Jul 17th 2003
From The Economist print edition
More money is needed to solve the world's water problems. But even more important, argues John Peet, is the application of economic principles, particularly pricing and markets
THE ancient mariner had it right. In Coleridge's poem, the glittering-eyed, becalmed sailor famously bemoaned the paradox of “water, water everywhere, nor any drop to drink”. Water is by far the commonest substance on earth, but 97% of the total is seawater, unfit for human use. Of the 3% that is fresh, two-thirds is locked up in glaciers or ice and snow around the poles. Only 1% of all the world's water is available for human consumption.
Water is literally vital: without it, life could not exist. But even 1% of the earth's available water should be enough for all. In a natural water cycle, rainwater falls from the clouds on to the land, nourishes life, returns through rivers to the salty sea and evaporates as fresh water back into the clouds. Except for a few sources, such as fossilised groundwater, it is not at all like oil or coal: water is infinitely renewable.
Yet two big obstacles stand in the way of delivery of water to people. The first is that it is often in the wrong location. Some places, such as Canada, Austria and Ireland, have more water than they can possibly use; others, such as Australia, northern China and the Middle East, have too little. In many parts of the world, such as India and Bangladesh, rainfall is highly seasonal: almost all the year's supply may arrive within a few months. There are variations even at local levels, as a “water poverty index” shows for two villages 20 miles apart in Tanzania, (see article). Water is also heavy, which makes it costly to transport over long distances.
The second, bigger difficulty with water is, however, neither physical nor geographical: man's extravagantly wasteful misuse of it. This stems largely from a wilful refusal to treat water as an economic good, subject to the laws of supply and demand. Water, the stuff of life, ought to be the most precious of all gifts. Yet throughout history, and especially over the past century, it has been ill-governed and, above all, colossally underpriced. Indeed it is often given away completely free. Not only does this ignore the huge costs of collecting, cleaning, storing and distributing it, to say nothing of treating waste-water and sewage. It also leads to overuse of water for the wrong things, especially for highly water-intensive crops. This survey will argue that the best way to deal with water is to price it more sensibly—to reflect, so far as possible, the costs of providing it (including environmental costs), as well as its marginal utility.
In the past few years water has become the stuff of international politics. Last March's world water forum in Kyoto, Japan, was only one of a plethora of conferences devoted to it. The United Nations has declared 2003 to be the international year of fresh water, and produced two heavy tomes in support. The Johannesburg earth summit in August 2002 agreed to reduce the number of people without safe access to clean water and basic sanitation by half by 2015. Today, over a billion people in developing countries have inadequate access to water, and 2.4 billion lack basic sanitation. Last month's G8 summit in Evian (a French spa town), appropriately, had water on its agenda, though in the event it did little more than reaffirm the Johannesburg goals.
Pricing ought to be a big part of such discussions, yet many green lobbyists hate talking about it. They believe that it is immoral to charge for water because the stuff is essential and God-given; that private-sector involvement in water is an ethical disgrace; and that interference with the flow of rivers, such as dam-building, is environmentally disastrous. They claim that water consumption inexorably grows with income and population, and that this will lead to increasing shortages and even to wars. The world is fast running out of water, they say, and extravagant domestic consumption is to blame.
To take this last claim first, the world is not running out of water, partly because the natural cycle perpetually renews it but also because the growth in water consumption no longer seems to be correlated with growth in GDP and population (see chart 1 for what is happening in the United States, the world's most profligate user of water). According to Peter Gleick of the Pacific Institute in Oakland, California, in the 1930s it took 200 tonnes of water to make a tonne of steel in America; now it takes only 20 tonnes of water, and the best Korean methods use only 3-4 tonnes. Toilets, which account for the biggest domestic use of water, show a similar gain: from six gallons of water per flush in 1980 to only 1.6 gallons in the latest models.
Domestic consumers are hardly ever to blame for water shortages. As much as 50% of the water in piped systems is lost through leakage. More important, wherever in the world water is scarcest, which is mostly in developing countries, irrigation for agriculture gobbles up at least 75% and sometimes as much as 90% of the available water. In richer countries, industry and energy use a surprisingly large amount. Domestic users everywhere account for a relatively small share (see chart 3). Any shortages should thus be blamed on farmers and manufacturers, not on swimming-pool owners.
As for the idea that future wars will be about water not oil, it is true that water has played a critical role in the Arab-Israeli conflict, and it has sometimes been a proximate cause of fighting elsewhere. But the management of water, especially of rivers, cries out for co-operation, and it has more often been linked to peace than to war. The Indus river partnership functioned through successive clashes between India and Pakistan; the Mekong has been a co-operative venture even though the region through which it flows has been racked by war; and the ten squabbling countries of the Nile basin have signed up to a compact brokered by the World Bank.
The critics' hostility to profit and the private sector is equally misconceived. Water delivery and treatment are highly capital-intensive businesses. As Gérard Mestrallet of Suez, the world's biggest water company, likes to say, “God provided the water, but not the pipes.” Wherever that capital investment comes from, somebody has to pay for it: if not users, then taxpayers or aid donors. For the people who now have no access to clean water, what matters is whether water comes out of the tap, not who delivers it.
Dams, too, are the subject of a noisy debate. Certainly many have been built with little regard for cost or for the environment. But to revert to the purely natural state that some greens advocate is to ignore the dams and water diversions that have been an integral part of civilisation ever since it began along the lower Tigris and Euphrates (in today's Iraq). The Romans built aqueducts everywhere.
The Johannesburg goals of reducing by half the numbers without access to clean water and basic sanitation are pressing; as Michel Camdessus, a former managing director of the IMF, says, no other development goals can be met without them. At present, millions of poor people (usually women) must walk for several hours a day to get water; or they pay through the nose to private water vendors. Either way, the water's quality is often poor. Inadequate sanitation makes matters worse. As much as 60% of the world's illness is water-related. The surprising thing, indeed, is that more has not been done to improve water access and sanitation before.
Meeting the goals will certainly take a huge investment (so it is unfortunate that Britain's development ministry has cut the share of its aid going to water from 5% in 1997 to 3.5% last year). Yet there is room for argument about how much is needed. In 2000, a group under the auspices of the World Water Council (WWC) and the Global Water Partnership (GWP), two big international quangos, reckoned that investment in water in poor countries was running at about $75 billion-80 billion a year, and suggested that this would have to be raised to some $180 billion. That figure was the starting point for a panel on the financing of water commissioned by the WWC and chaired by Mr Camdessus, which reported in March this year. The Camdessus report was criticised by many lobbyists for promoting privatisation and big dams, and even dismissed as a bankers' panel—though as Jim Winpenny, its secretary, tartly observes, it was meant to be that, because its subject was financing.
Other experts put the cost of achieving the Johannesburg targets somewhat lower. Margaret Catley-Carlson, the GWP's president, talks broadly of a doubling of investment. But WaterAid, a respected British-based charity, suggests that an extra $35 billion a year would be enough. Its planning director, Stephen Turner, says that appropriate provision often means standpipes in villages, not piped water to every home; and when resources are scarce, there is little point in treating all water to drinking quality, since much of it is used for cleaning or washing. Sir Richard Jolly, chairman of another quango, the Water Supply and Sanitation Collaborative Council, praises the effectiveness of “VIP latrines” (the acronym stands for ventilated improved pit), compared with far costlier sewage systems. He also notes that simply washing hands with soap is the best single sanitation measure.
Beyond money, the Johannesburg goals require action. To meet the one on sanitation, for instance, will mean bringing service to 400,000 new people every day: a daunting task, especially in countries lacking good government. And, as the GWP's mantra puts it, “Water is a problem of governance, above all.”
Yet despite the difficulties, the Johannesburg targets—and also Mr Camdessus's own professed aim of achieving universal access to clean water and basic sanitation by 2025—are achievable. Delivering clean water and removing waste-water is expensive, but it is not rocket science. Plenty of public and private bodies know how to do it. This is one of the few environmental problems that is, as it were, soluble. And the best way of solving it is to treat water pretty much as a business like any other.