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Symposium 2011

Proposal - For Water, the problem is more often too little than too much

The Challenge

The United Nations estimates that the number of megacities with a population of more than 10 million will triple from 20 in 2003 to 61 in 2015. It is estimated that more than nine tenths of urban grow ...

The United Nations estimates that the number of megacities with a population of more than 10 million will triple from 20 in 2003 to 61 in 2015. It is estimated that more than nine tenths of urban growth will occur in developing nations, with four fifths of urban growth occurring in Asia and Africa.

Where to begin

1st, water and waste are different sorts of urban services in fairly dramatic respects. Water is most critically a basic service for the populations of

megacities that, rather than being wasted or in danger of misuse, is normally in severely short supply, a problem mostly worsening as cities grow faster than their abilities to provide basic services for even minimal health and economic well being. Indeed these shortages stifle the abilities of individual families and firms

to survive. While conservation is often a way of killing two birds with one stone, via improved efficiency and better appreciate for the value of collective resources, megacity water does not fit that profile particularly well.

The main challenge for water managers in megacities is getting adequate quantities that permit basic health. This is more important in many cases than improving quality, as useful water can be so rare that basic sanitation is unavailable, leading to literarily millions of infants deaths per year. With fuel, even bad water can be boiled and cleaned of many problems. (Yet fuel is often scarce as well.)

Water use is however closely tied to sanitation waste especially, as getting water out of the home is nearly as important as getting it in. To keep these comments brief, I will focus here on water solutions.

The problems

Permit me to offer a somewhat different assessment of the problem before suggesting responsive solutions. The cases I am most familiar with illustrate four sets of problems and opportunities.

  1. On the one hand water is scarce, relative to any useful notion of demand. Two explanations dominate: One is the raw influence of population growth, attributable to macroeconomic trends as well as local urban land use planning practices. The other is the pattern of subsidies to water consumers, which tend to encourage overuse relative to cost. This scarcity has direct implications for the continued economic growth and vitality of the region. As water becomes scarce, the issue is thus not whether to conserve, but how to conserve most effectively in view of the environmental, equity and political considerations at hand.
  2. A second problem is that system finances are not sustainable under current practices. Water costs are rising, owing to the increased cost of adding new water sources, the costs of higher water quality standards, and the need to be more attentive to system maintenance and the expansion of the distribution system. At the same time, revenues from subsidies are unlikely to continue at historical levels. Among other major fiscal reforms underway in many developing countries is the devolution of both expenditure and revenue responsibilities to local levels. The public sector is decentralizing and subnational authorities at every level are required to self-finance more than in the past. Much more so than demand management, the principles of ‘cost-recovery’ are driving the behavior of local governments and water authorities alike in developing countries everywhere. Owing to factors beyond its control, the water sector is therefor being forced to generate substantially more of its own revenues than previously.
  3. A third set of problems concern the effects of water access and water cost on the quality of life of low-income residents of each area. Reducing geographic and income inequities within the area is an obvious concern, for health, fairness, and economic development reasons. Access to good water varies dramatically by location, and presumably by income, as does its real cost (including time and transport costs). Broadening the availability of low-cost access to water refers not only to the water tariff paid per liter but the time and effort required to get good water into the home. It also includes having an adequate sewage system in low-income areas, for environmental and family health purposes, which in turn requires an adequate water supply.
  4. Further, in many fast growing megacities in poorer countries, water has over time become an essentially unregulated private good via resales and home deliveries by enterprising private vendors. This limits the reach of public sector reforms at the retail level, though the original wholesale supply remains public. More to the point, though, is that this additional labor results in final user water costs that discourage healthy consumption. The problem with water in megacities, again, is that too little is consumed by most residents – whether measured in footprint metrics or not – and the redistribution of water by private means worsens this pattern.

Solutions

Some of the factors influencing the use of water by each customer are under the direct or indirect control of the water authority, and are thus policy tools. The use of any one of these tools to control water consumption is known as ‘demand management’. In contrast to supply-side strategies that emphasize the development of new and/or better supplies to deal with water scarcity problems, demand management is mainly concerned with policies affecting user behavior. It is useful for public policy purposes to think of such tools as falling into one of two categories:

  1. Involuntary: Policies that directly control water use include command-and- control methods such as water rationing, the retrofitting of plumbing equipment, new construction codes, water reuse regulations, and the like. Consumers have relatively little discretion regarding their implementation.
  2. Voluntary: Indirect policies include those influencing behavior but that do not dictate it. This group of tools includes economic and educational policies that encourage, while not requiring, certain changes in behavior. Economic strategies are most frequently based on various monetary incentives and disincentives that convey to users information about the social value of water in different uses. Realistic water pricing is one of the most fundamental keys to water demand management and is central to many of its options. Public education about the real cost of water waste is another.

Put another way, demand management is a framework for guiding consumer behavior to use levels leading to sustainable supplies and finances over the long term. It includes conservation and cost-recovery mechanisms, in addition to reallocating consumption among users to reduce waste and improve equity. Which of these policies will work most effectively depends on local circumstances. In some instances, for example, command-and-control techniques will achieve higher short-term gains than a revamped pricing policy.

A comment on the Symposium program site mentioned that while pricing could be used to guide more efficient use, it would seem to clash with affordability issues in low income cities. This actually is not always the case, especially where final users obtain their water from the private sector. In these cases, and there are hundreds of cities fitting this pattern, the inability or lack of will of the public sector to provide good water in adequate quantities to the poor generally leads to their paying much higher prices. New investment in water, and then charging the poor the actual cost of these investments, will generally reduce their costs by 50 to 80%. For those simply unable to pay, lifeline pricing systems are suggested.

The solution? One part relates to basic needs, the other to basic demands.

Basic needs: For health reasons, governments typically take on the responsibility for meeting the basic needs of the population. Additional demands are met for economic development reasons. One question is then: who should pay? The answer is not straightforward. For social reasons, some cross-subsidy across income groups is often the convention. However, in those cases where services are not extended to the very poor because it is not considered affordable, the equity issue can be used as a straw man. The evidence indicates that the demand for good water on the part of poor is usually high enough to cover the costs of increased access, as I’ll discuss in the next case. The poor will pay if they need to. They are willing. They show this by doing so. Whether this is required is a social and political question.

The goal here is to provide access to water of good quality at a cost that, at the very least, enables and encourages households to consume healthy quantities.

Basic demands: As I argue here, water’s user value depends overwhelmingly on how much is consumed, which in turn depends on cost per liter. In most cities in the developing world, publicly supplied water is subsidized such that people use much more of it than they would if they paid what it cost to supply. Put another way, they value it much less than it cost society. Where water is running out, this is hard to justify.

People value resources, natural or otherwise and for good or ill, at the price they pay for them. Moreover, water as provided by a public utility is not so expensive to many households that you need to subsidize it across the board. In the second, subsidies lead to waste, and rapidly growing cities especially cannot afford to waste much more. If water is free or nearly so, as it was in Mexico City until the 1990s, this can lead to considerable unattended leaks and spillage. In the third place, the water sector needs funds desperately to finance repairs and expansion. Together, these factors combine mainly to restrict the ability of each system to extend reasonable access to good water by the poor, who are thus often the losers rather than the beneficiaries.

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