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Importance of Water in Our Economy
Water is the source of all life on Earth and as much as environmental efforts are focused on carbon reduction and making our economy greener, a simple quote could offer some prospective: "No water, no life. No blue, no green"- Sylvia Earle.
UNESCO launched a report in March 2022 (Ayala & Cabrera, 2021) underlying the key role water plays in the transition to a green economy. They mention that water is fundamental to life, societies, and economies which is fairly obvious; but it is not as obvious how water ties into our economy. It is estimated that three out of every four jobs in the entire world depend on water. Water is vital to large industries around the world that are dependent on water sources to sustain operations. Given that water is so vital to not only individuals for life, but also our industries, it makes sense that all stakeholders should have a shared responsibility to care for it.
Ágora (2021) wrote about the economic value of water in which he raised some key points the WaterDAO aims to address. The most important mechanism for managing the scarcity of a good is a free market; however, the use of a market mechanism to manage water scarcity is uncommon and often unfeasible in the case of water due to its special characteristics. One of the key issues is that the value of water depends on the value people place on accessing it. For instance, when water is perceived as scarce, people will be willing to make more sacrifices to have it both on an individual and corporate scale. Locality is the key issue that hinders a global water market place because each locality will value water differently and in turn, cause drastic fluctuations in the value of water.
The price of water should reflect the cost of extraction, purification, transportation and even make a provision for when water is scarcer and must be pumped from deeper sources, use more sophisticated treatment or desalination. Matching the price of water to its cost would induce a level of consumption that is more in line with the conditions of water scarcity or abundance. Thus, a higher price will reflect greater scarcity and will make people more careful with their use of water, avoiding waste.
The WaterDAO proposes a localized water credit system in which the water credit price reflects the actual cost of water replacement in that area.