water better now, we will run out. When that happens, no pricing or management scheme in the world will save us.
Source (Excerpts from): Newsweek
Water wars seem more and more likely as nations realise how important this dwindling resource is to survival. Fortunately, except for a few outdated laws in some US states where it is illegal to harvest rainwater, rainwater harvesting can be done by anybody. Rain water is free if you harvest it from your rooftop and divert it to your own rainwater tanks. By harvesting rainwater, you will be protecting yourself from the sharp water tariff increases that are expected worldwide.
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