29 November 2010

A few words on footprinting

From today's NYT/IHT:
David Zetland... 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...
hahaha -- love that ending, at which point various people try to justify their work on water footprinting :)

4 comments:

Mike Wade said...
This comment has been removed by a blog administrator.
Marc Dettmann said...

Do you have any good recommendations of articles which attempt to evaluate a price of wate that reflects the cost of delivery AND the value to society?

Thnx

W.E. Heasley said...

Dr. Zetland:

We better translate this article. First we start with Dr. Zetland’s quotes:

(1) ‘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.” ‘


Oh no! An economist explained the economics! End of story.


(2) “Still, not all experts are so dismissive.”

Tanaya Machell doesn’t like the economic answer. Go figure. Hence she searches for “the- way-things-ought-to-be answers”. Yes, out the empirical and in with the notional!


(3) “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.”

Wait a minute! The United Nations is the most non-creditable source on the planet. Better move along.


(3) 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.

Huh? You mean the market might work but markets do not work? Hmmm.


(4) ‘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.” ‘

Ah! We trade the stuff and money can be made without correcting the problem. Perfect! Can you say CCX. Ops! CCX is shutting down with a boat load of losers. Better skip by this proposition.


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

Yes, reject economics, offer up a “scheme” as the solution, a nice central planning scheme [“ Whatever management scheme you devise…“], associate “schemes” with human rights and there you go!


Summary: reject the empirical, always report on the notional, way-things-ought-to be, lets make some money and not solve the problem, and end with a nice central planning scheme.

Where is F.A. Hayek when you need him?!?

David Zetland said...

@Mike -- I moved your comment to the WWD post.

@Marc -- cost of delivery is easy. Value to society varies, by a LOT. Some water should not be moved at all (negative value), some water goes to the wrong places (misallocation). Markets would make it easy to move water to the most valued place, but you'd never know the price in advance (nor would you care).