Water is a dying resource

Water is an increasingly scare resource all over the world, thereby an excellent example of supply and demand, and conservation for future generations. Because water is scare, demand for the resource is increasing, driving up the price. Residents in Washington D.C. pat about $350 for approximately 480 cubic meters of water, whereas that same amount of water would cost approximately $1700 in Guatemala City. The price people pay for water is determined by transport costs, the total demand for the water, and price subsidies. An example of a transport cost is in China. China is constructing 3 canals to transfer water from the Yangtze River to Beijing and other growing northern provinces. Water markets exist in some portions of the world. Where these markets exist, it is evident how high the scarcity of water can be. For example, in India, water scarcity has encouraged farmers to profit by selling their water instead of the goods from farming. This promotes a rapid drop in the underground water tables which is a “back-up” resource of water. Because of the drop in the underground water tables, water is not being preserved for future generations in India. Water subsidies can be very large. For example, water revenues in Delhi are less than 20% of what it spends on water each year. Oftentimes, residents in urban slum areas have no access to municipal water and must purchase their water from private surveyors who bring the water in by truck. The price for this water is exceeding $1 per cubic meter. The poorest households in Uganda spend approximately 22% of their income on water, while those in El Salvador and Jamaica spend more than 10% of their income on water. Water subsidies also exist in California and Utah. The price of the water subsidies provides for a good example of the scarcity of water. One way to avoid the subsidy problem is to use a block rate pricing system where a low level of consumption is very cheap, while prices increase at higher levels of consumption. If there is a way to make the use of water more efficient, then it will be relatively inexpensive and will save water and energy.

-Erin Kelly
-http://www.globalpolicy.org/socecon/gpg/2007/0307waterprices.htm