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View related content: Environmental and Energy Economics
Pressure on the Bush administration to lower energy use and reduce carbon-dioxide emissions has increased of late and from myriad sources: ranging from the apocalypse movie The Day after Tomorrow to the British government’s chief scientist, who stridently claims that climate change is a larger international threat than terrorism. But even if climate change proves to be a problem, is it serious enough to warrant a great deal of attention today?
One influential voice appears to think that what is most needed is a redirection of attention. According to Bjorn Lomborg, the infamous “Skeptical Environmentalist,” we should spend far more money on combating water problems than on worrying about climate change. For while the former is a major environmental and health challenge, the latter is a low priority for most countries, and may not even turn out to be a problem. The Kyoto Protocol alone would cost $150 billion a year, that money redirected to water policy would save countless lives.
The human cost of focusing on the wrong policies is stark. Around one billion people lack access to clean drinking water, and two billion lack access to decent sanitation; the result is many millions of deaths, especially in children. Yet, at most 150,000 deaths can be attributed to climate change. And most of these deaths are erroneously attributed to climate-caused increases in mosquito-borne disease. More people are dying from malaria than a decade ago but that is largely because of poor public-health policies and drug resistance and nothing really to do with temperature and rainfall changes, whether man-made or natural.
In addition to the human-health cost of water mismanagement, the impact on the environment has been disastrous. Most governments have spent billions on dams, irrigation channels, and other supply-augmentation techniques, and then price water at close to zero. The result is massive overuse by farmers, municipalities, and industries, which has caused irreversible environmental damage and long-term degradation of ecosystems on every continent. So far it is difficult to lay any significant environmental harms at the feet of man-made climate change simply because the effects are too difficult to link with increases in greenhouse gases. Harms maybe significant or beneficial, we simply don’t know.
What Water Policy?
Activists seem to dominate water policymaking. They demonize private-sector involvement in water supply and urge governments to reject all but the most superficial of “market mechanisms.” As water activist Maude Barlow puts it; “In rural communities all over the world, corporate interests are buying up farmlands, indigenous lands, wilderness tracts and whole water systems, then moving on when sources are depleted. Fierce disputes are being waged in many places over these ‘water takings,’ especially in the third world. Globally, corporations are now involved in the construction of massive pipelines to carry fresh water long distances for commercial sale while others are constructing super tankers and giant sealed water bags to transport vast amounts of water across the ocean to paying customers.”
Part of the problem about Barlow’s complaint is that it is only partially wrong. Markets are only as good as the institutional environments in which they operate, and currently markets cannot operate very well. Companies are restricted to bottled water supply, or are allowed to provide potable water through municipalities but are constrained on what they can charge, how they operate and for how long they can supply water. Corporations are bound to try and make unsustainable profits in the short run because their investment in new supplies, or improvements in old supplies, may be taken away from them at any time–it’s a classic tragedy of the commons. Currently corporations are over-pumping communal aquifers because they must do so to recoup their investments. Barlow’s solution is to nationalize all water resources. But nationalisation is what we’ve had and it doesn’t work.
What must change are the institutions in which water markets operate. Without acceptance that water is just another commodity it will never be used efficiently. If governments wish to provide financial support for the poorest, they should do so. Give financial aid for water, but don’t protect the suppliers with subsidies; only then will water be properly priced. Without institutional change water will continue to be wasted and the dire forecasts predicted by the U.N. more likely to occur.
But there is good news. Along with some sensible Australian, South African, and American policies, the starkest example of success is in Chile, where water has been treated as a commodity for 23 years. The result is that rural access has increased faster than in any other poor country, with fewer deaths due to waterborne diseases. Environmental problems, caused by excess water use in farming, have largely been stopped.
So unlike climate change, which is not yet a major problem, urgent action is required over water. Yet its climate-change policy that is being promoted globally. Lomborg contrasts the relative importance of climate and water policy: “Do we want to help more well-off inhabitants in the third world a hundred years from now a little or do we want to help poorer inhabitants in the present third world more.” The answer should be clear, but as is often the case, politics is as clear as mud.
Roger Bate is a visting fellow at the American Enterprise Institute.
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