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  • From: bob ford <bobford79 AT yahoo.com>
  • To: homestead AT lists.ibiblio.org
  • Subject: [Homestead] Water trading in the pipeline
  • Date: Tue, 11 Nov 2008 10:52:50 -0800 (PST)

Water as the ultimate commodity?

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Water trading in the pipeline
10 Nov 2008
Author: Oliver Balch




Energy use and water use have some common traits. Both are intrinsic parts of
many industrial processes, both have huge public impacts and both need to be
reduced.

Arguably, measuring and managing water use should be even more of a priority
for companies than cutting carbon emissions, says Mike Tuffrey, director at
UK consultancy Corporate Citizenship. After all, it is the consequences of
carbon-related climate change, not climate change itself, that affect a
business. “And one of the most obvious consequences of severe weather is
fresh water availability,” Tuffrey says.

Comparisons with carbon are exercising the minds of water experts as well.
The price of H2O, like its CO2 equivalent, is regularly out of sync with its
value as a public good.

In the case of water, government subsidies for farmers continue to keep the
cost low. Demand for industry, food production and domestic supply is likely
to push up prices, warns Jacob Tompkins of UK non-profit Waterwise. So too
will future norms on water quality and sewage, as well as infrastructure
costs related to climate change such as dams and flood resilience measures.

In the case of carbon, a fair price was found through market-based schemes
such as the European Union’s emissions trading scheme. By turning it into a
commodity, a market was created. The same should be done for water, some
water campaigners are saying.

A first step is currently on the table at the World Trade Organisation. An
alliance of non-profits last year proposed that the WTO consider creating a
“virtual water trading council”, through which water can be traded between
water-rich and water-stressed countries.

The term virtual water is becoming common parlance among hydrology
professionals. It captures the amount of water embedded in a product – the
amount of water that goes into making it. One kilogram of wheat, for example,
requires about 1,000 litres of water, giving it a virtual water content of
1,000 litres. The trade in virtual water rather than water itself relieves
the exporting country of putting its own water security at risk.

The virtual supply of water would also help reduce the financial and
environmental cost of transporting physical water. France and Turkey, for
example, both currently import water by tanker from Algeria and Israel
respectively, whereas trading in virtual water would enable the importing of
water-reliant crops grown elsewhere, rather than moving the water itself.

Virtual trading schemes such as the WTO proposal remain untested so far.
Physical water trading, however, has a long track record. Australia, for
example, began toying with a trading system to buy and sell water
entitlements two decades ago. Watermove, an independent water exchange, was
recently set up to facilitate these deals, most of which are between farmers.

Stuart Orr, fresh water policy officer at environment group WWF, remains
sceptical about physical water trading. The environmental and financial costs
of transporting water physically restrict any such system to the very local,
he argues.

As for a trade in virtual water, Orr is cautious of drawing too close a
parallel with carbon. He says: “A tonne of carbon is a tonne of carbon
regardless of where it’s emitted. But water differs from place to place, so
pricing will depend on very local situations.”

The institutional, pricing and technical challenges inherent in a global
trading scheme are “very, very difficult”, says.

There are other problems to consider when comparing carbon to water. Water
sources, for instance, need to be increased in the future – the opposite is
true for carbon. There are also ethical objections to turning a life-giving
substance such as water into a tradable commodity.






  • [Homestead] Water trading in the pipeline, bob ford, 11/11/2008

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