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Where is our water going?

September 1, 2010

Sunday sees the start of World Water Week and today’s post comes to us from Professor Andrew K. Dragun, an Economist with the Australian Rivers Institute at Griffith University in Brisbane Australia. He is currently editor of the International Journal of Water and the International Journal of Agricultural Resources Governance and Ecology.

Water is emerging as one of the most serious and controversial resource and environmental issues of the twenty first century. Fundamental water shortage, chronic environmental despoliation of water systems and irreversible debilitation of associated land and marine systems looms, while public expenditures on increasing and improving the water supply are increasingly unaffordable.

A great many of the world’s water “markets” are distorted as a consequence of inappropriate incentive–disincentive systems. The observations of Professor R.H Whitebeck, commenting in the Geographical Journal on early irrigation development in California in 1919, that irrigation development “… was occurring at too rapid a rate and at too high a price”, remain as poignant now as they were insightful nearly a hundred years ago. From the experience of the irrigation colonies of the Chaffey Brothers in Northern Victoria to the Central Arizona Project and, the failures of irrigation in the Central Asian republics, the lack of financial viability of irrigation in the absence of substantial public subsidy is a general rule – even in the paragon of efficient trickle irrigation and high cost irrigation water, Israel.

In many cases the drivers of water development have been political expediency and a desire to end food shortages in many poor countries, with little attention to the costs, the benefits and the prices of water.  The inevitable result of the irrigation-led revolution in water development and regulation, seen throughout much of the twentieth century, is that a huge amount of water is being wasted…

Relative to the consideration of cost recovery, the net returns to irrigation farmers are barely able to cover a small fraction of the annual operating, maintenance and the administrative costs of water management, while the prospect of contributing a meaningful financial return on the capital invested in the irrigation projects (the largest component of water cost) remains but a dream in just about every country on the planet. Societies and whole nations are expending considerably more on diverting and managing water than they are reaping in productive returns. And in many cases, given the lack of profitability, the high environmental costs of the market distortion are beyond the scope of consideration.

Water shortages are looming in both developed and developing countries, as river and groundwater systems become perilously despoiled. New urban and industrial users are pleading for more water, while the established irrigation – agricultural users who control most of the water in many countries, are adamant that they still need much more water to keep their systems going. Ironically, despite the near collapse of many irrigation – agriculture systems, the very low water prices levied on this sector will always stimulate more and more demand for water. On the face of it this water scenario appears headed for collapse.

However, with several leaps of reasoning and a bit of courage, there could be some light at the end of the tunnel.

First, there needs to be recognition that in many cases the apparent water shortage results from problems with the institutionalised process of supply and price/rate setting, rather than extraneous hydrological conditions. A good deal of existing water management at national levels appears to have difficulty realising and dealing with this.

Secondly, it is necessary to dispel the starvation – food shortage myth. It is quite clear that the real terms of trade for food products has been falling steadily for most of the past hundred or so years, indicating an obvious trend in food availability. Additionally, where food “disruptions” have occurred, the root causes can be hammered back to political “games” gone wrong mostly in poor countries, or the distortion of significant world food markets as a consequence of gross subsidization of agriculture in rich countries. High priority water for food is not as serious an issue as has often been made out.

Thirdly, there is a lack of will to move water away from agriculture as a consequence of a conception that it could decimate a whole sector which is often characterized as containing some of the poorer members of the community. The fact is that many of those poorer segments of this sector are suffering already and will suffer very much more unless reasonable readjustment programs are instigated in the near future to give them something else to do besides farming a failing irrigation agriculture.

Ironically, the actual amounts of water which need to be moved from the very low value end of irrigation, to urban, industrial and high end agriculture are not that great, and the pending benefits are enormous.

In many parts of the world, where three quarters of a country’s regulated water supply can be expended on irrigation and agriculture, the need might be to move as little as 10 to 15 percent of the water used in low value agriculture to the higher valued uses over the next twenty years. Another 10 percent could remedy much of the environmental despoliation. And the “nice” twist is that the higher valued users could also pay considerably more for their new supplies, so that a more reasonable balance of marginal returns to marginal cost could be achieved, thus reducing the subsidy burden borne by the long suffering taxpayers.

Being proactive in this way, means that some surplus could be extracted from the apparently stressed water resources, which should enable a reasoned “reassignment” and retraining of the low value irrigators, who are often poor. As well it should enable some remediation of the environmental condition together with refurbishment and appropriate augmentation of the existing stressed systems.

The blind focus on water problems and management as simply being that of hydrological scarcity, needs to be broadened to consider the institutional and economic setting within which water is developed and used. The real needs are to appraise the demands and supply of water in an economic way which accounts costs explicitly and enables prices to be applied to achieve a better outcome for many. (In a positive way the OECD focuses its efforts on the policy and institutional responses on pricing, financing infrastructure and sustainable management of water resources). Ironically, the “fear” of prices for water (poor people can’t pay), inevitably means that poor farmers will be committed to a life of servitude as their livelihood disintegrates underneath them, while at the same time other, often poor, taxpayers carry the burden of the very substantive subsidies and environmental cost which are funnelled into irrigation agriculture.

Water management in many national settings has been delinquent in identifying the institutional and economic underpinnings of wide scale water shortages and water despoliation, and it is timely to consider this failing and establish a pathway to reform as a matter of some urgency. Current issues and reform of world water management will be considered in two special issues of the International Journal of Water.

Useful links

OECD work on water

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