This paper examines economic and integrated approaches to global water sustainability, drawing on the Global Water Partnership's Technical Advisory Committee framework and a range of international case studies. It evaluates the Dublin Principles, the rationale for treating water as an economic good, and the role of Integrated Water Resources Management (IWRM) in coordinating land and water policy. Case studies from Hawaii, Chile, Australia's Murray-Darling Basin, Iran, Mexico, and the United States illustrate how water pricing, tradable water rights, and cap-and-trade systems can reduce waste, promote equity, and protect ecosystems. The paper also addresses cultural resistance to water commodification and the importance of adaptive, community-based governance structures.
The Technical Advisory Committee (TAC) of the Global Water Partnership has issued an urgent yet coherent series of proposals. The need for sensible, workable programs to deal with the rapidly growing world population is acute, according to the TAC. The list of challenges is long, but without the "will to act" by political players and affected communities, the crisis can only grow progressively worse.
The Dublin Principles should be on the opening page of any foundational text on world water resources: (a) fresh water as a resource is finite and vulnerable, and sustains life, economies, and the environment; (b) a participatory process should be in place to manage water development and water resources; (c) women "play a central part in the provision, management and safeguarding of water"; and (d) water has an economic value and should be seen as an "economic good" (TAC, pp. 13–14).
It is the responsibility of governments at all levels to establish the model for participation by all parties. Past failures in water resources management have occurred because water "is still" — and has been — viewed as a "free good" (TAC, p. 18). When water is treated as an economic good, however, it helps provide a balance between supply and demand. This is where Integrated Water Resources Management (IWRM) becomes essential.
Water managers in the past have seen themselves in a "neutral" role, but integrated management means that freshwater and saltwater systems must be incorporated into one strategy. Land management and water management must also be integrated, because the crops and other vegetation that are part of land use have potent implications for nearby water resources (TAC, pp. 23–24). At the heart of any successful integrated water resource policy is having economic planners and land-use policymakers working in concert (TAC, p. 27).
Legislators must have the political will to pass and enforce laws; otherwise, integrated systems will not function (p. 36). An important part of making linkages workable in integrated policy structures is transforming "top-down" authority structures into "bottom-up" strategies. That means new institutions must be established based on community needs and input. The regional or state power structure must be willing to charge for water and to enforce existing laws involving wastewater permits and land-use planning.
Regarding the merits of private property rights: when farmers are involved in the management of water resources — as individual landowners or through farm associations — it helps establish a sense of ownership that goes one step beyond stewardship. Private property owners' input into the political and environmental process is frequently a "precondition for improved and more sustainable management of assets and resources" (TAC/IWRM, p. 50).
Regarding the merits of water markets: while in some instances it is difficult to place a precise value on water, when markets do not truly reflect water's value, additional mechanisms must be introduced to bring water to its "highest value" (TAC, p. 56). When systems of trade for water are being established, economically based market mechanisms must be agreed upon by all parties.
"Full-fledged water markets" have been instituted as major water management reforms in several countries around the world, according to Maria Carmen Lemos (2008, p. 250). By implementing a policy that "reframes" water as a "common good with economic value — that is, a good for which users should pay" — a debate will likely ensue between policymakers and stakeholders. But if users "are made to pay for a good that they have customarily been able to access free of charge," they are far more likely to conserve what they pay for. Receiving something for free does not engender the same sense of value as having to pay for it.
According to F. Lee Brown (1997), there are cultural factors to be considered when treating water as a commodity in the United States. Native American and Latino communities have traditionally rejected the idea that water should carry a price — it is a deeply cultural issue. Non-Indian communities facing water shortages, however, have "always treated water as an economic model" (Brown, p. 2). Brown contends that every civilization in history has treated water as an economic commodity during times of scarcity. He also recognizes the difficulties in distinguishing between water as an economic commodity and water as a commercial commodity — "distinct and divorced from its value to the community in many ways that differ from its economic scarcity value alone" (Brown, p. 4).
When water became more of a commercial commodity — partly as a result of the U.S. Supreme Court ruling in Sporhase v. Nebraska, which subjected water to interstate commerce clause scrutiny — many people worried that cities like Los Angeles would draw far more water from the Colorado River than other entities simply because they had the financial resources to do so. Brown posits that if communities' norms, values, and customs are "conducive to the emergence of water markets, by all means let markets evolve," but cautions to "keep a watchful eye that they don't become noncompetitive" (Brown, p. 4).
In Hawaii, approximately 43% of agricultural water resources are used by private corporations in the sugar and pineapple industries — a "classic case of oligopoly in action" (Gopalakrishnan, 2005, p. 9). The sugar industry applies about 278 million gallons per day to cane fields, and the rapid proliferation of golf courses (over 60 in Hawaii) "has cut into the water available for other uses" and is a source of ongoing conflict. Author Gopalakrishnan created a "hypothetical water market" using actual prices to estimate the "potential loss of revenues from the oligopolistic control of Hawaii's water resources." He asserts that the establishment of water markets and water pricing in Hawaii is essential to preserving the state's freshwater supply (p. 20). When a water market is established, the "management of demand through the use of the pricing mechanism" reduces waste, at least partially eliminates overuse by corporate interests, and ensures "social equity" (p. 135).
In Iran, the mirab — the person in charge of water distribution — is paid in cash, sells shares based on water market value, or accepts crops in exchange for water usage (Gopalakrishnan, p. 139). It is an ancient system, but it establishes a market value for water. Water is not truly "free" anywhere, yet too many nations and localities have no formal water market and therefore operate under a patchwork of rules with limited accountability.
In Chile, market forces have played a "major role" in ensuring that only the highest-value user obtains water, which is "an important principle of IWRM" (Pena et al.). Chile's government did not permit the privatization of water utilities until a public regulatory system was "well-established" (Pena, p. 5). Private utilities were then allowed to charge for their services, effectively initiating a water market. No significant public protests followed, Pena explains, because the transition coincided with "a period of high economic growth" at 7% per year (p. 5). The Chile experience demonstrates that IWRM strategies must be "adaptable and dynamic, not fixed and inflexible" (Pena, p. 5).
Economic incentives — "especially effective water pricing and the creation of water markets" — are potentially powerful tools for boosting water productivity (Postel, 2003, p. 112). Water markets, as Sandra Postel explains, give conservation groups, government agencies, and others the opportunity to purchase water or water rights specifically to enhance water flows (Postel, p. 112).
In Australia, tools to manage scarce resources have been in place for centuries. Water is readily available in the north, but much of the continent is dry and subject to drought. The unpredictability and unreliability of precipitation requires the government to administer resources wisely (Hussainy et al., 2007). In the 19th century, Australia adopted the Irrigation Act of 1886, asserting that all streams are public property. Due to chronic water shortages, all surface rights in Victoria have been "nationalized" and riparian rights have been effectively abolished throughout Australia.
More regulation is nonetheless needed. Politicians have not consistently implemented the correct policy tools to link economics and ecology. The Murray-Darling River Complex involves thirty-three different government departments and 256 local governments that "have a stake in it" (Hussainy, p. 205). The economics of this basin are substantial, making cooperation imperative rather than optional. Although the Murray-Darling covers only about 14% of Australia's irrigated land, it supports 50% of Australia's sheep, 25% of its cattle, 40% of its rice crop, and 80% of its canned fruit production. In total, three-quarters of Australia's water originates from the Murray-Darling River system (Hussainy, p. 205).
"Chronic drought, salinity crisis, and cap-and-trade"
"Integrated watershed approaches in Asia and the Pacific"
"California pricing tiers, Chile and Mexico water trading"
Postel, Sandra, and Richter, Brian D. Rivers for Life: Managing Water for People and Nature. Washington, DC: Island Press, 2003.
The World Bank. "Water Resources Management: A World Bank Policy Paper."
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