Year: 2008
Type: report
Abstract: This study builds upon the explorative study of Hoekstra (2006), who puts forward an argument for coordination\nat the global level in ‘water governance’. Water governance is understood here in the broad sense as ‘the way\npeople use and maintain water resources’. One of the factors that give water governance a global dimension is\n‘virtual water trade’ between nations, i.e. the trade in water in virtual form through trade in water-containing\nproducts. Virtual water trade involves advantages as well as disadvantages. The development of institutional\narrangements to account for these disadvantages has not kept pace with the enhancement of international trade\nin general and virtual water trade in particular.\nThe objective of this study is to design alternative institutional arrangements to deal with the global dimension\nof water governance. The study elaborates three arrangements: a Water Pricing Protocol, a Business Agreement\non Sustainability Reporting of water-intensive goods, and a system of Water Footprint Permits. The three\ninstitutional arrangements are aimed to improve the ecological sustainability, economic efficiency and social\nequity of water governance. The arrangements aim to influence change agents in the virtual water chain (the\nproduction chain of water-containing products). Behavioural mechanisms bring about behavioural change of\nother agents in the virtual water chain.\nWe define the Water Pricing Protocol as an international agreement on water pricing structures that cover the\nfull cost of water use, including investment costs, operational and maintenance costs, a water scarcity rent and\nthe cost of negative externalities of water use. Such a protocol will favour an efficient and sustainable use of\nwater resources. By putting a price on water, conservation becomes economically efficient. The Water Pricing\nProtocol should account for the issue of social equity. The greatest challenge is to bring the theory of full\nmarginal cost pricing into practice. Practical difficulties involve the flowing character of water, disruption of\nhistorical water management systems and the need for national capacity to set up the institutions necessary for\nwater pricing.\nWe define the Business Agreement on Sustainability Reporting of water-intensive goods as an agreement\nbetween companies that commit themselves to report on the impacts of their business on water resources. Such\nan agreement will promote sustainable and efficient water governance. The Business Agreement merits from the\nfact that it focuses on so-called ‘channel leaders’ (agents in the production chain capable of imposing their will\non other agents). In the Business Agreement, channel leaders agree on a standardized chain-based measuring\nand reporting method for the sustainable use of water resources. Sustainability reporting is done in corporate\nresponsibility publications. In this way, companies can compare the environmental performance of their\nproducts over time and with the products of others. This may lead to the conservation of resources. The fact that\nthe Business Agreement is not binding threatens its effectiveness.\nA system of Water Footprint Permits defines a maximum global water footprint, which is allocated among\nparticipating countries. The system of Water Footprint Permits favours a fair allocation of global water\nresources among the people of the Earth. The water footprint of an individual is defined as the total volume of\nfreshwater used to produce the goods and services consumed by that individual. Comparable to the Kyoto\nProtocol, nations voluntarily participate in the system. The state parties define a global maximum water\nfootprint each six years. This global maximum is allocated to nations, based on the number of inhabitants. When\na nation’s water footprint is smaller than its permit, the national government can sell part of their permit to\ncountries whose water footprint is bigger than its permit. It can also reduce its water footprint by applying\ndomestic instruments to change the behaviour of stakeholders in the virtual water chain. The transaction costs of\nthe system are the highest of all institutional arrangements investigated. Whether the benefits outweigh the costs\nremains a topic of further research.\nThe institutional arrangements are not mutually exclusive. All three institutional arrangements require\nmonitoring efforts, which can be combined. On the other hand, combinations may be less effective than the sum\nof effects of the separate institutional arrangements. A combination of Water Footprint Permits and the Business\nAgreement is promising. This way, governments, civil society and business society involve in the equitable and\nsustainable water governance at the global level.\nThe study was a first-order exploration of possible institutional arrangements for global water governance.\nFurther research should adopt a multi-disciplinary and multi-level approach. Strategic alliances with other\ninstitutional arrangements are possible. Water Footprint Permits are much more relevant when combined with\nEcological Footprint Permits. A Water Pricing Protocol will be more effective when combined with other\nmeasures to change existing subsidy schemes, particularly the US and EU agricultural subsidy schemes.\nDesigning and implementing global institutions to account for the global dimension of water governance\nrequires forms of communication, information, and trust that are broad and deep beyond precedent, but not\nbeyond possibility.
Language: English
Subfield: Environmental Engineering
Field: Environmental Science
Domain: Physical Sciences
Open Access status: green
OpenAlex ID: W2101536672