It's High Time to Overhaul Water Pricing

Recent water-related catastrophes in places like Toledo, Ohio, Los Angeles and West Virginia highlight an increasingly pressing need for the U.S. to make significant new investments in water resource infrastructure and management. They also cast light on outdated market structures and pricing mechanisms that result in counterproductive, even perverse, use and management of precious water resources.

In a recent article published by online environmental magazine Ensia, long-time water resource specialist, author and journalist Cynthia Barnett delves into the at-times murky world of the political economy of water in the U.S. “We're subsidizing our most wasteful water use – while neglecting essentials like keeping our water plants and pipes in good repair,” she writes.

How best to restructure water markets so as to make genuinely sustainable use of water resources is a controversial and hotly debated topic among economists, government leaders and agencies, as well as end users. More broadly, it raises the economic issue of how public goods – water, air, knowledge and national security, for example – are priced by markets and allocated among end users. In her article for Ensia, Barnett quotes Amsterdam-based water economist David Zetland, “You can get to sustainability, but you can't get there without putting a price on water.”

The political economy of U.S. water resource usage and management

Facing the possibility of a fourth year of drought, NASA recently published a satellite map showing the alarming extent to which California's groundwater resources – the crucial buffer for water supplies when rainfall falls short – are being depleted.

Per capita water usage in the U.S. has declining even as the U.S. economy and population have grown. Less water is used today in the U.S. than was the case 40 years ago as public awareness and widespread measures to increase efficiency – irrigation, water recycling on the part of commercial and industrial companies, and low-volume toilets, for example – have been adopted, Barnett points out.

Nonetheless, Americans continue to use more water, and pay considerably less for it, than most societies on the planet. Although it's the most precious of natural resources provided by U.S. utilities, it is also the least valued, Barnett notes. Poorly designed water policies and pricing are compounding the problem, leading to excessively wasteful use of water and disincentives for water utilities to invest in infrastructure, she continues. Further intensifying the issue is climate change, which causes changes in precipitation levels and seasonal patterns, according to scientists.

“Squeezed by drought, U.S. consumers and western farmers have begun to pay more for water. But the increases do not come close to addressing the fundamental price paradox in a nation that uses more water than any other in the world while generally paying less for it. And some of the largest water users in the East, including agricultural, energy and mining companies, often pay nothing for water at all,” Barnett writes.

Water policies and pricing mechanisms lead to wasteful use

The Gulf of Mexico "dead zone," the Duke Energy coal ash spill in West Virginia, the toxic algal bloom that shut down water supplies in Toledo, Ohio, and the burst water main that wasted 90 million gallons of water in Los Angeles are only a litany of developments that have brought the political economy of water resource management in the U.S. to the forefront of the public agenda. As Barnett puts it:

“The problems are also laying bare the flawed way we pay for water — one that practically guarantees pipes will burst, farmers will use as much as they can and automatic sprinklers will whir over desiccated aquifers...

“Pennies-per-gallon water makes it rational for homeowners to irrigate lawns to shades of Oz even during catastrophic droughts like the one gripping California. On the industrial side, water laws that evolved to protect historic uses rather than the health of rivers and aquifers can give farmers financial incentive to use the most strained water sources for the least sustainable crops."

As one example, Barnett cites water usage and pricing near Yuma, Ariz. — the driest spot in the United States, with an average rainfall of 3 inches per year — where farmers use Colorado River water to grow alfalfa, a water-intensive crop. “Under the law of the river,” Barnett notes, “if they don’t use their allotment, they’ll lose their rights to it.”

Playing catch-up, municipalities around the U.S. have been raising water rates. Increases in cities' water rates have risen faster than the cost of living since 2007, but not fast enough to fund the estimated $1 trillion in projected new investments and repair costs for water resource infrastructure, Barnett continues.

The human right to clean water

Climate change is intensifying the need to restructure the political economy of water in the U.S. “Going forward, water infrastructure, supply and quality challenges intensified by the droughts, floods, temperature extremes and other influences of a changing climate will require new approaches to not only price, but also ethics: using less and polluting less, recycling more, and sharing costs among all users,” Barnett elaborates.

A public good essential to life, used and shared by all Americans, water markets are often opposed by human rights advocates, who argue that environmental goods and services that serve essential human needs should not be priced like commodities. While acknowledging this, Barnett believes water markets can be restructured in ways that meet the needs of all stakeholders, but do a much better job of allocation and producing the funds needed to make water infrastructure supplies sustainable and resilient.

“U.S. water use and price have been so skewed for so long that market solutions may be the only politically feasible way to right them. If we are to subsidize anyone, perhaps it should be the poor: A sustenance level of water for those who need it — free or dirt cheap — and higher prices for those who want more and choose to pay,” she writes. Barnett echoes University of Arizona law professor Robert Glennon, author of “Water Follies” and “Unquenchable: America’s Water Crisis and What To Do About It,” when she writes, “I argue for a human right to water. If we can’t guarantee that in the richest country in the world, we are a sorry lot.”

*Image credits: 1)  Jacques Descloitres, MODIS Land Rapid Response Team, NASA/GSFC, January 2003; 2) NASA; 3) Global Water Intelligence Tariff Survey 2014.