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“What’s good for the goose, is good for the gander" – a proverb of unknown origin.

The so-called cap on surface water use in the Murray-Darling Basin is widely acclaimed as a success.  This cap is dynamic and designed to limit the amount of surface water that may be taken from rivers in the each part of the Basin.

The cap’s main purpose is to keep water use and development within an agreed limit and maintain a degree of supply reliability at the individual level.  If someone wants access to more water than is currently allocated to them, someone else must agree to take less water.  In rural areas, this is achieved primarily by letting people trade water on a temporary or permanent basis.

Contrast this with the situation found in most urban water supply systems.  Even when severe water restrictions are in place, if someone wants to open up a new business or build a new house, they are allowed to do so.  As a direct result, the reliability of every else’s water supply is eroded.

The reality is that the construction of a new house or the establishment of a new factory is seen as so important that it should be allowed to proceed regardless of its impact on everyone else lifestyle and property.

Exploring this idea, participants at the recent Australian Davos Connection Infrastructure 21 Conference proposed that urban people, like their rural cousins, should be required to operate under a cap.

Would it make sense to impose a cap on urban water users?  What would happen if city planners were not allowed to grant building approval for a house, factory or shop until adequate water had either been secured or the applicant had made arrangements to off-set the impact of “their” proposed development on all other water users and a city’s environment?

A catchment cap

In Australia, most urban water is sourced from dams, rivers and, in cities like Perth, also from groundwater.  In order to impose a cap on water use in a city, the first step would be to work out how much water is needed to keep a minimum flow through the city’s rivers and streams and to cover evaporative losses.  The remaining water would then be available for sharing between the environment and all users.  In effect, the city would be given an entitlement to a share – a right to a proportion - of inflows after enough water had been put aside to keep the system functioning.  Under such a regime, the city’s right to access water in the catchments that supply it would be capped.  Pragmatically, this amount of water would be converted into a number of house equivalents.

If the amount of water that a city could take from its catchment was capped and supplies were short, attention would quickly shift to the supply and demand sides of urban water management.

Alternative supplies

On the supply side, one would expect the city’s water-supply managers to pursue groundwater development, stormwater management, waste water treatment, recycling options and the purchase of water from irrigators.  Climate-independent opportunities like desalination might be explored.  Whenever additional supplies were secured, the resultant increase in the number of house equivalents would be assessed and added to the cap.  We suspect water-supply managers might decide to call the resultant number of household equivalents of water “available” the city’s “water-security cap.”

One would expect that the water-security cap would account for the amount of water which, following use, was returned to the system.  No actions that reduce the amount of water already allocated to downstream users and or the environment would be allowed – unless, of course, there are no downstream users and downstream impacts from return flows on the environment are negative.

Reliability

No doubt, a debate about the potential effects of adverse climate change on expected mean water-supply-system reliability would soon emerge.  We expect that ultimately, the water-supply potential of a city’s catchments would be defined using something like a 10 year moving average of inflows.  This would mean that as it got drier, the water-security cap would start to come down.

Demand

Having exhausted cheap supply-side options, attention could then move to the demand side of the equation.  Water requirements for each type of house and business would have to be defined and minimum reliability standards set for them.  The impact of the current constellation of pricing, regulatory and other policy arrangements would need to be considered.  Each standard would then be multiplied by the number of houses and businesses that exist to determine how much water supply infrastructure was needed by the city.

A typical minimum standard might require each and every house to have unrestricted access to a reasonable amount of water for the next 100 years under worst-case climate change assumptions.  No more than 2 years of water restrictions in 100 years could be defined as a reasonable standard.

So far, these arguments are fairly traditional.  Urban water-supply utilities routinely prepare such analyses and use them, coupled with growth projections, to argue for funding in order for them to invest in water supply-side augmentation. Cities that grow need more water!

Making the cap fit

The main difference between a city with a formal water-security cap and the traditional approach is the cap’s commitment to stop development from eroding urban water-security.  Whenever the water-security cap is reached, a pre-defined water-security trigger would go off.  Further development would be possible if and only if, supplies are augmented or a water-security off-setting investment is made.

In order to ensure enforcement, a truly independent water-security commissioner would need to be appointed and required to inform the city when it was about to breach its cap.   An array of early warning triggers would be appropriate.  As suggested in Droplet 10, the Commissioner could be empowered to encourage timely investment by introducing scarcity pricing and requiring the money collected to be used to augment water-supply security immediately.  The Commissioner might also decide to relax third-party access rules and increase opportunities for private firms to compete with traditional water suppliers.

As the situation declined, all developers would come under massive pressure to invest and lobby to ensure that water-security was maintained at the household level and so that development would not stop.

Offset arrangements

As set out in Droplet 5, offset arrangements are used in the state of Arizona in the United States.  In that part of the world, no house may be sold without a statement as to whether or not its water supply is sufficient to supply it for the next 100 years.  When considering the best way to source water for a new subdivision, some Arizonan developers have financed groundwater recharge schemes and others have paid for the conversion of single-flush toilets to dual-flush toilets.  In a few cases, we understand that factories have been approached to see if they would sell their water and move to another location. The other option, which such actions encourage, is to build houses that demand less water.

Thinking further about the nature of the scarcity signal given, we expect that cities would set up a water-security credit banking system and encourage developers to bank unused water-security credits.

Setting the first water-security cap

We recognise that most governments would probably not be prepared to put in place such a regime until a water-security buffer had been established.  In cities where water restrictions are still in place, the first impact of a decision to implement a water-security cap would be a number of catch-up investments.  Once these catch-up investments had been made, it would be interesting to see if a government would be prepared to impose the discipline that a water-security cap creates on future governments.

Where to from here?
As has been demonstrated in rural areas, the introduction of a water-security cap can be expected to bring stronger investment and supply management disciplines to a city.  As summarised in a recent report to the National Water Commission, some Australian cities already operate under a catchment cap but, as yet, none have gone as far as to undertake not to allow developments that erode water reliability at the household or business level.

Assuming that water-security caps are well implemented, their introduction would create strong incentives for existing water users to search for and profit from increasing water-use efficiency and search for new ways to supply water to the city.  If catchment caps of the type described here were applied to a city, then the incentive to retrofit a city’s existing infrastructure would be much stronger than it currently is.

Should your city be prepared to subject itself to the discipline of a water security cap?  Once sufficient catch-up investments have been made, most of the pressure would fall on future governments.  We think the idea is worth careful consideration.  As part of this process, someone would have to work out what water-security standards to put in place.  Development of national urban water-security guidelines would be a good start.

Mike Young
The Environment Institute at the University of Adelaide,
           
Jim McColl
CSIRO Sustainable Ecosystems

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