With economic growth and the effects of climate change, reducing demand will, in most cases, be the cheapest and most readily available source of "new" water in most parts of the world. The amount of water that can be saved through demand management over the next 2 to 20 years is very great indeed.
4.1. PRICING AND COSTS AS THE CRITERION OF EFFICIENCY
Putting a price on water is standard economic wisdom. Pricing "works" in the sense that most household users and all commercial users of water, including farmers, adjust water use in response to price signals. Even in affluent and relatively water-rich countries such as Canada, cities that metre water show distinctly lower per capita rates of use than those that do not (Brandes and Ferguson, 2004). However, if pricing is to promote true water security, it must be implemented in concert with social and economic equity. For example, high prices for water are a fact of life for poor people, who commonly pay ten times as much per litre for water of questionable quality as do richer people for water of good quality. The inequity arises because the wealthy are able to bring public water services to their neighborhoods while those less fortunate have to rely on private vendors. Improvements in water security can only occur when increases in the price of water are coupled with ways to extend the benefits of public water to all.
Many cities in both industrialized and in developing nations have adopted increasing block prices, which serves several purposes. An idealized system might include three tiers or blocks. The lowest block for perhaps 10 to 20 m3 a month is sold at a low price (sometimes called a "lifeline" or a "social" tariff) that provides enough water for the basic needs of low-income households. The price for the middle block is set to cover full costs of treatment and delivery (including capital costs), and provides enough water for all indoor needs. The price for the upper block is high enough to cover not only its own cost but also the loss entailed by the under-priced initial block, as well as to provide a strong incentive for conservation (Easter and Liu, 2007). Subsidies to higher income people can be avoided by making the second block non-marginal. Those who consume more than the initial block pay the higher rate for the full volume, not just the additional water.
The situation is very different in rural areas. Farmers are not generally expected to pay capital costs for irrigation systems, which implies a huge subsidy. As put succinctly in Human Development Report 2006 (p. 191):
Governments since the time of the ancient Egyptians have financed the capital costs of irrigation infrastructure out of general tax revenue.
Even in those countries where irrigation infrastructure is being extended to new areas and where commercial farmers are expected to contribute to investment costs, subsidies remain high. Nevertheless, Easter and Liu (2007) report considerable improvement around the world in cost recovery for irrigation systems that adopt some measure of market pricing. However, they caution that the extent of improvement varies widely depending on the role of farmers in designing the cost recovery system, the degree to which payments were used to maintain or improve the irrigation system, and the transparency of the collection process. A particular effective approach is to establish or strengthen community-based water users associations (Dinar and Mody, 2004).
Recent research at the University of Victoria in Canada demonstrates the potential of demand management in urban areas of Canada, which may be generalized to many parts of the Global North (Brandes and Ferguson,
2004; Brandes et al., 2005). At almost no marginal cost, low-flow shower-heads reduce water for this use by half or more. Rooftop water collection is more costly but can reduce water for toilet flushing (the largest indoor water use in most buildings) by nearly as much. Some changes can occur surprisingly quickly. In the last decade, the number of Canadian households with low-flow showerheads increased by 50%, and the number with low flow toilets tripled - despite low water prices (Statistics Canada, 2007).
The gold standard in determining cost effectiveness of water demand management has been set by the Pacific Institute in California with a pair of studies. The first study looked at urban (residential, commercial, institutional, and much industrial) water use in California and found that current use rates could be cut by 30% using off-the-shelf technologies (Gleick et al., 2003). Those savings are available at lower cost and in less time than any new supply project, and they would eliminate the need for California to provide additional capacity for at least several decades. The follow-up study, which added agricultural and rural uses of water, and which adopted the same population, housing, and economic projections as did the official California Water Plan, concluded (Gleick et al., 2005, p. 1):
Under a High Efficiency scenario, total human use of water in California could decline by as much as 20 percent while still satisfying a growing population, maintaining a healthy agricultural sector, and supporting a vibrant economy. Some of the water saved could be rededicated to agricultural production elsewhere in the state; support new urban and industrial activities and jobs; and restore California's stressed rivers, groundwater aquifers, and wetlands.
These conclusions are not based on expectations of new technology or higher prices than those already planned by officials in the state of California. Rather, they stem from wider and more rapid adoption of high-efficiency water technologies.
Of course, the High Efficiency scenario will not come about on its own. As the authors (Gleick et al., 2005, p. 7) comment:
While we do not believe a highly efficient/water/future is necessarily easy to achieve, we think it will be easier, faster, and cheaper than any other option facing us.
We agree, but we caution that these studies apply particularly well in affluent societies where equity of access to water is taken for granted. The emphasis on efficiency needs to be tempered by social equity in circumstances where there is uneven access to water resources, something that is common in the urban areas of many countries, and even more so in rural areas.
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