Authors: Dr. Lixia Lambert, Department of Agricultural Economics, Oklahoma State University
Dr. Courtney Bir, Department of Agricultural Economics, Oklahoma State University
It’s challenging to consider something so familiar to us: water. Among all of the natural and environmental resources supporting life, water and air are arguably the most vital. In 1977, the United Nations declared access to clean water a fundamental human right (UN, 1977). At least 15 liters of water per-person per-day are required for our most basic needs to avoid health concerns (WHO, 2005).
Water is also a production input for goods and services through indirect and direct linkages. When and how much water is demanded for economic activities and how economic sectors and industries have used surface and groundwater to dispose of their waste, intentionally or unintentionally, affect water availability and quality. For example, agricultural production may adversely affect water quality (unintentionally) and the cost is borne by society. In the U.S., nutrient runoff from croplands into the Mississippi River and its tributaries is the leading cause of Hypoxia in the Gulf of Mexico (Rabalais et al., 1996). This ecological disruption has impacted fisheries, consumers and the seafood market through rising prices (Smith et al., 2017). In economics, this situation is a negative externality because the costs of diminished water quality are unaccounted for in the producer’s use of fertilizer or animal waste disposal.
How do we fulfill access to safe and clean water as a human right?
In the United States, the Safe Drinking Water Act (SDWA) was passed in 1976 and amended in 1986 and 1996. This legislation set legal and health standards for drinking water contaminant levels and treatment rules to protect public health under the U.S. EPA and state enforcement. There are over 148,000 public water systems in the U.S. Over 90% of these systems rely on groundwater, and the remainder on surface water. It is difficult for all public water systems to comply consistently with SDWA standards. For example, in 2019, the EPA issued more than 4,500 severe violations based on health standards (https://echo.epa.gov/). This suggests a portion of consumers face unsafe water and/or water insecurity at some time during the year.
What about the cost?
In economic theory, a water utility company falls under the ‘natural monopoly’ category. They did not choose to be a monopoly, but the single, large-scale producer is the most efficient way of providing water to households at a geographic location (a town, city, or a region). Once a public water supply system is constructed and the number of homes connecting to the network increases, the average and marginal cost of water treatment, distribution and plant maintenance decrease. This type of monopoly is allowed by the government, but it is regulated to ensure quality service and fair pricing. Most local governments do not allow excess profit for water utility companies beyond covering their costs.
Designing, constructing, operating and maintaining a water supply system that distributes water to its users while meeting national safety standards can be costly. A well-structured residential water pricing scheme is a useful tool for recovering water supply systems’ costs and limiting wasteful consumption. Consumers or taxpayers pay the price of infrastructure, treatment and distribution of drinking water.
However, low-income households may be unable to pay water bills if prices are too high. Recent research on water bills in 12 major cities led by The Guardian found that water bills rose by at least 27% in major U.S. cities, with the highest increase (154%) in Austin, TX between 2010 and 2018 (Colton, 2020 ). Water utility companies may shut off water in households that do not pay their water bills on time, and the COVID-19 pandemic has worsened this situation for many families without running water. To address this issue, dozens of states have mandated that public water supply systems provide access to their services during the pandemic for health reasons. Nonetheless, the question remains: if accessing clean water is a fundamental human right, what can society do to help these consumers fulfill their rights?
References
Colton, RD (2020). The affordability of water and wastewater service in twelve U.S. cities: a social, business and environmental concern. https://www.theguardian.com/environment/2020/jun/23/full-report-read-in-depth-water-poverty-investigation [accessed online November 10, 2020]
Rabalais NN, Turner RE, Justic D, Dortch Q, WisemanWJ, Gupta BKS. Nutrient changes in the Mississippi River and system responses on the adjacent continental shelf. Estuaries 19(2b):386–407 (1996)
Martin D. Smith, Atle Oglend, A. Justin Kirkpatrick, Frank Asche, Lori S. Bennear, J. Kevin Craig, James M. Nance. Seafood prices reveal impacts of a major ecological disturbance Proceedings of the National Academy of Sciences Feb 2017, 114 (7) 1512-1517; DOI: 10.1073/pnas.1617948114
United Nations (UN). Report of the United Nations Water Conference, Mar del Plata, 14–25 March 1977 (United Nations publication, Sales No. E.77.II.A.12), Chapter I.
ConsumerCorner.2021.Letter02
