Water Scarcity

Based on an online article from The Economic Times on the 9th of July 2011, it says that the high food cost has affected poor nations, hence, there is water scarcity. Scarcity exists when we are unable to get everything we want, and there is no getting away from the fact that we want more than we can get. Economic water scarcity is the most disturbing form of water scarcity due to the lack of investment in water and good management that allows the problem continue to exist. Water is not just for drinking but contributes to food production, energy and manufacturing. The allocation of water resources maintains the community by supplying water for human consumption, food production and sanitation, addressing mainly equity issues. As such, water is vital in our lives and has an essential role in the economic development of countries. Water is scarce in many countries including china continue to boost food imports. The restraints on food production and supply due to water scarcity gives pressure on food prices and the countries will be more dependent on food imports. In order to meet the rising demands for food, farmers will need 19 percent more water by 2050. According to a United Nations report, water scarcity persists in many farmers region. There is restraint on water availability for agriculture in many countries and the condition of it is aggravated. The use on fertilizers is increasing greatly in the world’s agricultural systems. However, the use of additional fertilizer produce only low amount of additional food product. Meanwhile, the quality of soil is lowered because of the fertilizers and intensive cropping. These factors cause the limitation of possibilities of increasing food production substantially and will boost relative food prices at a minimum and resulting hunger for many. The underground water which is pumped out at higher rates than rainwater replenish it to supply irrigation for agriculture and this problem results in the fall of water tables on every continent. 

 Efficient pricing and taxation can improve the allocation of a scarce resource. Most of the economic and welfare impacts is caused by the taxes on agricultural water use. The water use reduces much lower than the price of water. The sufficient water supply is intense for increasing number of countries due to the uneven allocation of water and people among regions. Population grows rapidly can increase the consumption of water and thus the problem worsens. Disruption of weather patterns is caused by the climate change and the emission of greenhouse gasses such as methane, carbon dioxide and nitrous oxide. There is more rain in some places but less in other places. China is affected by droughts over many years. The components of water resources are surface water, floodwater, desalinated water and groundwater. They are the main input for several kinds for economic sectors, such as industrial, hydropower, recreation and municipal. It is incumbent on us to allocate water resources efficiently and thus we need to make economic decisions reconcilable with social objectives, those are efficiency and equity. Economic efficiency is related to the amount of wealth that can be produced by a given resource whereas equity is about the allocation of the total wealth between the sectors and individuals in society. There are many forms of water allocation plans try to merge both efficiency and equity principles. Water is the scarce resource, and the economic produce returns by using it. Resources must be allocated efficiently so that the marginal benefit from the use of the resource is the same as the sectors for maximization of social welfare. If not, society will allocate more water to the sector for self interest. The resource may be allocated according to equity. Equity is related to fairness of allocation. For instance, an allocation of water resources that is based on equity suggests that all households have a basic right to obtain water services.

A marginal cost pricing mechanism ensures that a price for water is same as the marginal cost of providing the last unit of that water. The water’s unit price is equivalent with the marginal cost by an allocation which is considered an economically efficient. The total value of production across all influenced sectors of the economy is maximized by the efficiency criterion. Water charges comprise any social costs, although they may be hard to calculate. Social cost and scarcity value are shown in higher marginal cost curves than the private marginal cost curve. Marginal cost pricing can be implemented to open up differential prices for different qualities of water where water with higher quality possesses a higher marginal cost of provision. Public water allocation has intention to stimulate equity objective, ensuring that the water is supplied to areas of inadequate quantity. It gives protection to the poor, support to environmental needs and provision to a given level of water so that the minimal needs are in the receiving sector. Scarcity reflects the fact that the common measures in rising water demand in the past was to enlarge the water supply system. During Seasonal shortages, higher cost prices should be implanted to recover fixed costs to ration all of the water during the highest demand.

In conclusion, water scarcity is a serious issue of the future. Water scarcity is currently in the backseat because there are many issues being concerned in the world today. We tend to find a solution for the problems when the problems become fearsome. What will the new generation drink after 20 years? Many research and projections show that this will be a fearsome circumstance in as early as 20 years from now.

*Random fact: A healthy person can drink about 3 gallons (48 cups) of water per day.

By Cheong Wai Kit