Taking the lead or imposing inequity?

This post was originally posted on the Challenge Program on Water and Food's (CPWF) Director's Blog.

Alain Vidal responds to IFAD Director of Policy and Technical Advisory Division, Adolfo Brizzi’s recent suggestion that water markets could be the next big investment opportunity.

Last week in Rome, as part of CPWF's ‘mainstreaming innovation’ grant from IFAD, the International Fund for Agricultural Development, we organized for our Andes colleagues a workshop to discuss CPWF achievements on benefit sharing mechanisms. Our colleague Marcela Quintero presented successful outcomes in the Cañete Basin in Peru, recently featured on the blog

Andes PES

At the end of the meeting Adolfo Brizzi, the Director of IFAD’s Policy and Technical Advisory Division, suggested that water markets could be the next big investment opportunity. I suggested the reality is much more complicated. There is no reason to doubt that water markets could be the next investment opportunity, but every reason to question if it should be.

At the heart of this issue are two fundamental questions:

  1. Is water an economic and, therefore, a tradable good?
  2. Are water markets the best solution for a future where demand for water is only increasing?

Andes water

Your answer will depend on your world view, which will depend on where you stand in the global pecking order of haves and have nots. If you are an affluent, well-educated citizen of a developed Western country employed in a profession, especially the financial industry, you probably see considerable merit in these ideas.

If you belong to the growing underclass of Western nations or if you are smallholder farmer or a landless peasant anywhere else in the world, these ideas are just one more blow to any chance you might have of living a better life.

One way to understand the difference in these world views is to review a little history. According to Pierre-Frédéric Ténière-Buchot, former governor of the World Water Council and water law specialist, only three types of law cover probably 80% of water law cases:

The Anglo-Saxon water law which, like the rest of Anglo-Saxon common law, is based on a contract between neighbors sharing a common resource on which their proximity confers them rights. Anglo-Saxon law originated in the forested Northern European plains where water was relatively abundant and still applies in Anglo-Saxon and Commonwealth countries. Such a contract can include trade arrangements. Add to this the neo-liberal concept that anything can be traded, and you open the door to water markets.

Roman water law, like the rest of Roman law, is based on a natural law, often represented by a supreme authority (Emperor, Pope, King), and translates into codes, charters and constitutions. Roman law originated in the Mediterranean, where water is relatively scarce and generally considered a common goodmeaning that rights are shared and public and under some central rule. It still applies in countries where the language is derived from Latin and Greek and their former colonies in southern Europe, in Latin and Central America, and in parts of Africa. Thanks to Napoleon, it influenced the rest of Europe, except the UK.

Bedouin water law, where water belongs to the one who owns, conquers or first occupies the land. Bedouin law originates in the Middle East where water is extremely scarce but land is plenty. Here, water rights are linked with land rights; whoever owns the land also owns the water. It still applies in the Middle East, most Arabic, sub-Saharan African and Islamic countries, and exists in some places combined with Anglo-Saxon and Roman law, depending on historical influence.

With this rather broad historical background in mind we can begin to understand what water rights mean where, and what position people might be prone to take on tradable water rights. For example, trading water may sound:

  • entirely rational to an Australian or Californian who lives in a society where there is considerable respect of the rule of law and an economy where almost everything is and can be traded;
  • illicit in France or illegal in Ecuador where water is considered a common good; and
  • inequitable in sub-Saharan Africa where most of the poor don’t have access to land and hence have no water rights.

Some Australians have tried for many years to export the concept of water markets, which they have studied in what is certainly a good laboratory. There are others (see Walker et al. 2009), myself included, who would suggest that this is what ruined water resources and other ecosystems in the Murray-Darling Basin even while it was being cited in the 1990s as the success story in water management.

Elsewhere, the concept of water markets has encountered huge difficulties. Within Western countries there is a fierce debate over what can and cannot be valued economically. Outside countries with advanced economic systems and high regard for the rule of law, it remains to be demonstrated that water markets and trading water rights have anything positive to contribute to greater equity and poverty alleviation.

Learn more:

The Cañete River basin film

Blog on rewards for ecosystem services

For more on water law: Michel Camdessus, Bertrand Badré, Ivan Chéret, Pierre-Frédéric Ténière-Buchot, 2004. Eau. Robert Laffont, Paris, 2004. 

There is a considerable literature analyzing why water markets and water pricing are not silver bullets and may in fact be worse than existing rules; see for example:

In the absence of well-defined, transparent and freely traded water rights, markets may encourage higher use rather than conservation of water (Ahmad, 2000).

Ahmad, M., 2000. Water pricing and markets in the Near East: policy issues and options, Water Policy, Volume 2, Issue 3, 14 July 2000, Pages 229-242, ISSN 1366-7017, 10.1016/S1366-7017(99)00006-9.

Molle, F., 2009. Water scarcity, prices and quotas: a review of evidence on irrigation volumetric pricing. Irrigation and Drainage Systems, 23, 1, 43-58

See more here.

Comments

Bravo! Do we have to fight this battle yet again? The evidence on the limitations of water markets, especially when "encouraged" [=imposed] in most developing country contexts, is quite overwhelming. The water people in the same IFAD division know this well, therefore I doubt very much this will become the next big IFAD investment. But beware of others.

Thanks Doug. I could not agree more, but despite all evidence especially with water, neo-liberalism keeps suggesting a bright(er?) future where anything can be traded. It would be good to have comments here from those water people in the same IFAD division.

Brilliant! How would you link some of this argument further to Payment for Hydrological Ecosystem services? Are water rights enhanced or lost when those downstream are paying for water management upstream?

Thanks Camilla. I think there are two different aspects related to your question. The first is that, to me and as I tried to explain in this blog, "water rights" as such only exist under the Common Law (the Anglo-Saxon system). Hence there are many places around the world where the concept of water rights itself does not make sense for people, especially the most vulnerable. The only generic term I know is the "Human right to water", but this is of course different from "water right" under the usual meaning of those who would like to make it a tradable good.

The second is related to the Payment for Hydrological Ecosystem Services. As explained by Marcela Quintero in her recent blog, evidence shows that so-called "benefit sharing mechanisms" are more common than "payment for ecosystem services", because most users are actually not ready to pay. Sharing the benefits from ecosystem services goes way beyond the economic value of such services (hence beyond water markets), and also consider the social, cultural, environmental values which are so important to individuals and communities.

The shallowness of this presentation is astounding. While referring to the Common Law (the Anglo-Saxon system), Mr. Brizzi suggests that the world’s leaders might consider the marketability of the globe’s water. In so doing we put the future of the world’s most precious resource in the hands of the US Supreme Court, i.e. corporate America, as is already the case with > 50% of the global seed market. Although the world recently escaped from disaster when the Court stroke down human genes patents, the same Court made historical blunders as well. The US neo-liberal agenda is a horror scenario, and the mere idea that natural water might ever be subject to it is to be combatted at all cost.

Congratulation Alain for your accurate contribution. Of course, in Perú, like in any country of Latin American, people will not give up their right to water as a resource of the commons. They will defend this right with their blood.
It surprises me how a policy director of IFAD can easily give this kind of opinion!?, taking into account the principles of IFAD

Kevin Linton
Managing Director at Lippy's Enterprises

I believe these type questions will create massive 'debate' in the near future and to some extent should be encouraged, as soon as possible. Alain has cited and provided credit to those that have outlined broadly the three large 'areas' of historical 'water law' in the world today; Saxon, Roman and Arabic.

Alain has also provided an indication on 'where he sits' on the privatisation or the development of 'water markets' by indicating that the 'Australian experiment' of developing water markets contributed to 'a poor situation' there.

Although, Australia is a Commonwealth country and British Common Law has been used for about 125 years, Australian Water Law has developed 'very much' on a 'needs basis' and for this reason water law in Australia is sometimes on the 'cutting edge' of development. This is only natural in a country that is the driest habited continent.

Australian water law had served the country well for about 100 years and some unique advantages enabled the country to become an agricultural exporter in this time. Times change however and irrigation infrastructure needed to be upgraded, over-use and waste of scarce water needed to be controlled and government and authorities found that by developing a new 'market structure' to facilitate the 'redistribution' of those resources (water) in an orderly way was the best solution.

The basic idea is this...water needs to be directed to the areas where maximum benefit can be derived at least cost while minimising damage to the environment.

There was a lot of scepticism at first, as rural (or Agricultural) water was linked to land for about a century and now it is a trade-able commodity. In the time since reform started, Australia has had a drought that lasted for about twelve years (the longest and most devastating since Europeans have been in Australia).

This drought, did not have the effect of reversing reform, but hastened it. Now that the drought has passed and the south eastern part of Australia has received some good seasons, some groups are now questioning whether the water allocations to environmental requirements need to be so large, but from apart from this, I believe most people (including farmers) are 'pretty happy' with the reforms.

I am therefore sorry that I must disappoint Alain in his negative assessment of the Australian 'experiment' and implementation of a rural 'water market'.

Thanks Kevin for your very informative reply about the Australian case. The existence of literature (cited in my blog) that contradicts the success you describe shows at least that debate still exists, even in Australia. And as long as such debate mobilizes social and biophysical science, and listens to the various voices, especially those of the poor and vulnerable, we have better chances to see fair and equitable political decisions emerging, adapted to each situation.

Do I really read in Alain's first text: . "in sub-Saharan Africa where most of the poor don’t have access to land and hence have no water rights" ?? So entirely ignoring both customary land rights AND customary water rights - in the name of the poorest and most vulnerable across the South?? On the 'difference' between 'water rights' and 'the right to water', the issue is how they intersect. For that, I refer to the HLPE report on 'Water for Food Security and Nutrition'. This unravels how the 2002 General Comment on the Human Right to Water by the UN Committee on Economic, Social and Cultural Rights also concerns productive water uses (right to food, non-discrimination, adequate standard of living, etc) and, hence, water rights regimes.

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