Managing water as an economic resource

The failure to treat water as a scarce resource is, according to the author, one of the main causes of today's international water crisis. Demand management is one approach proposed to solve the problem. Demand management entails that better use is made of existing water supplies instead of automatically investing in new supply capacity to satisfy imagined future requirements (supply augmentation). Numerous case studies, taken primarily from reviews by the World Bank and the author's own Overseas Development Institute in London, are presented of measures promoting the more efficient use of water. These measures are classified into three groups: (i) enabling conditions (legislation, privatization, government economic policies); (ii) market-based (water tariffs, pollution charges, water markets, water banks, transferable water rights) and non-market-based incentives; and (iii) direct interventions and programmes (canal lining, reducing unaccounted-for water, water-saving devices). Three examples of demand-management projects in Indonesia, California and India are evaluated according to eight criteria, developed by the author: efficacy, economic efficiency, equity, environmental impact, fiscal effect, acceptability, sustainability, and administrative feasibility. The book concludes with a discussion on the implications of policy reforms and how they can be brought about.