Global water extractions from streams, rivers, lakes, and aquifers are continuously increasing, yet some four billion people already face severe water scarcity for at least one month per year. Deteriorating water security will, in the absence in how water is governed, get worse with climate change, as modeling projections indicate that much of the world’s arid and semiarid locations will receive less rainfall into the future. Concomitant with climate change is a growing world population, expected to be about 10 billion by 2050, that will greatly increase the global food demand, but this demand cannot be met without increased food production that depends on an adequate supply of water for agriculture. This poses a global challenge: How to ensure immediate and priority needs (such as safe drinking water) are satisfied without compromising future water security and the long-term sustainability of freshwater ecosystems? An effective and sustainable response must resolve the “who gets what water and when” water allocation problem and promote water justice. Many decision makers, however, act as if gross inequities in water access can be managed by “business as usual” and upgrades in water infrastructure alone. But much more is needed if the world is to achieve its Sustainable Development Goal of “water and sanitation for all” by 2030. Transformational change is required such that the price paid for water by users includes the economic costs of supply and use and the multiple values of water. Water markets in relation to physical volumes of water offer one approach, among others, that can potentially deliver transformational change by: (a) providing economic incentives to promote water conservation and (b) allowing water to be voluntarily transferred among competing users and uses (including non-uses for the environment and uses that support cultural values) to increase the total economic value from water. Realizing the full potential of water markets, however, is a challenge, and formal water markets require adequate regulatory oversight. Such oversight, at a minimum, must ensure: (a) the metering, monitoring, and compliance of water users and catchment-scale water auditing; (b) active compliance to protect both buyers and sellers from market manipulations; and (c) a judiciary system that supports the regulatory rules and punishes noncompliance. In many countries, the institutional and water governance framework is not yet sufficiently developed for water markets. In some countries, such as Australia, China, Spain, and the United States, the conditions do exist for successful water markets, but ongoing improvements are still needed as circumstances change in relation to water users and uses, institutions, and the environment. Importantly, into the future, water markets must be designed and redesigned to promote both water security and water justice. Without a paradigm shift in how water is governed, and that includes rethinking water markets to support efficiency and equitable access, billions of people will face increasing risks to their livelihoods and lives and many fresh-water environments will face the risk of catastrophic decline.
Rupert Quentin Grafton, James Horne, and Sarah A. Wheeler
Claudia Sadoff, David Grey, and Edoardo Borgomeo
Water security has emerged in the 21st century as a powerful construct to frame the water objectives and goals of human society and to support and guide local to global water policy and management. Water security can be described as the fundamental societal goal of water policy and management. This article reviews the concept of water security, explaining the differences between water security and other approaches used to conceptualize the water-related challenges facing society and ecosystems and describing some of the actions needed to achieve water security. Achieving water security requires addressing two fundamental challenges at all scales: enhancing water’s productive contributions to human and ecosystems’ well-being, livelihoods and development, and minimizing water’s destructive impacts on societies, economies, and ecosystems resulting, for example, from too much (flood), too little (drought) or poor quality (polluted) water.
Water scarcity has long been recognized as a key issue challenging China’s water security and sustainable development. Economically, China’s water scarcity can be characterized by the uneven distribution of limited water resources across space and time in hydrological cycles that are inconsistent with the rising demand for a sufficient, stable water supply from rapid socioeconomic development coupled with a big, growing population. The limited water availability or scarcity has led to trade-offs in water use and management across sectors and space, while negatively affecting economic growth and the environment. Meanwhile, inefficiency and unsustainability prevail in China’s water use, attributable to government failure to account for the socioeconomic nature of water and its scarcity beyond hydrology. China’s water supply comes mainly from surface water and groundwater. The nontraditional sources, wastewater reclamation and reuse in particular, have been increasingly contributing to water supply but are less explored. Modern advancement in solar and nuclear power development may help improve the potential and competitiveness of seawater desalination as an alternative water source. Nonetheless, technological measures to augment water supply can only play a limited role in addressing water scarcity, highlighting the necessity and importance of nontechnological measures and “soft” approaches for managing water. Water conservation, including improving water use efficiency, particularly in the agriculture sector, represents a reasonable strategy that has much potential but requires careful policy design. China’s water management has started to pay greater attention to market-based approaches, such as tradable water rights and water pricing, accompanied by management reforms. In the past, these approaches have largely been treated as command-and-control tools for regulation rather than as economic instruments following economic design principles. While progress has been made in promoting the market-based approaches, the institutional aspect needs to be further improved to create supporting and enabling conditions. For water markets, developing regulations and institutions, combined with clearly defining water use rights, is needed to facilitate market trading of water rights. For water pricing, appropriate design based on the full cost of water supply needs to be strengthened, and policy implementation must be enforced. An integrated approach is particularly relevant and greatly needed for China’s water management. This approach emphasizes integration and holistic consideration of water in relation to other resource management, development opportunities, and other policies across scales and sectors to achieve synergy, cost-effectiveness, multiple benefits, and eventually economic efficiency. Integrated water management has been increasingly applied, as exemplified by a national policy initiative to promote urban water resilience and sustainability. While economics can play a critical role in helping evaluate and compare alternative measures or design scenarios and in identifying multiple benefits, there is a need for economic or social cost–benefit analysis of China’s water policy or management that incorporates nonmarket costs and benefits.
Freshwater’s transboundary nature (in the form of rivers, lakes, and underground aquifers) means that it ties countries (or riparians) in a web of interdependence. Combined with water scarcity and increased water variability, and the sheer necessity of water for survival and national development, these interdependencies may often lead to conflict. While such conflict is rarely violent in nature, political conflict over water is quite common as states diverge over how to share water or whether to develop a joint river for hydropower, say, or to use the water for agriculture. For the same reasons that water may be a source of conflict, it is also a source of cooperation. In fact, if the number of documented international agreements over shared water resources is any indication, then water’s cooperative history is a rich one. As the most important and accepted tools for formalizing inter-state cooperation, treaties have become the focus of research and analysis. While treaties do not necessarily guarantee cooperation, they do provide states with a platform for dealing with conflict as well as the means to create benefits for sustained cooperation. This also suggests that the way treaties are designed—in other words, what mechanisms and instruments are included in the agreement—is likewise relevant to analyzing conflict and cooperation.