Framework for reforming water resources allocation mechanisms


Reforming water resource allocations: is the Netherlands prepared for the future?

Gepubliceerd op
18 juli 2014

In general, climate change will lead to longer periods of drought, while the demand for water increases due to the growing world population. As a result, the competition for scarce fresh water resources will be intensified. Water is an essential and irreplaceable input for both production processes in economic sectors like agriculture and manufacturing industries, and nature. The allocation of water resources to water users in case of droughts often has a historical basis. Given the present and future conditions, historical water allocation mechanisms can lead to negative impacts on nature, loss of economic benefits, or disproportional impacts on particular water users. To meet the current conditions, water allocation mechanisms need to be reconsidered and reformed if necessary. New allocation mechanisms are preferably flexible and can deal with fluctuations in water supply and demand.

Recently, the Dutch ministry of Infrastructure and the Environment, LEI Wageningen UR, OECD, and Unesco IHE organised an international workshop for experts on water resources allocation mechanisms from Australia, Korea, the USA, the UK, France and the Netherlands. The primary goal of the workshop was to review and advise the OECD on the forthcoming OECD report on water resource allocation mechanisms. This report presents a framework and a checklist for the judgement of water resources allocation mechanisms; the majority of OECD countries is working on reforming water allocation mechanisms. The Netherlands would like to play a leading role in global issues such as food security and water shortages (Ministry of Foreign Affairs, 2011). In the Netherlands, the water allocation mechanism is currently subject of debate in the so-called Delta decisions. The Dutch government has to decide on measures to improve the Dutch water allocation mechanism for future developments. It has introduced the concept of fresh water supply levels. These levels indicate the available water for all users under normal conditions and during water shortages.

Framework for reforming water resources allocation mechanisms

There is not one optimal allocation mechanism, because the circumstances differ across countries or regions. In the forthcoming report, OECD will present an inventory of water allocation mechanisms. The OECD framework has three objectives: economic efficiency, environmental efficiency, and social equity. The first objective, economic efficiency, implies that water resources are allocated to water users who generate large value added or employment, minimise water use, distribute risks efficiently (by avoiding huge damages), invest wisely and have an incentive to innovate. The second objective, environmental efficiency, entails that water use of vulnerable ecosystems which need fresh water to survive is ensured. Social equity, the third objective, is the equity between existing and new water users. The costs and benefits of water use, as well as the risks, should be divided proportionally.

There are a number of conclusions to be drawn from the workshop. Water has a value that can be expressed in monetary terms. When property rights are assigned and distributed, a market can be developed for trading water rights. A system of levies for water use should be transparent and equitable; the user-pays principle should be applied to water use, to create an incentive to use water efficiently. The water allocation mechanism should be flexible; the infrastructure for water supply should be available for multiple users.

The reforms of existing water allocation mechanisms are time consuming and involve high transaction costs. A clear necessity to reform should be identified. The benefits of reforming should be higher than the costs. Finally, it is important to realise that the water allocation mechanisms are also affected by other policies such as those addressing energy, agriculture, and water quality.

National Delta programme: Delta Decision on Fresh Water

September 16 -the King’s speech, every third Tuesday in September-  the Dutch Delta plan 2025 will be presented including the Delta Decisions. The Delta Decision on Fresh Water will introduce fresh water supply levels. These levels provide information on how much water is provided by the government. Moreover, water users know how much water they will receive in case of water shortages. As a result, the risks of water shortages become clear, so that water users can decide to invest in measures such as water storage basins. The water supply levels will be based on agreements between water users and the government. LEI Wageningen UR will use the outcomes of the OECD workshop to  advise the Delta programme fresh water about the water allocation mechanisms.