Cape Town: complex water pricing

Miqui writes*

Clean water is vital to human beings and is fundamental to a functioning society. It is therefore often seen as an obligation of the government to ensure that all of its citizens have sufficient access to a clean water source. Numerous people, such as activists, argue that pricing the very poor for water is unethical and assume that increasing the price of water will always harm the poor. The City of Cape Town (CoCT), South Africa, is a useful and interesting case to reflect on this assumption. This city has one of the most unequal income distributions of the world. Providing water to the poor has always been a complex issue. Especially now, because recently this city has experienced a severe water shortage. Factors that come into play are equity, water conservation, and raising enough revenue to pay for the enormous costs of water infrastructure.

Pricing the water is almost inevitable in order to prevent shortages. There are numerous different tariff options. The CoCT has chosen an increased block rate (IBR), which they label a ‘step-tariff’. This means that if the consumed volume of water increases the price of the water also increases. This price increase is done in blocks/steps (Figure 2 source). The main reason for choosing such a tariff is because the wealthy in general have a higher consumption and therefore also have a higher tariff; they pay a larger part of the total supply cost of water and vice versa in the case of the poor. Another important reason is that an increasing volumetric price makes consumers pay attention to their use. In theory, this seems like a rational option. However, the case of Cape Town exemplifies that increased block rate pricing can have some serious ramifications, which you will read about below.

The CoCT also introduced a tool called “water management devices” (WMD’s). This meter was promoted to low-income households. If such a meter was installed, the CoCT would relieve them of their historic debt. At the same time, it would reduce demand because if this device detects leaks or excessive water consumption, the water supply will be cut off. The intent was to assist low-income households. The actual result was, however, the opposite. Most low-income households are found in the townships around Cape Town. Proper water infrastructure is often lacking, and leaks are common. As a result, the actual water use could be considerably higher than the effective water use. On top of this, people with a low income generally live with more people in one household than the official standard. This also adds up to the total water consumption of a household. The above will make the water bill soar or deprive people of sufficient water in the case of a cut-off.

Another ramification with IBR was that during the recent water crisis revenue sharply decreased because households which initially had a high-volume use shifted their consumptions. Hence, they became users in a lower block rate. The loss in revenue is especially detrimental in a time where water shortages demand for expensive investments in the water infrastructure. Coping with the decreases in revenue and to further incentivize the conservation of water, block rates increased tremendously (1st block +200%)(see fig.1). Low-income/volume users were particularly affected because they have less room to reduce consumption.

Bottom Line: The IBR is, arguably, not a proper price mechanism for the city of Cape Town. There are many different options, but pricing will always stand in the shadow of the huge historic inequality.

For more about the pricing of water: The Paradox of Water Pricing.

For more about Cape Town’s history of inequality and its water management: Water governance and justice in Cape Town: An overview

* Please help my Water Scarcity students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

Rome’s ration running out

Irene writes*

Ancient Rome’s water engineered infrastructures were based on the assumption that water was abundant and accessible. Those infrastructures, built in third century BC, still carry large volumes of water into the city. Growing water scarcity will be the biggest threat to the planet in the next decade. Despite Rome being the only city, out of all European capitals, with a sustainable water supply system, namely the water table recharging faster than the city can use, Italy is still projected to be under high water stress (40-80%) by 2040.

While Italy is hit by a drought in July 2017, Rome undergoes an unprecedented event: shutting down its public drinking fountains. More than a problem of water quantity, that action symbolized the transition from an era of abundance to an era of scarcity. On top of the drought itself, major issues are threatening Rome’s prosperous waters: pollution, poor quality streams and aquifers, natural levels of dissolved elements and compounds, subsidence and salinization, and groundwater flooding. Neglect of water management has been the main alert of approaching scarcity. The real problem will not be drinking water per se but the waste of water caused by leakages in the pipeline system. These supply problems are triggering losses up to 47.9% of the withdrawn water volumes.

The city of Rome depends on Aqueduct Peschiera for 70% of its total supply of 1,4 million m³ per day (9,000 liters a second) in normal conditions. The water is withdrawn in the Acea infrastructure of Cittaducale, on the lower slope of the mountain where the aqueduct is born. This is one of the biggest hydrological systems in the world dedicated exclusively to spring water. The impact of water rationing is causing millions in agricultural damages that, as a domino effect, are driving farmers out of business. Moreover, according to charities like the Red Cross, rationing water poses a major threat to homeless people and a growing number of migrants.

Politicians ordered the utility Acea to stop withdrawing water from Lake Bracciano, a recreational lake which, despite being just 8% of Rome’s water supplies, it is still a major source of drinking water for the city. Although Acea had promised to work to repair water pipes in order to avoid rationing of water, Environment Minister Gian Luca Galletti said “we cannot waste anymore time”.

In order to fight future water scarcity, the focus needs to be redirected to fixing infrastructure. To do that, lessons should be learned from the Ancient Roman engineers. Solutions like private rain water harvesting, recycling water in public fountains, or rethinking their infrastructure system will help avoiding major shortages in the future.

Bottom line: The drought period of 2017 was a wake-up call, not just for the Eternal city but for every city around the world coping with a changing climate, to re-think their water management strategies. Rome might lose its role as a model of sustainable water supply. If Rome cannot manage its abundant resources, how will other cities cope? Rome must act to reverse its water mismanagement.

* Please help my Water Scarcity students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

A threatened groundwater source

Lenaide writes*

Imagine living in a city located on top of the largest groundwater source and longest river in France, but to also have both of these sources be under the threat of scarcity. That it is the current state of Beaugency, France.

Beaugency has two water sources: the Beauce aquifer, which I will focus on in this blogpost and the Loire river, which I will only briefly mention at the end.

The aquifer, covering about 10 000 km2, is referred to as the water tower of the department, as it provides water to about 1 million inhabitants. Since the beginning of the 1990s, special attention for its care and sustainable use has been given to it as there was a major drought, forcing regulations to be put in place. However, these did not last, and thirty years later here we are with falling water levels and deteriorating water quality .

The aquifer provides drinking water for citizens and water for irrigation (mostly) and industrial uses. (For more info on the extraction, specific uses, and historical regulations imposed check out this website.)

Climate and agriculture threaten the Beauce groundwater.

The region Centre-Val de Loire (where Beaugency is located) is known for its lack of rain. Since the aquifer recharges with winter rains, a lack of rain impedes replenishment. Strong winds also reduce water supply by increasing evapotranspiration (see this PDF for more details).

Climate change changed rainfall occurrence and intensity. Altered and unreliable rainfall makes replenishment inconsistent. Average temperatures have also increased, and in the summer, there have been droughts leading to strict regulations.

The second problem I will mention is linked with agriculture. There has been an increase in population, meaning that more production is needed to meet the demand and needs of the people. Because of this increase in demand on irrigation systems, more water is used, adding to pressures from increased domestic use from the aquifer.

Additionally, there is a major problem regarding pesticide/herbicide aquatic pollution. In 2015, over half of all the groundwater sources tested in the region surrounding Beaugency had traces of either pesticides or herbicides. Some levels are dangerous, especially from forbidden herbicides (see this PDF for more info).

Finally, the river Loire is also under stress due to the same reasons affecting  the aquifer. Climate change causing extreme heat events and reducing the amount of rain which leads to a reduction of the flow which can lead to future shortages, and reduces the efficiency of the nuclear powerplant relying on the river flow. Agricultural runoff laden with more pesticides and herbicides also pollutes the river, leading to health concerns.

Bottom line: The increased intensity of climate change impacts, ever-growing population demanding more food, and poor management of water resources puts both the aquifer and the river under major threat. Action is needed to protect them.

* Please help my Water Scarcity students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

The water crisis in Port au Prince

Helena writes*

Port au Prince is currently dealing with a serious water crisis due to poor management and unequal distribution of water. Several stakeholders, namely the private sector and La Direction Nationale de l’Eau Potable et de l’Assainissement, are involved in the development of water supplies. As there is enough water available in Haiti, there is a better future that can be achieved, but for that better governance, collaboration and improvement of water infrastructures will be needed.

Unequal distribution and poor management [pdf] are the main reasons why Haiti is facing a water crisis. After the 2010 earthquake and the recent cholera epidemic, an urgent improvement in water services was needed [pdf] to respond to the increasing demand for water.  Arising from the lack of action from the part of the government, the private sector had to take over the water supplies and sanitation [pdf] in the capital of the country, Port au Prince. As Port au Prince is going through unplanned urbanization and rapid growth, the private sector was facing quite a challenge regarding the organisation of water supplies in this city. However, even if the situation was tough, the private sector succeeded to meet the needs of a significant part of the population as it is currently providing water to 57% of the citizens of the capital.

There is not only the private sector that is involved in the water management of Port au Prince. La Direction Nationale de l’Eau Potable et de l’Assainissement (DINEPA), which was established by the Haitian government in 2009, also plays an important role in water management. The motives of DINEPA are assuring safely managed sanitation services, making sure that the private sector has the ability to meet the increasing demand and encourages collaboration with several authorities to establish the needed legal and regulatory framework [pdf].

The lack of water management leading to poor water infrastructures resulted in severe degradation of water quality [pdf] over the past decades. When water quality decreases significantly, water becomes contaminated and can lead to the outbreak of infectious diseases such as an epidemic of cholera. In Port au Prince, the degradation of water quality was due to the contamination of the aquifer Plaine du Cul de Sac, which is providing up to 60% water to the city [pdf]. The situation got worse as the share of the population having access to water over the past 20 years has fallen by 4 percent. Now only 58% of the population has access to water services, and 30% of these water structures are in a poor state.

The World Bank is asking the government and more specifically DINEPA to take action.

In addition to the lack of water management, Port au Prince is facing serious inequalities when it comes to the distribution of water. DINEPA and the World Bank initiated in 2015 a project called “Budget Programme par Objectifs” to fight unequal distribution. This project aims to improve water sanitation and improve access to clean water for everybody. This initiative illustrates that collaboration amongst stakeholders will help to solve the crisis Port au Prince is currently experiencing. This will help to attain the aimed objectives namely a sustainable service, equal access and distribution and efficient governance. Finally, regular maintenance and daily supervising of water supplies [pdf] will also improve the situation by ensuring a better quality of the water.

* Please help my Water Scarcity students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

Flooding due to water scarcity

Eleonora writes*

Jakarta sits on a swamp, the Java sea is on the north shore, and thirteen rivers flow through it. Currently the news is swamped with images of a flooding even as the city suffers water scarcity. This man-made shortage of clean drinking water results from faulty infrastructure and contamination. Let’s break the paradox down.

The city has always been prone to flooding but the risk is increasing due to the fact that the city is sinking. North Jakarta has sunk 2,5 m in the last 10 years. The floods have become more severe due to both climate change, which results in heavier rain and sea level rise, and the sinking of the city. Jakarta is sinking due to excessive extraction of its underlying groundwater reserves. Over 60% of the city’s population relies on groundwater, especially in underdeveloped neighbourhoods.

The population relies on groundwater for two reasons: faulty infrastructure and contaminated rivers. The piped network of Jakarta only reaches 60% of the city, mainly in wealthier neighbourhoods. Even more so, the tap water in Jakarta is not drinkable due to contamination from bacteria, viruses and other microorganisms, heavy metals, pesticides, chemicals and microplastics. Richer citizens drink bottled water. Others boil their water or, even though they might have the rare access to pipes, use community groundwater wells. This explains how 40% of the city lacks the water infrastructure, but 60% depends on groundwater for their water. The remaining residents without piping depend on alternative water supplies. The lack of pipes results in people illegally obtaining their water.

The rivers flowing through the city are too contaminated to supply fresh water. Part of the problem of contamination is the absence of waste services, which means residents dumping their waste into rivers that are already contaminated. The city’s largest water source is the Jatiluhur dam on the Citarum river, which is often referred to as the most polluted river in the world. It is polluted due to locals dumping their household waste into the river and around 2000 industrial factories disposing their wastewater directly into the river. The river water causes diseases and rashes, making it an unsafe water source. Hence, people are pumping their water directly from the ground; indirectly causing the city to flood.

Table 1. The industry type contaminating the Citarum river

Bottom line: Polluted rivers and faulty infrastructure cause freshwater scarcity in Jakarta, making 60% of Jakarta residents rely on groundwater. This results in the groundwater reservoirs being depleted and therefore the city is sinking rapidly. The newly submerged city now endures more severe flooding as a consequence of human actions: climate change, faulty infrastructure and pollution.

* Please help my Water Scarcity students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

Sydney’s struggle: Water ore coal?

Amy writes*

Drought. Wildfires. Rising population. The future of Sydney’s water is at serious threat, so why has the Government extended a mining company’s contract to mine under Sydney’s ‘protected’ water catchment area? The recent wildfires that devastated an area of Australia the size of the US states of Vermont and New Hampshire combined showed the world the force that is climate change. The wildfires damaged 30% of the Warragamba Dam, which provides 80% of Greater Sydney’s drinking water. The threat to Greater Sydney’s water supply is clear, yet the Government and mining company continue to degrade and deplete water supplies through the practice of longwall mining.

South32 is the mining company in question. Their longwall mining machines cut away at a wall of coal one row at a time. The process creates a pressure differential causing land to twist, warp and buckle. Water flows down through cracks into aquifers, often draining creeks, swamps and other waterways. Even if water returns for a short period, the presence of many hard metals severely reduces its quality, never mind the fall in quantity.

Unsurprisingly, Water NSW (responsible for supplying the state’s water) as well as local environmental groups such as Protect Our Water Alliance (POWA) oppose mining underneath the protected catchment area, yet this has not prevented the Government from extending contracts. The Subsistence Environmental Management Plan (SEMP) requires monitoring for a minimum of one year prior to mining in order to establish a base-line of environmental values in the area but scientists say this time frame is too small whilst the negative consequences continue for many years after mining has stopped. In this face-off between coal and water, it is concerning to watch the Government favour the former, though perhaps not surprising when the country’s Prime Minister advocates ‘hazard prevention’, otherwise known as deforestation.

South32’s response to criticisms are comical. Through offsetting potential subsidence-related impacts to upland swamps, using remediation techniques which have continually failed to rehabilitate, and proposing water quality improvement actions like fire management (i.e. deforestation), the company claims that the project will actually have a net beneficial effect on water quality. Unbelievable!

Ironically, mining companies may be able to exploit coal reserves underneath the catchment area but individuals are prohibited from entering the protected region, meaning that the true impact of longwall mining is  unknown to outsiders. Even so, experience abroad provides no grounds for optimism. Impacts of subsidence are long-lasting and cases in the United States have seen both surface and groundwater hydrology permanently affected. Contrary to the belief held by some of those in favour of mining, streams rarely heal naturally.

As South32 waits for approval for a contract extension until 2048, it is vital that water is valued as it should be, especially in a nation frequently overwhelmed by drought. While costs to the colliery are obvious in terms of lost production, surely there is no comparison when compared to the value of water and ecological integrity for Greater Sydney.

Bottom line: Sydney’s water scarcity issues might have been accelerated by consequences of climate change, but it is puzzling that mining’s harmful impacts on scarcity are not more strongly considered. Whilst residents and businesses face Level 2 water restrictions, there is no justification for allowing longwall mining to continue under the ‘protected’ water catchment.

* Please help my Water Scarcity students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂

Book 2, Chapter 1

This introductory chapter to the second book (“Some fundamental notions”) is short. It begins with Marshall’s plan to study “wants” (demand) in Book 3 and “efforts” (supply) in Book 4. Since these two are brought into equilibrium via money, or wealth, then Book 2 focuses on wealth.

§2. Marshall quotes Mill and Darwin to justify caution when considering the meaning of words and use of new words for old ideas (e.g., “interest” replacing “usury”). He says that older words might be more common but that newer words express recent ideas that are having a greater impact on society, since they are used to discuss important changes.

§3. The challenge, then, is to use common words in ways that the average person can understand, i.e., avoiding jargon. This pledge runs into trouble when one considers the many possible interpretations of a single word (“utility” springs to mind!)

§4. Thus it is important to use words that convey, rather than obscure, the results of analysis. I find this caveat to be wise and perhaps forgotten by too many modern economists who use “demand” when they mean “quantity demanded” or “elasticity” when they mean “price elasticity” — and that’s before even getting into our narrow definition of “elasticity,” which defies the normal use of the word!

Interesting stuff

  1. Civilizations don’t collapse. States do.
  2. A big storm washed away sand meant to protect the Dutch coast from storms (!) The government claims it will “come back.” Right.
  3. Fascinating: An anthropologist on Wall Street and the origins of the “shareholder value” that’s destroyed so much social value.
  4. Three podcasts on cryptocurrencies: a godfather, their weaknesses, and how they help people in mis-governed countries.
  5. And then podcasts on the social impacts of online dating and a really fascinating interview with a financial scammer.
  6. Romer criticizes economists but not Nordhaus (co-winner of the Nobel), who has rationalized inaction on climate change for long enough to doom humanity.
  7. Fascinating (accurate) insights on Wall Street from an anthropologist.
  8. China’s response (total lockdown) to the Wuhan corona virus is mostly about showing that the party is in charge.
  9. (Some) Scandinavians admit they gain from the rest of the world, unlike nationalists who think incest is the best source of innovation.
  10. The endless damages of CC will push us to abandon cities and “how bad can CC get by 2050? Very bad!”

H/T to CD

Book 1, Chapter 4

This chapter on “the order and aims of economic studies” begins with:

We have seen that the economist must be greedy of facts; but that facts by themselves teach nothing. History tells of sequences and coincidences; but reason alone can interpret and draw lessons from them. The work to be done is so various that much of it must be left to be dealt with by trained common sense, which is the ultimate arbiter in every practical problem. Economic science is but the working of common sense aided by appliances of organized analysis and general reasoning, which facilitate the task of collecting, arranging, and drawing inferences from particular facts. Though its scope is always limited, though its work without the aid of common sense is vain, yet it enables common sense to go further in difficult problems than would otherwise be possible.

This paragraph is interesting for its emphasis on common sense — much against the popular interpretation of Friedman’s 1953 positivist argument that assumptions do not matter if predictions are accurate.

Marshall goes on to qualify economics as a science in terms of how it can predict actions in response to “measurable motives” such as the motive of money. Marshall thus limits the predictive power of economics in areas where motives are not clear or reflect different institutions, i.e., in places lacking “free enterprise, of general education, of true democracy, of steam, of the cheap press and the telegraph” [p 33]. These caveats were lost in the decades after Principles was published, as economists sought to generalize their theories to all times, places and peoples, an imperialism that has often overreached.

§2. Marshall then cautions against assembling facts in the quest for a “silver bullet” explanation, as such practice prevents one from understanding the situation as it is. He therefore recommends assembling all related “facts and reasonings” to see how they interact and thus reveal “nature’s laws.” To me, this passage emphasizes inductive reasoning.

§§3-4. Marshall then gives a veritable laundry list of questions worthy of economists’ attention. For example:

  • “Subject to what limitations is the price of anything a measure of its desirability?
  • Taking it for granted that a more equal distribution of wealth is to be desired, how far would this justify changes in the institutions of property, or limitations of free enterprise even when they would be likely to diminish the aggregate of wealth?
  • Is it necessary that large numbers of the people should be exclusively occupied with work that has no elevating character?
  • Have we carried as far as we should the plan of collective ownership and use of open spaces, of works of art, of the means of instruction and amusement, as well as of those material requisites of a civilized life, the supply of which requires united action, such as gas and water, and railways?
  • What scope is there for the moral pressure of social opinion in constraining and directing individual action in those economic relations in which the rigidity and violence of government interference would be likely to do more harm than good?” [pp 33-35]

Marshall ends §4 calling for an emphasis on the study of man’s social life,  and turn from studying politics. Thus, economics `shuns many political issues, which the practical man cannot ignore: and it is therefore a science, pure and applied, rather than a science and an art. And it is better described by the broad term “Economics” than by the narrower term “Political Economy”‘ [p36]. Wow. This “narrow-broad” characterization flips my use of “political economy,” so I am a bit confused here. At the moment, my interpretation is that Marshall sees politics (“the art of the possible”) as a limited sphere in negotiation and strategy, whereas economics is concerned with the larger realm of how humans interact in markets, social settings, etc.

§5. Marshall then calls for economists to use their perception, imagination and reason to study the underlying influences on actions and the interactions that affect society. This perspective contradicts assertions of cause-effect via lazy shallow assumptions that are worse than making no assumptions at all. To understand these deeper relations, “economic studies call for and develop the faculty of sympathy, and especially that rare sympathy which enables people to put themselves in the place, not only of their comrades, but also of other classes” [p 38]. It is clear (from other examples in this chapter) that Marshall is concerned with the working classes that have been roiled and displaced by the Industrial Revolution.

§6. Marshall ends the chapter with some perspective on “recent” developments of the 19th century, i.e., that economic freedom has been helpful for the majority of mankind while the complex impacts of the “industrial organism” are still surfacing.

He then condemns “economists” pushing narrow (upper) class interests:

And even in our own time, that title [“economist”] has been assumed by opponents of generous expenditure on the education of the masses of the people, in spite of the fact that living economists with one consent maintain that such expenditure is a true economy, and that to refuse it is both wrong and bad business from a national point of view… The fact is that nearly all the founders of modern economics were men of gentle and sympathetic temper, touched with the enthusiasm of humanity. They cared little for wealth for themselves; they cared much for its wide diffusion among the masses of the people. They opposed antisocial monopolies however powerful. In their several generations they supported the movement against the class legislation which denied to trade unions privileges that were open to associations of employers; or they worked for a remedy against the poison which the old Poor Law was instilling into the hearts and homes of the agricultural and other labourers; or they supported the factory acts, in spite of the strenuous opposition of some politicians and employers who claimed to speak in their name. They were without exception devoted to the doctrine that the wellbeing of the whole people should be the ultimate goal of all private effort and all public policy. But they were strong in courage and caution; they appeared cold, because they would not assume the responsibility of advocating rapid advances on untried paths, for the safety of which the only guarantees offered were the confident hopes of men whose imaginations were eager, but not steadied by knowledge nor disciplined by hard thought.

This passage, even if self-serving, rings true, as “good” economists are indeed more interested in the wealth of nations and advance of society over the wealth of the elites and their grip on power. We oppose abuse of market power, and thus support unions as a countervailing force. We support education, and thus oppose the exploitation of ignorance or limits on the spread of knowledge. We (if I may) see our role as one of furthering our collective advance and prosperity.

Marshall ends the chapter with a note of “new hope” based on the biological sciences, i.e., the idea that the evolution of species (Darwin published in 1859 and was influenced by Adam Smith source1 source2) meant that man was not “doomed by his circumstances” (nurture) but also influenced by the evolutionary results of prior generations (nature). From this claim he pivots to saying that the “rights of property” do not deserve automatic priority, except as they contribute to progress — for all.

Interesting stuff

  1. Democrats are losing touch with the “high school nation” that is the US
  2. Six (corporate) life lessons — the funny version
  3. The “desk killers” who kill millions at a distance
  4. The Mumbai police have a brilliant solution for too much honking
  5. Review of Shoshana Zuboff’s Age of Surveillance Capitalism (2019): “The aim for the surveillance capitalists is to share this theft of information about private lives with third parties for money.” Read my review of Future Crimes to protect your privacy.
  6. The war on cannabis has been failing since 600 BCE
  7. Amazing rant on Louisville’s failure to invest in water infrastructure
  8. Are we all members of the Voluntary Human Extinction Movement?
  9. Academics are starting to predict where people will move under the influence of climate chaos. Good morning Detroit!
  10. Related: The solution to climate change is not population control but carbon controlresearchers are updating flood maps to reflect rapidly rising climate riskArctic permafrost is melting so fast that it may overwhelm the (direct) human contribution to climate chaos. Happy Valentines!

H/T to PB