Mar 5, 2011

Tradable Water Rights – Coming to a province near you


In January of this year, the BC government joined Alberta, Saskatchewan and Manitoba to become the fourth province to announce that it is considering creating tradable water rights as a way of curbing use and improving the efficiency of allocation. The announcement came as a vague reference to “water markets” in the latest draft of the proposed Water Sustainability Act .

A water market is essentially a private market in which individuals and companies can buy and sell access rights to water resources. They are promoted as a way to encourage conservation and efficiently allocate water between user types – primarily from agriculture to industry, and within agriculture, from low to high-valued crops. However, economists and social scientists caution that they are subject to market failures, including predatory pricing, externalities and under-valuing water’s environmental services. As a consequence, these markets tend to exacerbate social inequity and have negative economic impacts on rural communities. For example, in his 2009 study, researcher Jordi Honey-Rosés found that in California’s Central Valley – where tradable water rights have existed since the 1970s – there are 8 jobs and $170 000 net income lost for each 1000 acre feet of water traded out of agriculture (see: Honey-Rosés, J. 2009. Reviewing the arguments for market based approaches to water distribution: A critical assessment for sustainable water management in Spain. Sustainable Development. 17(6):357-364).

These consequences were not lost on BC residents and response to the Water Act proposal was swift. Almost overnight, the Province’s Living Water Smart Blog  was flooded (no pun intended) with submissions calling for the removal of any form of water privatization.

The province now claims that it is not intending to “privatize” BC’s water, only allow individuals and companies to buy and sell access rights:

Water is owned by the Crown on behalf of all British Columbians…. This will not change and water will not be privatized under the proposed Water Sustainability Act, which is aimed at ensuring a sustainable future for BC’s water.”

And here we are again, traveling the same fine line walked in debates over public-private partnerships – the debate between ownership and operation. In that debate, we understand that, for all intents and purposes, multi-decade operation contracts are tantamount to privatization. In the case of water markets, we do not have long-term contracts; we have the sale of access rights to private entities. These private entities are then free to sell their rights without government intervention. This effectively removes governance of the use of water from the public sector and thus privatizes the resource.

 British Columbians are not being fooled by this smoke and mirrors trick and opposition to the introduction of water markets threatens to submerge the entire Water Modernization Act process.

 We will have to wait and see whether water markets will find their way into this province. In the meantime there is much to be excited about in the draft Water Sustainability Act, including proposals to protect environmental services and in-stream flows and increased monitoring of groundwater resources. Yet, if this process is truly to create robust and strong water policy for British Columbians, any discussion of privatization should be dropped.

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