Putting a price on H₂O

”When a well is dry, we know the worth of water” — Benjamin Franklin

Energy is life. We price it. We trade it.

Carbon emissions are an externality of life. One that we increasingly price and trade.

Water is also essential to life. Yet we fail to put a price on it or trade. Instead it is close to free, or heavily subsidised, even to consumers who could pay more.

Putting a price on the first two in the ‘energy-carbon-water’ nexus enables scarce resources to be allocated more efficiently. Putting a price on them provides the incentive to ensure supply and demand move towards a stable balance. Not to do so would result in persistent surpluses and deficits — harming those in need of affordable energy and polluting our atmosphere with carbon dioxide. Yet despite the benefits we have yet to really begin to recognise the benefits of putting a price on water — the scarcest, most precious of the three.

According to the UN, agriculture accounts for 70% of global water use compared with 22% for industry and just 8% for domestic users. These proportions vary by region with agriculture even more important in Asia, Latin America, and Africa. Meanwhile, in Europe and North America, industry dominates demand for water.

Everything we eat, whether it is your eggs and toast you had for breakfast, the salad you had for lunch and the steak you had for dinner indirectly consumes massive quantities of water in its production. For example it takes 547 litres of water…