Water management and development

Water resource scarcity is one of the most pervasive natural resource allocation problems facing development planners throughout the world. Water resource scarcity can be a result of decrease water quantity following growing demand, or decreased quality resulting from degradation of freshwater resources, or both. By 2025, it is expected that the number of countries qualifying as 'water-scarce' will have increased to 35 from 20 in 1990 (UNEP 2003). To illustrate the magnitude of the problem, it has been estimated that, globally, 12 million deaths can be attributed to water scarcity in any given year (Shaw 2005). Water scarcity is widely perceived to be an important constraint on sustainable economic development, and has major environmental, social, economic and political repercussions. Furthermore, sustainable economic development, especially for developing countries, is threatened by flood events, stressing even more the need for appropriate policies for water resources management. In this chapter, the market and government failures that affect water management are highlighted. We then provide a summary of valuation methods for water resources, and a typology of economic instruments considered and applied in providing incentives for the rationalization of common resources like surface and groundwater. Then we outline a methodology for integrated water resources management compatible with the goals of economic efficiency, equity and environmental sustainability. This emphasizes the importance of using declining social discount rates (DDR) for environmental management, and is illustrated by providing an example of flood- control investment in developing countries.