Rethinking the economics of water

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Water is rising on the policy agenda as population growth and climate change intensify scarcity, shocks, and access inequalities. Addressing this, a special issue of the Oxford Review of Economic Policy led by Assoc. Prof. Dustin Garrick, Prof. Michael Hanemann and Prof. Cameron Hepburn features water for the first time in its 35-year history. Drawing on expertise across a wide range of topics and geographies, the issue outlines the challenges, opportunities and lessons of water economics, bringing together insights of direct relevance for current policy decisions. It is available in open access until 31 May 2020.

The World Economic Forum has identified water crises among the top 10 global risks to humanity each year for nearly a decade. Meanwhile, the conventional economic policy recommendations-privatization, pricing, and property rights-have struggled to solve these challenges.

Recognising the urgent need to rethink the economics of water and enable better policy decisions, researchers at the Smith School of Enterprise and Environment, University of Oxford, convened leading economists to chart the growing challenges of delivering clean water and take stock of policy innovations. The resulting special issue addresses major themes of water management and examines the role economic policy can play.

The papers respond to the growing global challenge of water scarcity, which manifests in flash points of crisis around the globe, and whose threats are multiplied and accelerated by climate change, population growth and public health risks.

Topics include:

  • An assessment of the economics of water, examining how economic policy has responded to the challenges of financing water supply infrastructure, pricing water and setting up water markets to deal with scarcity and shocks (Garrick, Hanemann and Hepburn)
  • The economics of delivering water for drinking and handwashing in rural Africa. By networking water services at scale, creating value for users, and developing performance-based funds, a framework for new policy and investments is proposed. (Hope, Thompson, Koehler, Foster)
  • An assessment of water privatisation in England, considering whether water privatization thirty years ago has delivered the promised superior performance to nationalization, which remains the dominant model in Europe. (Helm)
  • Lessons learned from water markets in Australia, where water scarcity and conflict over water have become critical issues exacerbated by recent extremes including bushfires and drought. (Wheeler and Garrick)

Further topics covered by the special issue include: the economics of water scarcity (Damania), the economics of dams (Jeuland), the paradox of pricing water (Grafton), lessons from water rights and marketing in the US and Australia (Hanemann and Young), groundwater management (Blomquist), and sanitation (Whittington et al).

Meeting the water sustainable development goals will require institutional and technological innovations to supply, allocate, and manage water, as well as a sustained political and financial commitment to address those who might be left behind. As a global hub for the translation of new thinking on the economics of water into global policy and ultimately the well-being of communities around the world, the Smith School of Enterprise and Environment and its partners have a key role to play in addressing this global challenge.