The National Round Table on the Environment and the Economy has released Charting a Course: Sustainable Water Use by Canada’s Natural Resource Sectors. The report calls for new approaches to managing water use by the energy, mining, forest, and agriculture sectors – the country’s biggest water users.
As a former member of the Round Table and its water subcommittee, and as one who has long advocated putting a price on water, I am pleased and proud that the report recommends pricing to encourage water efficiency and conservation.
The report notes that current water management approaches may not function well as demand for water increases and water becomes more scarce. New management tools are needed – tools that are flexible and adaptive to changing circumstances. Pricing, the report concludes, is one such tool, providing flexibility to water users and encouraging innovative ways of reducing water waste, including re-circulation and recycling of water.
The Round Table’s research suggests that “industry is responsive to the price of water, and efficiency and conservation gains can be expected with small increases in the price of water.” According to its modelling, with the forecast year of 2030, a charge of $0.05 per cubic meter of water would reduce water intake by 20 percent in most provinces. Some industries would of course face bigger challenges than others. Paper manufacturing would likely be hit the hardest, followed by metal ore mining. The report notes a lack of empirical studies of how the thermal electricity generation sector responds to changes in the price of water. When the modellers excluded thermal generation from their calculations, they found that a price of $0.09 per cubic meter of water would be required to achieve a 20 percent reduction in water intake.
After considering the benefits and costs of putting a price on water, the report recommends that provincial and territorial governments should, where necessary, “send a long-term signal that water has an economic value by setting a volumetric price on water intake, in situations were water scarcity is or could be a real risk.” Nonetheless, the endorsement of pricing is cautious. The report advises further research and careful consideration of the impacts of prices on the natural resource sectors and the economy as a whole. It recommends a phased approach, in which governments first ensure that enabling legislation and regulations are in place and then evaluate individual watersheds to determine which policy instruments are most appropriate.
The report explores the role of other economic instruments, as well – in particular, tradeable water permits. The report also emphasizes the need for better information about current and projected water use and advocates more collaborative approaches to water governance.