Water trading via a cap-and-trade model can be one way to use market signals to allocate resources, reduce scarcity, and enhance ecosystem sustainability.UNITED STATES, May 19, 2021 /EINPresswire.com/ -- The United Nations defines water scarcity as a lack of availability due to the physical shortage, such as drought, or the failure of institutions and infrastructure to ensure a regular water supply. The UN World Water Development Report in 2020 reported, “four billion people currently experience severe physical water scarcity for at least one month per year, a situation that the climate crisis has exacerbated.” Water scarcity has devastating effects on public health, food security, economic development, education, community stability, and in some countries, safety for women and children.
The Paris Agreement’s aim to limit global warming to 1.5 Celsius above preindustrial levels could reduce water scarcity issues in some regions. However, even though water scarcity is linked to at least six UN Sustainable Development Goals (SDGs), the concept of water preservation is rarely documented in company climate target statements. Credit Suisse’s recently commented that the “reason why the issue of water scarcity has not received the necessary attention by the global community to date might be because water scarcity is perceived as more a local issue than climate change.”
Edward Barbier, the author of “The Water Paradox,” argues that water scarcity is primarily the result of inadequate water management practices where outed governance structures and inefficient pricing structures have resulted in overuse, undervaluation, and lack of innovative technology and ideas.
One response to the water scarcity issue is to cap water extraction to balance water availability between users (irrigation, farmers, industry) and the volume required to ensure the long-term health of the regional water source – ultimately to manage future scarcity. This model is often referred to as a cap-and-trade, where the government determines a cap on water availability and regulates how water rights can be traded.
Water trading benefits include the ability to buy and sell water rights on a temporary or permanent basis, the formation of a market-driven price for water, and the reallocation of water resources to where it is required the most.
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