28 December 2007

Turning Water into Gold

Council on Foreign Relations - December 26, 2007

Toni Johnson

Turning Water into Gold

Bottled water is one of many ways that water is commodified. (Kyodo)

Though it's getting drenched this week (AJC), the city of Atlanta, Georgia, is running out of water (CNN). The city has suffered from an ongoing drought, but officials also now admit their failure to act (LAT) on warnings of environmentalists and federal officials amid “years of recent explosive growth.” Facing a problem of emergency proportions, Atlanta has earmarked $4 billion to upgrade water infrastructure, including water capacity. The Atlanta Journal-Constitution tracks the city's efforts to cope with the drought on its website.

Atlanta is not alone in its water problems (Economist). In a recent interview with CFR.org, former Environmental Protection Agency chief Christine Todd Whitman said the United States needs to invest up to a trillion dollars for water infrastructure. The Bush administration believes U.S. drinking and wastewater projects should use private bonds (PDF). Water issues are among the few major policy victories the Democratic Congress has over the Bush administration. An example is last week’s decision to override a presidential veto (Times-Picayune) of the FY2008 bill funding U.S. flood control project. The water problem is becoming so urgent that communities, such Orange County, California, now look to recycled sewage (NYT) for drinking water.

Global population increases, urbanization, and changes in climate are taxing water resources like never before. Many governments subsidize drinking water, but the rising costs associated with infrastructure have led to a push in many places for more privatization. A report published by the U.S. National Institute of Environmental Health Sciences argues that private water systems have “more success in raising investment funds,” because public utilities often face a backlash over raising rates needed to maintain adequate services. The report says that, when the United Kingdom privatized in 1989, water infrastructure investment increased by 80 percent. But a U.S.-based consumer advocacy group argues that “inferior services almost always accompany privatization” pointing to the numerous environmental and health violations of Britain’s biggest water company.

A UN Development Program report on global water scarcity asserts that while some water privatization programs are successful, many around the world show “the conviction that the private sector offers a ‘magic bullet’ for unleashing the equity and efficiency” for better water access “has been misplaced.” The World Bank says the success of private efforts largely depends on the design of water contracts (PDF). A 2003 water financing report from a coalition of nongovernmental groups notes that private operators, when required “as part of their contract,” successfully provided affordable services to poor communities (PDF).

The UN’s report argues the world has enough water and that “scarcity is manufactured through political processes and institutions” that disadvantage the poor forcing them to use expensive, private water sellers. But other sustainable development advocates contend the simplest solution to addressing the “economic scarcity of water” is creating “water rights markets” (PDF). Some analysts foresee water shortages (Times of London) as a geopolitical issue that may trump climate change, and say water may soon be traded on global markets. A recent UN report on climate change lays out the impact on water supplies.

While investment site, IndexUniverse, touts water as “blue gold,” pointing out numerous index funds for water infrastructure investment, a global movement of activists has emerged declaring “water is not merchandise.”  A Canadian journalist says consensus on addressing water access is tough to find, noting the issue pits people who assert water is a natural right against others who consider it a commodity to be traded (Tyee).

The Peru-based Latin America Press points out the myriad of ways water already is being commoditized, including by bottling water. Bottled water is the fastest growing soft drink worldwide, especially in places where tap water is safe and abundant. Bottled water can cost ten times what tap water costs and often costs more than the price of gasoline when measured volume for volume.

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