The strengths and limitations of a market-based approach to managing fresh water resources.

24 Sep

By David Holland

3.6% of the world’s GDP is consumed through price based management instruments. (Whitten et al (2004) This would indicate that market based management schemes can adequately manage natural resource allocation in the environment.

But in the Syr Darya basin there seems to be no system of management for the fresh water resource. With a range of competing needs for the water and the likelihood that climate change will change the dynamics of its supply, the Central Asian States need to act to secure the availability of the fresh water resource into the future. (Savoskul et al 2003)

With water use going to electricity generation through hydro schemes and cotton farming taking a sizable share, the resource is at risk today. This is because much of the water from the power industry is being diverted to a newly formed wetlands and as a result the Aral Sea has a drastically reduced water level. (Savoskul et al 2003

It seems that with the snow melts and present levels of precipitation there is just enough water to go around provided there was a water sharing plan in place and the profitable industries such as the power and cotton industries contributed toward the environmental cost of the use of the resource. (Savoskul et al 2003)

But what type of management should be imposed? A command and control (CAC) mechanism or a market based system.  A market makes users value the resource and a CAC raises funds to improve the management of the resource. The Republic of Korea uses both systems and as a result can collect funds to subsidise farmers for their livestock waste water costs. (Muchapondwa 2015)

Before applying any mechanism, it is important to understand the dynamics of the resource before designing a market or any other control. (McDonald2014) Managers must be careful to design a market that produces the required results, otherwise there could be little or no improvement to the environmental problem. (Whitten et al 2003)

Pannell (2010) has devised a framework to help ensure that schemes are scrutinised by criteria that tests the benefit of the initiative against the costs, whether a CAC or market based design, to get the best outcome for the least cost. Poor design of projects could result in poor environmental outcomes.

Similar schemes to the Korean initiative could also tackle poverty while providing an environmental benefit. In counties where poverty is common or employment is low, funds collected by the CAC scheme could be used for employing unskilled labour to remove invasive alien plants as is the case in one of the “Water for the World” projects as described by the UN Environment Program publication by Muchapondwa et al (2015).

 

References:

Adamrah, M. (2010, March 29). Govt to build reservoirs in flood-prone areas. The Jakarta Post, Retrieved from https://www.pressreader.com/indonesia/the-jakarta-post/20100329/281913064295698

McDonald Dr Garry, Fairgray Dr Douglas (2014), Managing and Protecting our Freshwater Resources – Some Implications for Rural Communities , Market Economics Ltd, Takapuna, Auckland,  Retrieved from www.marketeconomics.co.nz/LiteratureRetrieve.aspx?ID=172924

Muchapondwa, Edwin; Stage, Jesper; Lee, Youngsoek; Chiramba, Thomas; Mungatana, Eric; Kumar, Pushpam (2015), Use of Market-based Incentives in Watershed Management: Driving the Green Economy through involving Communities & the Private Sector, Freshwater Ecosystems Unit, Division of Environmental Policy Implementation, United Nations Environment Programme , Retrieved from http://ltu.diva-portal.org/smash/get/diva2:996517/FULLTEXT01.pdf

Pannell, D. J., Roberts, A. M., Park, G., Curatolo, A., & Marsh, S. (2010). INFFER (Investment Framework For Environmental Resources): Practical and Theoretical Underpinnings, INFFER Working Paper 1001, University of Western Australia, Retrieved from http://dpannell.fnas.uwa.edu.au/dp1001.htm

Savoskul, Oxana S. , Chevnina, Elena V. , Perziger, Felix I. , Vasilina, Ludmila Yu. , Baburin, Viacheslav L. , Danshin, Alexander I.  A.I., Matyakubov, Bahtiyar , Murakaev, Ruslan R. (2003). Water, Climate, Food, and Environment in the Syr Darya Basin, Contribution to the project ADAPT, Adaptation strategies to changing environments, Retrieved from http://www.weap21.org/downloads/AdaptSyrDarya.pdf

Whitten Stuart, Carter Marc and Stoneham Gary (Edited), (2004 Oct.) Market-based tools for environmental management , Proceedings of the 6th annual AARES national symposium 2003 , A report for the RIRDC/Land & Water Australia/FWPRDC/MDBC, Joint Venture Agroforestry Program , Retrieved from http://www.aton.com.au/publications/Proceedings_AARES_2003.pdf

 

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One Response to “The strengths and limitations of a market-based approach to managing fresh water resources.”

  1. rayr65 September 24, 2017 at 10:22 am #

    This is a very important subject and essential to resource use. A well put together article.

    Ray

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