Page last updated at 19:11 GMT, Monday, 2 February 2009

How can water be fairly distributed?

ANALYSIS
Clare Davidson
Business reporter, BBC News

The dry bed of the Hume Weir, Murray-Darling basin
Some argue Australia's experience is an indicator of what is to come

By the time you read this you will have inevitably used water directly and indirectly since the start of the day.

The chances are you have no idea how much you have used.

But without it, many activities would have been impossible - from obvious processes such as drinking to washing - to having food to eat, using energy and enjoying any number of manufactured goods.

But as competing demands for water intensify, how can we ensure that water is fairly and affordably distributed?

Stress

By 2030, 3.9 billion people are forecast to be living in areas under severe water stress, the OECD predicts. This is in addition to around one billion who already lack clean water today.

While the scale of the problem might be clear, opinions are fiercely divided over how to handle this pending crisis.

At one extreme are those who say water should be traded through markets, like a commodity, to optimise its value.

WATER TRENDS
How availability, use and needs are changing across the world

At the other are those who argue water, specifically access to it, is a human right and is priceless.

Talking at a recent UN event, Maude Barlow, senior advisor on water to the organisation and an author and campaigner on water issues, said: "Water is not first and foremost a commercial good - though of course it has an economic dimension - but rather a human right and a public trust".

Daniel McCarthy, chief executive of Black and Veatch Water, a firm specialising in the treatment of water, says that water is indeed free.

But he goes on to add: "Of course, providing water is a business. What you pay for is the service that gets it to you in a reliable form.

Someone has to pay for infrastructure costs, ongoing maintenance, and staff, he says.

"The question is the degree to which it should be profitable."

Template

Looking ahead, many view Australia as a warning of what might happen elsewhere.

It has faced severe water shortages, and in response has adopted a complex water trading system to distribute the commodity better.

Tap
Water has often been heavily subsidised

Under the country's National Water Initiative, water rights can be transferred on a temporary or permanent basis between different parties, such as irrigators, environmental water managers, and water infrastructure operators.

The government argues that it allows "scarce water resources to be transferred to their most productive uses".

Don Blackmore, who was involved in the early stages of such a mechanism in Victoria in 1984 and today is chairman of eWater Cooperative Research Centre, goes as far as to say: "We would have gone to war without a water trading system".

Within such a framework, he says: "The value is what someone is prepared to pay you."

Too cheap?

Water cycle

"Every water issue is a local issue," says John Briscoe, professor of environmental engineering at Harvard University and until recently the senior water advisor of the World Bank. Many others echo this. "There is no one answer for providing or managing water," says Mr Briscoe.

So there is no easy formula to define its true value or cost.

But many agree that there has been huge wastage of this precious resource.

It has often been heavily subsidised. Paradoxically, analysts argue, this has meant water has been overused because it has been misleadingly cheap for the end user.

Those in favour of trading argue that unless the true cost of having water is made clear there is no motivation to be more efficient.

Trade choices

Mr Briscoe says as supplies become more constrained, there is more and more emphasis on "more value per drop of water".

"It was crazy for rice to be grown in [Australia's] desert. It was argued that the country needed it for food security.

"But if growing grapes and almonds creates more jobs and better exports, it's a better use of water," he argues.

Similarly, he says: "Having golf courses or casinos with water features in Nevada is not a moral issue.

FUTURE WATER STRESS
Water map

"It is a practical issue."

If that is the best way to add value by creating jobs, so be it.

Some places, including Saudi Arabia, are re-assessing what they produce due to water shortages.

They have shifted away, sensibly in Mr Briscoe's view, from producing water-intensive crops like wheat.

Instead, they can import goods they need using money generated by oil.

But what about poor countries that are water-constrained? How will they trade?

The simple answer, says Mr Briscoe, is "with great difficulty".

"In some cases there will be massive migration to places where there is work," he adds.

If water is deemed a commodity, who will protect it, questions Ms Barlow.

"There is a risk that only the rich will have clean water, nature will have to fend for itself and there will be no incentive to stop pollution or conserve water," she says.

Growth

It would be a mistake to think trading systems are easy or quick to implement. Australia has taken 20 years to develop what is a highly sophisticated mechanism.

And Mr Blackmore says certain preconditions are essential to ensure an efficient and transparent system, such as well-defined property and land rights - which is not the case everywhere.

While water trading is still relatively limited, several investment banks have underlined the opportunities in the sector through investment in utilities or firms that develop technology to treat water.

In a report last year, Goldman Sachs said it continued "to be bullish on the long-term defensive growth opportunities in the $425bn global water sector".

Meanwhile, oil tycoon T Boone Pickens has been buying up ground water rights in Texas, as the state faces an increasing squeeze on demand.

It is hardly surprising some call water "blue gold".

Cost of dirt

While lots of money might be up for grabs in water-related investments, there is another side of the coin, namely the cost of dirty water.

Polluted water is a major contributor to deaths in the developing world, with young children among the most affected.

But investing in water treatment systems and infrastructure itself does not guarantee that the neediest actually get the water they require.

"There has been a lack of investment in water. It only takes priority when it starts becoming unavailable," says Black & Veatch's Mr McCarthy.

But by then it could be too late.

A New South Wales farmer walks through a dusty field after its barley crop failed, 26 October, 2006
Australia is facing its worst drought in a century



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