What price recycled water?

The size of the reasonable allocation and the increase in price are parameters that can be tuned to achieve the objective of encouraging a reduction in water consumption and as a replacement for water restrictions. By keeping the reasonable allocation at the sustainability level the system will self adjust through a feedback loop.

It is suggested that recycled water be priced at whatever the market dictates. For recycling to work it is necessary to invest money. It is proposed that the money for recycling comes from current consumers through the rewards system. That is rewards can only be spent on water recycling systems. So rewards could be spent on household systems, or on, community systems. Rewards could also be transferred to others - i.e. can be sold.

This will give the rewards a market and this along with the market price for recycled water will give an efficient economic outcome.

The system as proposed will provide the seed capital for recycling projects. A water authority can tailor the parameters of a “reasonable” allocation for household use and the price of water over that allowance so that enough private investment will be made in recycling systems. This approach will make sure that the monopoly powers of the water authorities are not abused and water pricing is not turned into another form of taxation.

The logistics of determining allocations, rewards, transfer of rewards, payments to recycling projects, have all been considered but are not presented here. The systems to handle these logistics would be paid for out of the rewards money and from private investment. In other words the rewards would fund the logistics of building rewards and allocation systems.

The system and its operation would be funded totally from rewards. There will be no need for any input of extra public funds, although the monies currently allocated by various governments for recycling projects could be channeled through the system and serve to prime it. Private finance will become available for recycling projects when it is shown there is a market that can compete with fresh mains water.

The ideas require NO change to existing water authority infrastructure. There is a relatively small change to billing systems to include a two tiered tariff. The system of rewards, allocation and distribution of monies is a completely separate system from existing systems. The effect would be to reduce costs of the water authority as they would no longer be responsible for allocation of monies for recycling.

The system would remove the need for any pricing authority to consider the price of recycled water as it would be determined by market forces.

A separate devoted organisation should be set up to run recycling. This body would decide on the allocation amounts, publicise the benefits of recycling and select the recycling projects suitable for funding via rewards. The reason for this is to allow the water authorities to bid for recycling projects, to keep the system independent and cost accountable. This organisation could be a not-for-profit co-operative. Its board would be elected by people who received rewards and it would be financed from the rewards monies. Its primary objective is to foster recycling for sustainability and to encourage this in the most economically efficient manner.

The cost of the recycling system could be funded entirely from money collected from mains fresh water users and would require no change in the existing functions performed by any pricing body.

How much chance does this proposal have of being realised?

In proposals such as this there are inevitable losers. In the case of sustainable water the main losers are governments who use water supply as a form of indirect taxation, governments who lose control over the appointment of people to the board of the recycling body, and governments who control water authorities. Governments are the only ones who can change the system.

The only hope for this proposal is to convince a government somewhere to look beyond their short term goals and trial it. This is likely to happen because the long term outcome for the government that adopts this approach will be substantial. The system can be used - with modifications - anywhere in the world. It could be adopted by local government, or by state, or by federal or by any government anywhere that controls a water supply. The government that first adopts it will have a new “knowledge industry” in their jurisdiction which with an appropriate structure can be exported with gains for the government.