The Big Thirst, page 35
You pay the price you are willing to in order to secure the supply you need. If you’re running a microchip factory or a vineyard of expensive, drought-sensitive grapevines, you might think it’s worth it to invest in high-security water. If you’re running a rice farm—water intensive, but not perennial, and perhaps not profitable enough to justify expensive water—you buy low-security water. If you’re running a city, on top of your critical human needs allocation, you might buy both general-security water and high-security water, to go with whatever other sources you might have—your own wells, reservoirs, or desalination plants.
“If you’ve got high-security water and low-security water, everybody can determine how much risk they want to take,” says Young, “user by user.” They can determine how much risk they can afford to take— economically.
What percentage of the total available water is high-security and what percentage is general-security—as with the slices that go to the environment and critical human needs—depends on the dynamics of each water system, how much water is available, who uses it, how variable the flows are, and how a community is growing economically. The point is to understand the water system and to set the rules for how to use it in advance.
In Young’s ideal scheme, the high-security pool of water is 30 percent of the ten-year moving average of available water. If a river typically has an annual flow of 10,000 gigaliters (half the historic flow of the Murray River), then 3,000 gigaliters—30 percent—would be designated high-security. That leaves 50 percent as general-security water (20 percent has gone to the “first glass” allocation).
If the river, in this example, does flow at 10,000 gigaliters in a particular year, you take off 20 percent—2,000 gigaliters—for the environment and the critical human needs, and 3,000 gigaliters for the high-security users, and the remaining 5,000 gigaliters goes to the low-security users.
But if there is a dry period, and the river only flows at, say, half its normal rate—if there’s a year where it’s just 5,000 gigaliters—the low-security users get no water. The high-security users get all their water first.
And even the high-security users have some risk: If the flow falls even lower, the high-security users only get what’s left, on a proportional basis, after the environment gets its water and the critical human needs get their water.
Young wants the rules set up in advance. Again, it seems obvious, but most watersheds—the interlocking and interdependent systems of sources of water, reservoirs, lakes, rivers, and the users of water, cities, industries, and farms—exist in a kind of patchwork quilt of agreements, jurisdictions, assumptions, overlapping law, and practice.
“The beauty of this system,” says Young, “is that you don’t have to know in advance what’s going to happen with the future of water. Everybody knows the water they’re going to get”—or, if there’s an actual trading market each year, the water they can buy—“and they can focus on, What’s the best outcome I can get with that water?”
People know what proportion of water they’re going to get each year, they know their own circumstances, and instead of fighting, they can make decisions.
For those who might find the layers-of-water-in-the-glass explanation a little too abstract, Young has a metaphor that seems like a wild leap of imagination, but turns out to be very useful.
“A really good comparison,” he says, “is the way corporations are defined. A corporation, a company, is a legal artifact.” That is, corporations aren’t in any sense natural—we invented them. “Corporations have really exciting features, which apply to water as well.”
“Exciting” may be an overstatement—but interesting, certainly.
“If you own a corporation,” Young says, “you have a ‘unit share’ in it— the stock. That’s each owner’s share of an uncertain future.
“The rules about how the corporation operates are all specified in advance.
“If there’s a profit, you get paid according to your share of ownership.
“If there’s no profit, then there’s no dividend, and even though you own stock, you get nothing that year.
“The law around corporations is designed so that they must reveal when something is wrong—with tremendous drama sometimes, but also clearly, transparently.
“Corporations provide the opportunity to take risk.
“And the governance structure is functional. The people who run the company day-to-day aren’t the shareholders, they are the managers. They need a structure that allows them to get quick decisions, decisions as fast as the world is changing.
“Similarly, if we’re running out of water this week, we need decisions this week, not in six months, after everyone with a ‘stake’ is consulted.”
If the comparison between corporate management and water management isn’t, in fact, exciting, it is in fact quite brilliant.
Corporate law doesn’t care what you’re doing with your company— opening a convenience store or writing software—and the rules of the game are set in advance, so you start a company, you go to work for a company, you buy shares in a company, with clarity about the rules and the consequences. You decide what risk you’re comfortable with.
In the water scheme that Young can draw on a single sheet of paper, it likewise doesn’t matter what you’re doing with the water, and the rules are specified in advance. If you’re in a highly water-sensitive business, you buy high-security water, and shoulder the cost. In most years, the low-security users will also get water, but not in every year.
It’s like the difference between preferred shares of stock and common stock.
And like publicly traded corporations, the water system would require openness—about the state of the water, the volume, the availability, the management.
And in a real crisis, the rules are well settled about water for the system itself, and water for the basics of human civilization.
Young thinks this kind of system—which is relatively simple to describe but would require a fair amount of negotiating and politicking to implement in any given community—has something else in common with corporations: It is a robust system. Robust, in his terms, is something very specific: “A robust system for water can evolve and change as the conditions evolve and change.”
If the climate changes, and the water that’s available changes, the buckets of water adapt. If a factory owner, or a farmer, figures out how to improve water productivity, he can sell some of his water to someone who needs it more. The very price of the water itself encourages efficiency and investment—a city facing increasing population may raise rates, or require low-flow plumbing fixtures and appliances, to avoid having to either buy more water or build new treatment plants.
We don’t often think of water itself changing, or of our relationship to water changing. But it does change, just the way our relationship to electricity or transportation changes.
“What looks like the right way to use water this year,” says Mike Young, “won’t look like the right way to use water ten years from now. A robust water system continues to work in harmony with itself, with the environmental conditions, with what people need.
“With a robust water system, you look back and you don’t regret the past, and you look forward and you don’t fear the future.”
Most of us, in fact, do not live in a water system where we can look back without regret or look to the future without fear.
There are two final twists to Young’s model framework.
First, Young sets aside a slice of both the low-security pool and the high-security pool of water for the environment—for the river, the mangroves, the marshes, the lakes, the aquifers—on top of the initial environmental allocation. His point is that the environment has typically been a victim of water neglect and water starvation, when times are flush and when there is no water at all. Humans always put themselves first.
“This way, if anybody gets water, the environment gets water too. That protects the environment from the politics of water.”
A second twist has to do with the actual market for water. Water is a funny commodity—it’s not traded the way copper is traded, or oil, coffee or wheat, or even something intangible like carbon credits. It’s not traded, because in most places, you can’t move the actual water and deliver it the way you can the wheat or the carbon credits. It’s nice that someone in Orlando has a lot of water, but even if someone in a drought in North Carolina is willing to spend money for that water, there’s simply no way of getting the water itself from Orlando to North Carolina.
Water is rarely priced, and rarely priced smartly, and some of that has to do with our attitude about it—but some of it also has to do with the character of water itself. Water and water systems are fundamentally different because the water itself is so independent. Even if you have a willing seller and a willing buyer, the water can be utterly unwilling to be traded.
But there are watersheds where water could be traded. The basic criterion is very simple: If I sell you my water, you have to be able to get the very water that I would otherwise use. A river or an aquifer is a good example—one farmer or factory or community doesn’t take the water it is entitled to, and the buyer of the water takes exactly that amount of water.
Indeed, the Murray River has just such a nascent water-trading market—which has helped, even with the tiny allocations in the Big Dry, as some farmers sell what little water they have and others buy enough water to keep some crops in the ground.
What’s happened in Australia is a reminder of how spoiled we’ve become. In the developed world, water has been so readily available, we’ve completely lost sight of the fact that it is a vital economic resource—one, in fact, that we have no well-constructed economic system to give out. As Young puts it, “Allocating the opportunities to use water gives us the quality of life we have.”
SOMETIMES THE ECONOMICS OF WATER is as clear as water itself.
Before the start of the 2009–2010 NBA basketball season, the Cleveland Cavaliers quietly removed all eighteen water fountains from their home stadium, the Quicken Loans Arena in Cleveland, known as the Q, which seats 20,500 people.
Where the fountains had been, the Q eventually taped up paper signs that said “For your convenience, complimentary cups of water are available at all concession stands throughout the Q.”
For more than three months, through dozens of events and hundreds of thousands of visitors, there were no water fountains in the Q. If you wanted a drink of water, you had to stand in line at the concession stand, and when it was your turn, you could receive a free nine-ounce cup of water or you could buy a bottle of chilled Aquafina for $4.
On February 8, 2010, Cleveland’s daily newspaper, the Plain Dealer, ran a page-one story about the then five-month-old removal of the water fountains headlined “At the Q, No More H2O, at Least not From Fountains.”
Team spokesman Tad Carper said the Cavaliers had removed the water fountains because they posed a risk of spreading germs and illness during the winter flu season, and he told the paper the Cavaliers had followed the recommendations of the NBA and the International Association of Assembly Managers, the trade association for big arenas.
The Plain Dealer reporter called both the NBA and the IAAM, and neither had ever recommended removing water fountains to fight the spread of disease. Carper then said the Cavaliers had simply wanted “to provide the healthiest environment for our fans.”
As to the possibility that the Cavs and the Q were trying to drive bottled water and food sales by sending thirsty fans to the concession stands, Carper said, “That’s simply absurd. That never crossed our minds.”
Cleveland city councilman Anthony Brancatelli wasn’t buying it. “It’s clearly an opportunity to sell more drinks,” he said. “If there were health reasons, we’d be taking [water] fountains out of every school and institution.”
Two days later, the Plain Dealer raised an issue it hadn’t in the first story: The Cavaliers’ removal of the water fountains was illegal on at least two counts—the arena hadn’t gotten a permit to remove the water fountains, and Ohio’s building code requires an arena of the Q’s size and age to have eighteen water fountains.
Cavaliers spokesman Carper backpedaled, telling the paper the Cavaliers were considering reinstalling the fountains now that flu season had peaked.
The day the second story was published, the Cavaliers posted an announcement on the NBA Web site saying that the removal of the water fountains was always intended to be “temporary”—something Carper hadn’t previously mentioned—and promising that the fountains would be reinstalled “as soon as possible.” In an attempt to mollify the anger caused by the water fountain removal, the Cavaliers set up temporary water stations around the arena for the games scheduled before new water fountains were installed, so thirsty fans wouldn’t have to stand in line at the concession stand.
During the time the fountains were absent from the Q, the Cavaliers alone hosted 29 sold-out games at the arena. If just 10 percent of fans bought a bottle of water they wouldn’t have otherwise, the Cavaliers sold sixty thousand extra bottles of water, bringing in nearly $10,000 in additional concession sales per game.22
One of the few real gifts the bottled-water industry has given us, in fact, is some important insight into the economics of water. Two things are clear: We are willing to pay for water, even to pay what amount to ridiculous sums, more than gasoline costs, and we intuitively understand that different waters, in different settings, have different values and therefore different prices.
And, of course, as the Cleveland Cavaliers discovered, like hundreds of city councils before them, we also think that basic gulp of water should be free.
Why, after ten thousand years of organized human civilization, do we suddenly need an economics of water?
As we’ve said, the last hundred years of human society have been an unusual period with regard to people and water: If you lived in the developed world, not having to think at all about where your water would come from was a whole new human experience.
But that flush, unthinking period is over. Many areas that have never experienced water scarcity are being hit with dramatic reductions in natural water availability. Growth in population, millions of people moving into the middle class around the world, and the spreading of factories to developing countries—those three trends put additional demands on water supplies. And population growth carries a dramatic hidden water tax— remember that even in the developed world, where our daily water use is indulgent, we require far more water to make our electricity and our food than we use for drinking and sanitation. The typical American uses about a hundred gallons of real water a day; the food the typical American consumes requires five hundred gallons a day to produce.23 As more people rise into the middle class, their unseen, but very real, water needs increase in the same way.
A second problem is that the hundred-year golden age of water has caused us to think that water delivery is a kind of natural phenomenon— you turn on the faucet, the water comes out. It’s like opening a window and having a cool breeze come in. Except, of course, it’s not. Vast national water circulation systems that were installed a century ago are crumbling and need to be upgraded. The cost to refurbish them is modest compared with their value, it’s modest even compared with what we spend on bottled water, but it’s still tens of billions of dollars a year for many years. An explicit, well-thought-out economics of water would help us with both problems.
One of the most striking changes in our relationship to water in the next hundred years will likely be that we will start using the right water for the right purpose. We won’t use purified drinking water to flush our toilets and water our lawns. We won’t hesitate to tap the most readily available source of water for most cities—our own wastewater. And that layering of water uses dovetails perfectly with Mike Young’s economic framework for water: different waters, different prices.
The most basic ration of water for all of us will be low-price. Beyond that, there will be tiers of water with all kinds of qualities—the cleanliness of the water, the quantity available, the reliability or security of the supply in times of scarcity—and those qualities will all come with prices.
The result should be a richer appreciation of the value, the uses, and the costs of water. It should also mean a water system that is more transparent, that makes more sense, and that generates the money necessary to sustain and improve itself.
None of that flies in the face of the idea of water as a basic human right—pricing water doesn’t require further squeezing people in developing nations who don’t have good water access now. In fact, poor people around the world pay a terrible daily price for their water today, a far higher price than the $34 a month our water costs us. That price is the billions of people in the world’s developing nations who give up education, or the possibility of employment, just to stand in line for hours a week, or walk for hours a day, to get their water; it’s poor people whose children are dying at a rate of a hundred kids an hour from diseases they catch from tainted water.
Indeed, as the residents of the Delhi slum Rangpuri Pahadi remind us, poor people, too, are willing to pay for water when it makes economic sense. Rangpuri Pahadi is the Delhi neighborhood that organized its own miniature water utility, installing storage tanks, laying water pipes, and charging each family that connects a modest monthly fee that pays the costs of the system. Those families, in fact, are much closer to their water supply than the rest of us. They can see the pipes along the side of the dirt paths, they know how their monthly cost relates to the staff and electricity costs, they remember what it was like just six or seven years ago, when they had to stand in line for water of lesser quality. That water was “free” only in the most pinched sense; in fact, water you have to walk for, water you have to stand in line for, is the opposite of free—it’s a kind of water bondage that desiccates the whole rest of your life.
