Why We Urgently Need Water Policy Reforms

Growing water scarcity and degradation pose rapidly growing challenges to global food security and human well-being.  Policymakers contending with these problems face many obstacles, including the increasing cost of developing new water through constructing storage, conveyance and treatment infrastructure, including for desalination of sea water. Other obstacles include the growing degradation of soils in irrigated areas, expanding groundwater depletion, rapidly growing water pollution, and the overall deterioration of freshwater ecosystems.  Unless important policy reforms are undertaken today, water scarcity and pollution will adversely affect most, if not all, livelihoods in the coming decades.

But water scarcity already poses major challenges to food and nutrition security today as 36% of the global population—approximately 2.4 billion people—live in water-scarce regions where 22% of the world's GDP and 39% of the world's grains are produced.  Scarcity and degradation impact food production and prices, leading to lower food consumption and thus threatening the nutrition and health of the poor. Combined with growing climate variability and change, intensifying competition for water resources by non-agricultural sectors will put downward pressure on food supplies. According to scenarios projected by the International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT) at the International Food Policy Research Institute (IFPRI), Business-as-usual (BAU) levels of water productivity and economic growth will increase water-related risks, that is, the likelihood of water-related production shortfalls and economic disruptions because of severe water shortages increases. Under BAU, 53% of the global population, 49% of global grain production, and 45% (US$63 trillion) of global GDP will be at risk due to water stress by 2050. Generally, low-income countries, especially those in Sub-Saharan Africa or South Asia, will be the hardest-hit by growing water stress.

Meeting the challenges posed by global water scarcity will require action on many fronts. There are six critical priorities for water policy reform that are essential for a water-secure future.

The first priority policy reform is water rights, a cornerstone of efficient and equitable water management. In many cases, water reallocation is an ad-hoc process carried out with government consent. For example, cities may add new end users to their systems, and build additional water offtake plants to support the increase, depriving other users of water. Water rights empower users by requiring their consent for any public reallocation of water and compensation for transferred water. Well-defined, tradable water rights also motivate users to invest in water-saving technology: they gain additional income by selling the water they save. A properly-managed system of tradable water rights also allows cities and irrigating farmers to internalize the external costs imposed by their water use, reducing the pressure to degrade resources. Very few water systems have achieved these goals, with perhaps the most effective being the Murray-Darling Basin of Australia.  

Water markets in the Murray-Darling Basin—developed through a number of reforms over the past two decades—have generated significant economic benefits in recent years (Grafton, Horne, and Wheeler 2016).  They employ a 'cap and trade' system in which the cap represents the total pool of water available for consumption. Two types of rights are traded: water access entitlements, or rights to an ongoing share of the total amount of water available in a system (traded on a permanent basis), and allocations based on the actual amount of water available in a given season. During the year, state governments allocate water against entitlements in response to changes in rainfall, storages, and other conditions. This system provides users with certainty as to the water they will receive, while allowing states to manage overall availability under different climatic conditions.

A water brokerage (charge-subsidy) system could be an important step toward water markets in developing countries.  This system would introduce incentives for efficient water use, recover O&M costs, and simultaneously protect or even increase farm incomes. Such allocation systems could pay farmers for reduced water use.  Water would be allocated to farmers based on historical rights, with transfers permitted at a price determined by a water agency or through a voluntary market. Users would then be charged or paid at a price for demand above or below that of base water rights. Unlike other water pricing schemes, such a system introduces non-punitive incentives: marginal efficiency prices apply only to marginal water use.

A second priority area is the implementation of economic incentives to encourage the efficient use of water. Distorted incentives such as free access for irrigation and subsidies for urban tap water create inefficiencies and scarcity. Urban water pricing systems are often complex. Many use combinations of flat rate and increasing block-rate tariffs to achieve specific objectives, such as cost recovery, water conservation, efficiency pricing, or support to connected, poorer populations. But such arrangements have potentially adverse impacts on non-connected, poor consumers and farmers. For example, users connected to a public system typically incur low water fees, while poorer, non-connected users can face charges up to 100 times the public rates.

The third area that needs reform is investment  better farming technologies. Productivity gains for both irrigated and rain-fed crops are critical to future water and food security. Plant breeding can improve plant biomass per unit of water and the efficiency of biomass growth per unit of transpiration. To ensure effective breeding for high-stress environments, the availability of diverse genes is essential. The tools of biotechnology should be used to support a broad and targeted gene pool. Even if countries elect to forgo transgenic breeding, they can employ marker-assisted selection, cell and tissue culture, and gene editing (National Academies of Sciences, Engineering, and Medicine 2016; PBS and ABSP II 2004).

Improved crop and water management, such as enhanced water harvesting, conservation tillage, and small-scale precision farming are also important to improve yields in both irrigated and rain-fed settings, while investments in high-efficiency irrigation can help increase “value per drop” in irrigated environments.

Farmers adopting these techniques must take into account changes in the availability of return flows for other users within a river basin or an irrigation system. Realizing the benefits of new technologies should not harm other farmers. Managing these potentially contentious interactions will require quantitative allocations based on water rights combined with economic incentives to allocate water for productive uses in agriculture, domestic tasks, and industry.

The fourth policy to examine is improved governance for groundwater. Groundwater use has increased very rapidly in a very short period of time since new drilling technologies and individualized pump sets became available in the 1970s and 1980s. This is particularly true in Asia, due to the availability of cheap pumps and subsidized energy (Giordano and Villholdt 2007). While expansion of groundwater use is beneficial, over-drafting causes land subsidence and salinization, degrading both land and water quality in the aquifer areas.

Governing groundwater is particularly difficult because the resource is invisible to users, there is a lack of data on safe yield and availability, and groundwater moves continuously. Nevertheless, effective governance is essential for more sustainable groundwater use. Elements of a successful governance system include recognized use rights, means for sanctioning violations, financing mechanisms, and procedures for adapting to changing conditions. In addition, local water user associations should monitor usage and approve and manage groundwater rules, which must respond to local conditions and evolving environments.

The fifth policy area in need of reform is how agencies deal with water quality and associated environmental problems. Unsafe drinking water combined with poor sanitary conditions in households and communities is a major contributor to disease and malnutrition in developing countries, particularly among children. But industrialized countries are not immune: In 2015, lead leaching into the Flint, Michigan, water system created a public health crisis as children’s levels of lead in blood levels rose dramatically, with the effects concentrated in low-income neighborhoods. Using contaminated wastewater for irrigation also creates significant risks to human health. Several measures must be taken to address growing water pollution challenges. Investing in water quality monitoring, for one, should be scaled up and measurable and feasible water quality standards for different uses must be established. Additionally, water quality should be incorporated into water rights systems, and water quality standards enforced by empowered national and district agencies.  Enforcement will pose the greatest challenge: those who pollute water must be made to pay regulatory fines and the use and discharge of low-quality water must be discouraged. Finally, significant, additional, public and private investments in water treatment and sewage disposal plants will be required.

Lastly, there needs to be a greater understanding of the linkages between water and energy; and among water, nutrition, health, and gender. All water uses are linked to multiple inputs. Joint energy and water system development can have multiple positive impacts. For example, if energy planners are aware of future declines in water supplies this could be factored into facility development. Similarly, most water investments entail significant energy needs. In the irrigation sector, such needs may arise from pumping surface or groundwater, or from increased mechanization and agro-chemical use. Understanding these linked needs and ensuring that interlinked resources are used efficiently should be part of any water investment plan.

Similarly, water supply and irrigation can have wider development impacts, particularly for nutrition, health, and gender empowerment. In order to ensure that water supply and irrigation systems address these multiple impacts, health agencies must be involved in their design and hazard management. Additionally, irrigation institutions should support gendered asset development and water and land rights systems.

The reform of existing systems of water rights and allocation is intrinsically difficult. In addition to the policy complexities, in many countries, established interests benefit from existing systems of subsidies and water allocations.  However, status quo policies will become increasingly costly as water scarcity worsens. The improvement of water and food security outcomes can be achieved through the measures discussed above.  Analysis shows that implementation of these measures can improve water use efficiency, increase food production and consumption at lower prices, and reduce hunger and childhood malnutrition (Rosegrant et al. 2013).

To move these important policy reforms forward requires engagement and leadership from all actors involved: Ministries of agriculture and water, farmers as the main stewards of freshwater resources, the private sector and the research community. They will need to work together to implement these important reforms so that water scarcity and pollution are effectively addressed.


This article was developed with support from the CGIAR Research Program on Water, Land and Ecosystems and the CGIAR Research Program on Policies, Institutions and Markets.

Mark W. Rosegrant is Director, Environment and Production Technology Division, International Food Policy Research Institute (IFPRI). With a Ph.D. in Public Policy from the University of Michigan, he has extensive experience in research and policy analysis in agriculture and economic development, with an emphasis on water resources and other critical natural resource and agricultural policy issues as they impact food security, rural livelihoods and environmental sustainability.  He is the author or editor of 12 books and over 100 refereed papers in agricultural economics, water resources and food policy analysis. Rosegrant has won numerous awards, and is a Fellow of the American Association for the Advancement of Science; and a Fellow of the Agricultural and Applied Economics Association. 

Claudia Ringler is Deputy Division Director of the Environment and Production Technology Division at the International Food Policy Research Institute (IFPRI). She also manages IFPRI’s Natural Resource Theme and co-leads the Institute’s water research program. She is currently also a co-manager of the Managing Resource Variability, Risks and Competing Uses for Increased Resilience (VCR) of the CGIAR Research Program on Water, Land and Ecosystems (WLE), chairs the Food, Energy, Environment and Water Network (FE2W) and is associated with the Sustainable Water Futures Program of Future Earth. Her research interests are water management, global food and water security, natural resource constraints to global food production, and the synergies of climate change adaptation and mitigation. She has more than 100 publications in these areas.