Water Footprint As the Next Big Thing

Lynne Kiesling

Wednesday’s Christian Science Monitor had an interesting article about burgeoning water scarcity issues:

Move over, carbon, the next shoe to drop in the popular awareness of eco-issues is the “water footprint.”

That’s the word in environmental circles these days. Just as the image of a heavy carbon foot made it possible for the masses to grasp the power of carbon-dioxide emissions, water footprint is the phrase now drawing attention to the impact of human behavior regarding water.

I wonder if people will continue resisting the accurate pricing of water as this issue evolves. We are only starting to chip away at the resistance to the accurate pricing of electricity, and if the Waxman-Markey bill is any indication, we are not going to have incentives and institutional designs in place that enable us to discover the accurate price of carbon any time soon. I would like to be able to be more sanguine about water.


8 thoughts on “Water Footprint As the Next Big Thing

  1. From the perspective of the rich-in-wind Great Plains region, and particularly the southern Great Plains, water is a big issue and one attraction to wind power is that it doesn’t draw on water resources for power production.

  2. I remain unconvinced that there is one “accurate price of carbon” to be discovered. I am not sure there is one “accurate price of water” either.

    What is the definition, in either instance, of the “accurate price”? For water, is it the “market clearing” price? For carbon, is it the price at which carbon emissions from all sources become uneconomical?

    For carbon, I believe some emissions sources would have very low carbon prices at which continued emissions became uneconomical. For others, such as coal-fired electric power plants, the carbon price at which continued emissions became uneconomical would probably be much higher, particularly for new power plants.

    However, all of this is market impact discussion is really off the mark. The principal determinant of the accurate carbon price is the price which would produce the required federal revenue stream. All other considerations are secondary.

  3. One thing is clear about water prices: they should be strongly locational. Water is the valuable commodity, which has strong geographic availability and consumption differences, and transportation costs. In a carbon market, carbon itself isn’t the valuable commodity. What is valuable is the ability to produce some other valuable good while emitting less carbon than other producers of that same good. And, the “cost” of the emissions that the good embodies feeds back into the demand for that good relative to other goods.

    It doesn’t matter where you don’t emit carbon, just as long as you don’t. The value of carbon-emission avoidance to humans is vague and non-sensible because it’s a present value of distant future consequences. A single carbon price would have a unifying effect bringing emission avoidance into the economics of all manner of economic activities, and would produce a response. The response would match the price, even if the price were just administratively determined and held constant. In that sense, the price would be “accurate” with respect to the response, without regard to whether the response is sufficient. Raise the price, get more response. Lower the price, get less response. Would we worry about the “accuracy” of the response? I wouldn’t. The response is what it is at the price. Of course, the cap/trade approach is to set the desired response and let the price find itself. If the physical response matches the desired level, I wouldn’t be concerned about the accuracy of the price. But there could be a single, non-locational price. But, accurately quantifying the emitting behaviors could be a huge issue. Because emission is invisible, and its economic impact is off in the future, cheating could go unnoticed.

    I’m sure the problem that Lynne was referring to in water was that its regulated prices don’t approach locational marginal cost or scarcity in most locations. I recall commenting that Atlanta water prices were insensitive to the fact that its main reservoir needed mowing, and that administrative water-consumption restrictions were required. Price wasn’t a factor in rationing consumption. In fact, some people complained bitterly when water prices were raised slightly to make up for lower consumption at the fixed cost-recovery rate. An additional compare/contrast feature is that the consumption of water in a specific location is easily measured with accuracy, so its consumption is visible, locatable, and has to be supplied in the present. Water and non-emission of carbon don’t seem to match up well enough for clean comparison.

    I wonder how much of a Blue Book these comments would have consumed written in longhand. I guess it’s too much to expect Lynne to grade them. 😉

  4. It’s MUCH easier to price the externality cost of carbon (a global externality) than water. Even better, there’s no need to track water footprints if the price results in sustainable use. It’s not like water use produces negative externalities!

  5. Thanks for the link, Lynne. I’ll have a look at the CSM article.

    If you or the readers of KP have ideas about how to better manage/price/govern water use, there is some funding available to explore them. At the risk of shameless self-promotion, see:
    http://www.glpf.org/rfp/HW/HWRFPMain.htm

    As for David Zetland’s comment- I’m not sure if the ‘water use doesn’t produce negative externalities’ is sarcasm, or if I have missed the point of all those economics courses I took.

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