In Deep Water

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Water has been in the news a lot this summer — from the historic drought in California (check out the before and after photos in the top screen), to the algae blooms in Lake Erie (again, the photos are stunning). California doesn’t have enough water. Ohio has water – but it’s green.

We all know water is a critical resource. Too little and life is threatened. Too much and floods wreak havoc (Calgarians know that well). And when it’s polluted or dirty, it’s not useful.

So what’s a policy-maker to do? The challenges around water use, water access, and water infrastructure and management are large and complex. But there’s a lot Canadians can learn from what other countries – and some leading Canadian jurisdictions – are doing. Those at the leading edge have started putting an economic value on water, reflecting how important it is to our quality of life and the health of our economy. The table below shows how Canadian water prices are low relative to our water use (data from Environment Canada and the OECD.) There are no muddy waters here – it’s clear that we need to value clean water and dis-incent water pollution.

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There are lots of different policies we can use to do this. At SP, we think policy makers would be wise to use all the tools in their toolbox (like regulations, education campaigns, etc.), but that one policy in particular can be especially helpful: pricing.

When it comes to using water, if we get it for free – or for a really low rate – we tend to use it quite a lot. We water lawns and fields, leave the sprinkler on for the kids, run the tap – and think of water as limitless. The truth is, water isn’t limitless, as Californians are keenly aware. And even when water’s plentiful, as it is in most of Canada, there are costs of getting it to us – costs like building and operating water treatment plants and water piping infrastructure. The city of Toronto realized this and over the past several years changed the way it charges for water, slowly increasing prices. The result was quite amazing – water use declined more than expected. As prices increased by 6% to 10.8% over the last decade, residential water use declined by 24% on a per capita basis.

On the flip side of the water coin, pricing can also help keep water clean. SP tracks what’s going on with water quality markets in Canada – these are markets in which releases of pollution to water are limited and priced. For instance, our Environmental Markets 2013 report included the South Nation River Total Phosphorus Management Program. This nifty program manages phosphorous releases to the South Nation River watershed (located south of Ottawa) by ensuring point source emitters of phosphorus pay to secure a right to release phosphorus (and those funds are used to help non-point source emitters, generally farmers, reduce their phosphorus emissions.) While rare in Canada, this kind of water quality trading market is used extensively in the US. A pricing solution like this could potentially help manage the phosphorus pollution releases to Lake Erie.

Getting pricing policies right requires finding a careful balance of getting the price level right while finding ways to make sure those who need water can afford to pay for it – but done right, pricing can be a large part of the solution.

Of course water use pricing and water pollutant pricing alone won’t solve all our water issues. We still need to address the causes of our water issues, like droughts caused by declining snow packs due to climate change and erosion from loss of forests due to economic activity. And we need to raise awareness.

Interestingly, while the ubiquitous ALS ice bucket challenge started out as an awareness raising initiative for ALS research, it has also helped raise the profile of water issues. For instance, some notable California celebrities have done the challenge with dirty bath water to help educate Californians about water conservation and in Hunan Province in China, citizens have adopted the empty bucket challenge to raise awareness for the worst drought in the area since 1951.

As they say, you never miss the water until the well runs dry. Or in Ohio’s case, green