Drops of Change: The Ethical Dimensions of Water Pricing in a Changing Climate
This post is part of a monthly series called “Drops of Change” by the North American Youth Parliament for Water (NAYPW), a chapter of the World Youth Parliament for Water (WYPW). For more information on the NAYPW, you can explore their website or contact NAYPW at outreachnaypw@gmail.com.
Written by: Sepase B. Tersoo-Gwaza, Master’s Candidate in Integrated Water Resource Management at McGill University.
The availability of water both in terms of quality and quantity is threatened by the effects of our changing climate, and one of the most important tools at our disposal for managing provision, access and distribution of water is water pricing. Water pricing here refers to any policy or pricing regime that requires consumers to pay for water use, access or any costs associated with the development or maintenance of water infrastructure.
Water as a private good
Water pricing as a policy approach is based on water being considered a private good. In economic theory, a private good is one where individuals can compete for exclusive rights to access, manage or consume it. A pure public good requires non-exclusive ownership of the good, non-competitive access to the good and availability of that good to all users.
While it might be tempting to construct water as a public good due to the fact that water is necessary for basic life and dignity, the reality is that water is in limited supply in terms of quantity and quality, and this vulnerability is continuously exacerbated by the changing climate. This scarcity means that there is competition for water resources and a need to restrict indiscriminate water use. Furthermore, although everyone uses the public good, no one bears responsibility for the cost of maintaining or sustaining that good; therefore waste and depletion of quality and quantity are not protected against by the consumer—this is known as the free rider problem. The goal of water pricing therefore is to generate revenue to develop and maintain water provision and distribution infrastructure and to provide an economic incentive to maximize water use efficiency and reduce waste of a critical resource.
Why is ethics important in water pricing?
Philosopher Hastings Rashdall in his 1907 publication on Ethics described ethics as a system by which all types of inquiries into what is good or right might be discussed. This definition allows for a very broad scope for which ethics can be applied. So far as a question can be posed as to what is good or right, there exists a basis for ethical consideration.
There are no universal contexts to the dynamics of water pricing. Water pricing policies, and their socioeconomic effects, vary from place to place and present ethical implications that may include economic, racial, ethnic or gender exclusion. These are implications that must be carefully considered when creating or evaluating any water pricing policies. Here, I limit the discussion to the merits of water pricing from an economic theory perspective where purchasing power determines access to an economic good.
In economic theory, the supply of a commodity is determined by the willingness of the consumers to pay an amount that compensates for the cost of supplying that commodity. The problem for ethics here is that consumers or citizens who cannot afford to pay the amount required for supply could be prohibited from accessing the resource as a result. This is potentially a human rights crisis since many people below a certain economic potential would presumably not be able to access water for basic use. Basic use comprises what it takes (quality and quantity) to fulfill basic domestic needs consistent with human rights, such as drinking, cooking and sanitization.
The reality of climate change puts an extra strain on water resources both in quality and quantity. Water as an economic good will become even more scarce, and the infrastructure for providing water even more costly as a result. Economic exclusion will become even more severe.
An ethical way forward
The definition of ethics provided by the philosopher Hastings Rashdall involves asking “what is good or right?” Hastings proposes a system of ethical evaluation called teleology where what is good, or right, is evaluated based on the results of any course of action. In order words, the ethical merits of any water pricing policy can be evaluated based on the ideal end result of water availability and non-exclusionary access for all.
In order to address the potential problem of economic exclusion. Barraqué and Montginoul in their 2015 article on Integrating social objectives into water pricing advocate the following measures:
Pricing alleviation to vulnerable groups such as the retired or elderly and people with disability
Income supplementation for the poorest members of society to fulfill water needs
Innovative water cost sharing strategies such as averaging out costs over sections of buildings, as opposed to individuals
Reimagining the consequence of not being able to pay for water, so that people who miss out on water payments do not have to lose access to basic water.
A cap on pricing based on household income, for example capping water cost at a prescribed percentage of household income
Pricing could be determined on a threshold basis where rate-based pay only take effect after a certain “basic-need” volume of water has been consumed
In order to address the potential problem of climate change induced costs, any water policy must capture revenue and invest it in protecting water sources through adaptive and mitigative strategies such as eliminating pollution, restoring damaged wetlands and better predicting the effects of climate change and cost implications. One useful tool for measuring the effect of climate change on water cost allocations are Artificial Neural Networks (ANN), like the one implemented by researchers Khan, Dassanayake, Mushtaq & Hanjra in 2009. These are models that adapt historical, economic and forecast data to model water availability as impacted by climate and consumer willingness to pay, making it an effective tool for management and improving water pricing efficiency.
In conclusion, there is no one size fits all policy approach. The end result of any water policy has a lot to do with how the policy is implemented and the specific contexts considered, so it is inappropriate to give a broad stroke judgement on whether or not water pricing is ethical. Rather, every water pricing policy should be evaluated by its outcomes. At the very least, does it satisfy basic use needs for every individual regardless of their economic ability? Does it account for impacts of climate change on price and consistent access to quality water? If these points are addressed in a water pricing policy, then Hasting’s teleology suggests that it is ethical.