Water as the next oil?

In light of my recent presentation on water markets and trading, I would encourage you to read a Freakonomics guest post by Charles Fishman titled "Why Water Will Never Be the Next Oil". In this post, Fishman argues that we've hardly seen any innovation or progress in the water sector over the past 30 years including water markets, technology and infrastructure. The chief reason? We still do not understand the true value of water. Oil, by contrast, is the world's most liquid commodity market with a clear market price; while this resource has severe social, economic and environmental ramifications, it has a transparent price that markets and governments can respond to.

Water still has a long way to go in establishing a price -- not least for its scarcity value -- but also so people do not use the resource profligately. Fishman makes insightful comments in his post and also comments on water markets. I agree with him for the most part, but I think he is wrong to say that we have hardly seen any innovation in the water world.

On the supply side of water, desalination has been taking off in parts of the world.  By no means is desalination the solution to our global water challenges; it's very energy intensive and can disrupt aquatic ecosystems. But, it is helping countries like Australia and Israel with their water shortages. I am a firm believer in the demand side solutions to water and there have been many of them. The case study project I did on Andhra Pradesh has proven that education, capacity building and leadership can lead to innovation in the conservation and management of water resources.

Water markets and pricing are other forms of demand side solutions that can help jurisdictions around the world conserve their water resources and distribute it more equitably. This, alas, is not always the case, as rapacity, corruption and water profitability can erode a government's goal of reaching better water management.

Either way, I fervently believe that we'll see lots of water innovation in the coming future. At the heart of this innovation we should ask ourselves how our "efficiency" improvements can also lead to "equity" improvements so that we can get one step closer in alleviating the dismal statistic of poor water access, that is, "one out of 6 people lack access to clean drinking water". This will be challenging but I hope we'll see change in my lifetime.