‘Water Footprinting’ to Deal With Demand for Supplies

I.H.T. Special Report: Business of Green

‘Water Footprinting’ to Deal With Demand for Supplies

By TANAYA MACHEEL
Published: November 29, 2010

NEW YORK — A water-use report issued in September by Coca-Cola with the Nature Conservancy found that 518 liters of freshwater are required to produce just one liter of its Minute Maid orange juice, and 35 liters are needed to produce a half liter of Coca-Cola.

A growing awareness of just how much water it takes to produce everyday consumer goods is inspiring a rising interest in “water footprinting” — akin to carbon footprinting — as a tool to analyze and guide the development of new technologies, water infrastructure investment and policies aimed at coping with the world’s rising water demand.

Conceptually, the water footprint is similar to that of carbon — an impact indicator based on the total volume of direct and indirect freshwater used in producing a good or service. There is a difference, however. Unlike carbon in the atmosphere, fresh water resources are localized, not global.

“Water is not carbon,” said Jason Morrison, program director at the Pacific Institute, a research organization in Oakland, California, that studies resource sustainability issues. “Whatever you might say about the validity of carbon credits, it will be extremely hard to have that amount of success in the water area because, volumetrically, one volume of water has a different meaning in one part of the world versus another.”

Still, in July, Veolia Water North America, a water and wastewater utility based in Chicago, and part of the French utility Veolia Environnement, presented its water impact index. The company said it was the first indicator to provide a comprehensive assessment of the effects of human activity on water resources.

“Current water footprints focus almost exclusively on volume,” said Laurent Auguste, the company’s president and chief executive. Volume, he said, is “a good indicator to raise awareness, but not sufficient to represent the impact on a water resource.”

The volume of water needed to produce a carton of orange juice or a bottle of Coca-Cola, for example, may be fixed; but the actual effect on a freshwater resource, and the local environment, can vary tremendously — including the amount of energy and raw materials used and the chemical and other waste contaminants created in the process.

To give a fuller view, Veolia’s index integrates other variables, including resource stress, water quality and competing consumption needs with existing volume-based water measurement tools.

Some analysts, however, question the usefulness of that approach.

Claudia Ringler, a senior research fellow in Montreal with the International Food Policy Research Institute, based in Washington, said water footprinting was a good concept in theory, but less so in practice. “It’s almost impossible to do a comprehensive analysis,” Ms. Ringler said. “One has to be very careful before drawing conclusions based on it.”

David Zetland, an economist and the author of a forthcoming book, “The End of Abundance: Your Guide to the New Economics of Water Scarcity,” said footprinting would serve little purpose unless, for a start, water was priced according to its value.

If water were appropriately priced, he said, the price of consumer products would reflect the amount of water used in making them. Since most consumers either would not understand footprinting, or would not care, Mr. Zetland said, they would almost always pay more attention to the price of what they bought than to a certificate on the label.

From the point of view of producing companies, he added, if water supplies were free, or nearly so, water footprinting and investments in water efficiency would remain superfluous. “Water footprinting has no operational, economic or social value to companies if the cost of labor and equipment to reduce water consumption exceeds the cost of the water saved,” Mr. Zetland said.

The basic problem, he said, is that the price of water rarely reflects its value or scarcity. “The price for most products combines value to consumers with the cost of production and delivery,” Mr. Zetland said. “Since the price of water only reflects the cost of delivery — the water itself is free — we don’t pay a price that reflects its value or scarcity.”

Still, not all experts are so dismissive. Even though water footprinting is still in its infancy, and there is no common agreement on what variables should be taken into account, tools like the Veolia index could help to map the relative risks associated with water use in specific locations, said Mr. Morrison, the Pacific Institute program director.

With water-related risk likely to become more pronounced over time, he said, “there is a lot of value to water footprinting, no matter how you define it.”

A recent report by the institute, prepared for the United Nations Environment Program, evaluated different water-accounting tools and found that many, though still evolving, would be essential to companies in their water risk and impact assessments and water management, Mr. Morrison added.

Water footprinting has also spawned interest in markets as a possible driver for smarter water use. Water markets are full of distortions, said Ms. Ringler, the International Food Policy research fellow, and it is almost impossible to create a real competitive international market. But there are examples of successful in-country water markets, she added, citing river basins in Australia and Chile.

Michael Van Patten is chief executive and founder of Mission Markets, a financial services company that operates Earth, a multi-environmental credit exchange regulated by the Financial Industry Regulatory Authority in the United States. “We might be several years away, but the potential is huge,” he said. “The world knows we have a huge water problem, and no one knows how to solve it yet. This is one way to approach it.”

His idea is to develop tradable credits from the offsets of localized water projects. These could be bought by companies, countries or any community with a direct effect on the water supply. While there is no regulation in the United States to drive such a market, credit programs, if managed properly, could help to encourage environmental protection by reducing the costs involved, said Christian Holmes, a senior adviser for energy and environment at the U.S. Agency for International Development.

Still, said Charles Iceland, an associate with the World Resources Institute, water is a highly political topic, and allocation decisions cannot be made on the basis of economic efficiency alone.

“Whatever management scheme you devise must have equity built into it,” Mr. Iceland said, “so that people have their human right to water.”