Last month, Peter Brabeck-Letmathe, the chairman of Nestlé SA, the world’s largest food company, made a splash in Alberta for announcing, via an interview with Reuters in Geneva, that Nestlé was in talks with the Alberta government to establish a so-called water exchange—a market in which water, life’s sine qua non, could be bought and sold just like wheat, pork bellies or any other commodity. “We are actively dealing with the government of Alberta to think about a water exchange,” said Brabeck-Letmathe, describing the province as ideal for such a scheme because water there is scarce and competition for the resource between farmers and oil sands operators is fierce.
This was news to the government of Alberta, which swiftly moved to allay fears about the commodification of Alberta’s water, and its potential export. “Alberta’s water is not for sale and will not be,” Environment Minister Rob Renner told the legislature.
Yet Renner did not deny outright that the province had met with Nestlé, or others, to discuss the notion of setting up a water market in which licences to access the Crown-owned resource could be traded for money. (The province left it to Nestlé to clarify the issue: “Nestlé SA representatives have not met the government of Alberta to discuss an exchange-based water trade,” a press release said.) In fact, Renner signalled the province might indeed have an appetite for setting up such a system: “I think there will come a day, at some point in time, when we need to value water. Whether that means in the form of a regulatory regime or whether it means in some form of a market remains to be seen.”
What was left strangely unsaid was the fact that just such a water market has been functioning in Alberta since 2006, when the provincial government imposed a moratorium on new water licences in the arid South Saskatchewan River basin. Over the past five years, Alberta municipalities, farmers, irrigation districts and industry players have bought and sold 58 water licences. (The Alberta government doesn’t track how much these transactions are worth.) Most licences are held by agricultural concerns, and there’s no competition with oil sands outfits. Moreover, several blue-ribbon reports commissioned by the Alberta government have recently recommended that the province expand its water market and relax the rules governing how allocations are bought and sold within the scheme, which was adopted as a method of managing a scarce resource without introducing too much cumbersome regulation.
Alberta’s not unique in this regard. Water markets have increasingly become part of the debate worldwide about how to manage water amid growing demand and worries about global warming, which is likely to make water-starved regions like southern Alberta drier still. Markets are an easy way to put a reasonable price on water, a signal that in turn promotes efficient use. Even British Columbia is looking at adopting the scheme.
As Brabeck-Letmathe pointed out in his controversial chit-chat with Reuters, water exchanges go back thousands of years. “There’s evidence going as far back as the Code of Hammurabi that there were rules governing the sharing of water,” says Steven Renzetti, an economist at Brock University whose specialty is the economics of water resources. Water markets now exist in the southwest U.S., South Africa and, in perhaps the most sophisticated iteration, Australia. “Australia is not a bad snapshot into the future for a lot of regions, and in particular North America,” says David Henderson, managing director of XPV Capital Corp., an investment firm focused on water technology companies.
That possibility scares some people. Australia established a formal water market after over-allocation threatened to run the country dry in the early 1990s. By last year, foreign investors had snapped up tens of millions of dollars’ worth of water rights from a total market estimated at almost $30 billion (some $3 billion in trades took place in 2009 alone). “A lot of these big multinationals—and municipalities as well—are beginning to realize that water underpins either their operations or their economy,” says Henderson. “One of the ways they’re starting to manage this is by accumulating assets, which are the rights themselves.”
The phenomenon throws into relief an uncomfortable truth about water markets: “Once you have water in the economic domain, when issues of who gets water and when are determined by economics, then big companies have a very powerful set of capital resources they can use to mobilize water,” says Jeremy Schmidt, a Ph.D. candidate in geography at the University of Western Ontario whose work focuses on water.
That doesn’t jibe with the way most people think of water—as a necessity, as free and abundant (at least in much of Canada), and, according to a United Nations resolution passed last year, as an essential human right. In 2008, the Canadian government lobbied successfully against an earlier UN resolution declaring water a human right, arguing it did not reflect international law; the left-leaning Council of Canadians said the Conservative government’s position had everything to do with ensuring that water could continue to be sold under NAFTA.
The tension—between the good of pricing water to encourage conservation, and keeping it free for those who need it—remains unresolved, in Alberta and elsewhere. Indeed, it is likely insoluble. “You’re always running up against this dual view of water,” says Sandra Odendahl, director of corporate environmental affairs at RBC. “Is water actually a commodity, or is it something much different—because you can’t live without it?”