Environment & Poverty Times

07 2012

UNEP/GRID-Arendal

4 5 Did you know?

t Global Investment in smart water me- ters to reach $4.2 billion by 2016.

t Research shows that consumers react to the technology, curbing water use by at least 15 per cent just with the meter switch.

(Source: Pike research)

t In order for the Millennium Develop- ment Goal related to drinking water and sanitation to be met by 2015, 961 mil- lion urban dwellers must gain access to improved water supply, and 1 billion to improved sanitation.

(Source: UNESCO)

t For every $1 invested in water and sanitation, $4 is returned in increased productivity (UNDP).

(Source: UN WWAP, 2009)

t The total available water resources for the Northeast Asia Region (Japan, Repub- lic of Korea, China, Mongolia) are 3 351 km3

,

about 0,3 per cent of the global total. t Per capita water availability is 2 221 m3

, about 25,7 per cent of the world´s average.

t The total water use in Northeast Asia is 684,3 km3

, or 29,7 per cent of the global total.

(Source: UNEP, Facts and figures from “Freshwater Under Threat: Northeast Asia” Report)

t Freshwater ecosystems sustain a large number of identified species and provide more than US$75 billion in goods and ecosystem services for people but are increasingly threatened by a host of water quality problems.

(Source: Vié et al., 2009)

t Globally, 96 per cent of the urban world today uses improved drinking water resources. t Some 250 to 500 million m3

of drinking

water get lost in mega cities each year. Saving this amount could provide an additional 10 to 20 million people with drinking water in each mega city.

t The water footprint of an individual, business or nation is defined as the total volume of freshwater that is used to pro- duce the foods and services consumed by the individual, business or nation. A water footprint is generally expressed in terms of the volume of water use per year.

We estimated the minimum deterrent penalty across eight different workforce sizes for factories operating in Bollaram. We compared the cost of compliance, the expected penalty and the overall operating profits of the company. From Figure 2 it can be seen that the expected penalty (maroon bar) is higher than the cost of compliance (green bar) for all factory sizes. This means that if the company is caught not complying then its deterrent payments will be greater than the amount it would have spent on pollution control.

The dark blue bar shows the profits of the companies. Since one of the penalties is to shut down production, this bar shows the loss that companies would bear if closed down for non-compliance. The expected loss of operating profits alone should there- fore be sufficient to make polluters comply with regulations. Also, the high profit levels suggest that all companies could easily bear the cost of compliance. Our analysis shows that, in theory, the present form of penalizing errant companies by stopping production, together with the rate of detec- tion of violation in Andhra Pradesh, should be sufficient to deter companies from violat-

ing water pollution laws. This appears to be true for the factories belonging to all eight size segments.

In spite of this, violation of water pollution laws appears to persist. Many factories that have been closed for violation of pollution control acts often remain closed for a long time. There may be two explanations for non-compliance. First, violating companies may be risk-takers that gamble with the law even after the minimum deterrent penalty is imposed. The only way of deterring them is to further increase the detection rate. Second, the operating profits of a violating company may be less than the minimum deterrent penalty, and far below the average for their size segment. Factories that remain closed are likely to have an operating profit below than the cost of compliance. Thus, low profitability appears to be a plausible reason for the continued violation of pol- lution laws. If this is so, improvement of economic benefits (a company’s operating profits) would seem to go hand-in-hand with environmental compliance.

Economics of wastewater It is extremely important for industrial

units to recycle wastewater, since there are many arid regions where industrial estates have been set up with little regard for water resources. There are industries that not only have low freshwater consumption, but also recycle their wastewater. When feasible, it can be advantageous for such industries to be located in water-scarce areas.

The economics of recycling waste shows that it is highly profitable to recycle. Not only are the profit rates high, but also the payback period for companies is relatively short, often less than a year.

Penalties for water pollution are theoreti- cally sufficient to act as a deterrent. When factories are closed down, companies lose their profits as long as they remain non- compliant. The cost of compliance is usually significantly lower than the expected cost of penalties. This should encourage companies to implement pollution control on the basis that it costs less than the penalties.

About the authors: Dr (Ms) Prabha Panth is Pro-

fessor of Economics at Osmania University, Hy- derabad, India. Dr Rahul A. Shastri is Professor of Economics and Joint Director at the National Academy of Development, Hyderabad, India.

(Sources: UN-Water Decade Programme on Advo- cacy and Communication (UNW-DPAC), UNESCO)

t Virtual water is the water ‘embedded’ in commodities. Producing goods and services requires water; the water used to produce agricultural or industrial products is called the virtual water of the product. The production of 1 kilogram of: – rice requires 3 000 litres of water – maize requires 900 litres of water – wheat requires 1 350 litres of water – beef requires 16 000 litres of water.

(Source: UNESCO)

t 60 per cent of the world´s 227 biggest rivers have interrupted stream flows due to the dams and other infrastructure. Interruptions in stream-flow dramatically decrease sediment and nutrient transport to downstream stretches, reducing water quality and impairing ecosystem health.

(Source: UN-WWAP)

t 60 per cent of China´s 660 cities are short of water. (Source: The Asia Water Project)