Water Markets and Integrated Water Resources Management

Introduction: The Dublin Principles and IWRM

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.

Water Markets and Economic Valuation

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).