Should water be for sale?

There is a case to be made for water being a commodity, as long as it is sold at a price responsive to supply and demand

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EDMONTON, AB Jul 20, 2015/ Troy Media/ – Nestlé, the Swiss food and beverage company, is in hot water over, well, water. The case is easy enough to explain: Nestlé sells bottled water. One of the places it gets bottled water from is British Columbia. B.C. is in the middle of a drought and suffering one of the worst seasons for forest fires in many years. While many residents are under lawn watering restrictions Nestlé is still taking water from aquifers to sell in bottled form in Canada and abroad. People in British Columbia are understandably outraged.

At issue is the way that Nestlé takes water from the province. Currently, it just takes the water from aquifers for free. New regulations that come into effect in 2016 will change that slightly: Nestlé will then have to pay $2.25 per million litres. Last year the company bottled 265 million litres, so if they don’t expand their production they can expect to pay an annual price of around $596.25. That is outrageous and certainly something worth complaining about. An online petition, in fact, is demanding that Nestle pay a price closer to what B.C. residents pay for their municipal water.

But many activists are countering that water is a human right and should not be for sale at all. They claim that making Nestle pay a “fair price” for water would open the proverbial (and presumably literal) floodgates to bulk water export, worsening the already outrageous situation. Water, they say, should not be treated like a commodity.

I’m not only in favour of treating water like a commodity I want it to be treated even more like a commodity than it is already. It ought to be sold at a fluctuating price responsive to supply and demand. Currently, if you live in most municipalities in Canada (and cities throughout the world), your water is provided to you at a fixed rate per unit, often of several thousand liters. This amount never varies, so you pay the same amount during winter as you do during the summer. As a result, many places have to endure water restrictions during the hot months because there is no incentive to ever use less.

The fact that we have water shortages and cities need to surveil their suburbs to make sure no one is cheating on lawn watering restrictions is a sign that the price is, for part of the year at least, much too low. The situation is even more ridiculous with agriculture. Many of you will have seen pictures of California’s drought and the parched fields of farmers whose “livelihoods have been ruined.” Those farmers only had a livelihood because, in addition to many other subsidies, they bought their water at a price almost too cheap to meter, which encouraged reckless and wasteful practices. If those same farmers had to respond to real prices they’d have changed what they grew to things more suitable for the climate. Perhaps they wouldn’t have tried growing almonds in the desert.

Some, like B.C. Environment Minister Mary Polak, argue that selling water would create bad incentives for government. They say that once water was viewed as a source of profit there would be a rush to exploit it as much as possible. There’s no reason that needs to be the case; her argument also suggests governments are completely immune to oversight from their citizens.

Annual licenses to extract water could be bought and sold; these then could be traded. The bulk of those licenses could be reserved (given at low or no cost) to municipalities, with only a few made available to corporations, possibly at very high prices if one wanted to exclude the bottled water industry from working in the province.

Alternatively, there could be tiered prices – low for the first few thousand for households, with steadily increasing prices for higher quantities, all of these adjusted by the current state of supply and demand.

These are just a few possible ideas for management, all of which take advantage of the information contained within prices.

Michael Flood is a marketing writer and communications consultant. He holds an MA in Philosophy from the University of Alberta.

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