the business of water: market environmentalism in the ... business of water: market environmentalism...

EG39CH17-Bakker ARI 27 September 2014 13:21

The Business of Water: MarketEnvironmentalism in theWater SectorKaren BakkerProgram on Water Governance, University of British Columbia, Vancouver, British Columbia,Canada V6T 1Z2; email: [email protected]

Annu. Rev. Environ. Resour. 2014. 39:469–94

First published online as a Review in Advance onJuly 25, 2014

The Annual Review of Environment and Resources isonline at environ.annualreviews.org

This article’s doi:10.1146/annurev-environ-070312-132730

Copyright c© 2014 by Annual Reviews.All rights reserved

Keywords

water, commercialization, governance, management, markets, marketenvironmentalism, liberalization, pricing, valuation

Abstract

This article reviews the literature relevant to market environmentalism inthe water sector, focusing on five themes: the privatization of resource own-ership and management, the commercialization of resource managementorganizations, the environmental valuation and pricing of resources, themarketization of trading and exchange mechanisms, and the liberalization ofgovernance. For each dimension, the discussion addresses a topic of contem-porary academic interest (and policy and political relevance): privatizationand protest, the contradictions of commercialization, the distinction be-tween environmental valuation and commodification, the multiplication ofmodes of marketization, and the limits to the liberalization of environmentalgovernance. Specific attention is given to unresolved questions and tensionsin the debate over market environmentalism, particularly the tension be-tween human rights and environmental rights and among state, market, andcommunity roles in water management.

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Contents

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470THE RISE AND FALL OF THE STATE HYDRAULIC PARADIGM . . . . . . . . . . . . 471DEFINING MARKET ENVIRONMENTALISM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474THEMES IN MARKET ENVIRONMENTALISM IN THE WATER SECTOR . . 477

Privatization: Protest and Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477The Contradictions of Commercialization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479The Pricing Debate: Valuation Versus Commodification . . . . . . . . . . . . . . . . . . . . . . . . . 480Marketization: Water Markets, Water Rights, and the Human Right to Water . . . . . 482Liberalization of Governance: Balancing Harmonization and Subsidiarity . . . . . . . . . 484

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487

INTRODUCTION

The past few decades have witnessed a rapid increase in the development of markets and theinvolvement of businesses in resource management and environmental governance across abroad range of resource sectors: water, wetlands, forestry, fisheries, and atmospheric carbon(1–3). A diverse set of processes has been deployed by a range of actors: Private companies andnongovernmental organizations have assumed more significant roles in ownership, management,and certification; market-based trading mechanisms, incentives, and regulatory instrumentshave been developed and tested by governments and nongovernmental actors; and the conceptof environmental services has become widespread. Taken together, these trends representsignificant—and controversial—shifts in our approach to water management, which are linkedto broader trends in environmental governance (such as globalization, decentralization, andcross-scale governance) (4).

As explored in this review, controversy surrounding these trends, grouped under the label ofmarket environmentalism, has been sustained. Proponents argue that market environmentalismaddresses critically urgent environmental crises, enabling continued economic growth while mit-igating environmental impacts. Opponents, by contrast, reject market environmentalism as theappropriation of resources and the environmental commons for private profit, which (they argue)deepens, rather than reduces or resolves, socioenvironmental problems. As explored below, thedebate typically pits defenders of state management against advocates of market- and private-sector management, with communitarian models of resource governance overlooked, dismissedas being of limited applicability given the challenges of replication at large scales, or strategicallymobilized by both sides in the public-versus-private debate.

The case of freshwater—the focus of this review—is emblematic of these broader debates overmarket environmentalism. The engagement of the private sector and markets in water supplyhas been widespread over the past two decades and has included water markets, the privatizationof water supply utility companies, the corporatization of water utilities, full-cost water pricing,bottled water, and the abstraction of water by beverage companies. A particularly controversialissue has been the rapid growth in private provision of urban water services, as some of the world’slargest multinational companies—including Bechtel, Enron, and Vivendi—have expanded theiroperations worldwide with significant success: The world’s largest private water company nowhas over 100 million customers (5).

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The growth of market environmentalism must be understood in the context of debates over theglobal water crisis, given growing concerns among academics and policy makers about the vulner-ability of human populations and ecosystems (6–12). In many instances, market environmentalismis proposed as a solution to the intertwined set of issues (human water insecurity, freshwater biodi-versity loss, water-food-energy nexus trade-offs) invoked in debates over the global water crisis. Ofcourse, Linton (13, 14) rightly points out that the concept of a global water crisis is a simplifyingabstraction, given that water availability is highly temporally and spatially varied. Rather than a sin-gular global water crisis, Linton argues that we should speak of a set of interrelated water crises atmultiple scales (13, 14); both problems and solutions may vary across sites and scales. Nonetheless,the discursive construction and biophysical reality of the global water crisis merit our attention, inpart because of the controversy inspired by debates about market environmentalism in the watersector. This controversy is the result of water’s multiple roles: It is simultaneously an economicinput, an aesthetic reference, a religious symbol, a public service, a private good, a cornerstone ofpublic health, and a biophysical necessity for humans and ecosystems alike. Because water fulfillsmultiple functions and holds multiple meanings, it is thus unsurprising that it generates multipleand often opposing views.

This review explores these perspectives and arguments, focusing on five dimensions of marketenvironmentalism: the privatization of resource ownership and management, the commercializa-tion of resource management organizations, the environmental valuation and pricing of resources,the marketization of trading and exchange mechanisms, and the liberalization of governance. Foreach dimension, the discussion addresses a topic of contemporary academic interest and of policyand political relevance: privatization and protest, the contradictions of commercialization, the dis-tinction between environmental valuation and commodification, the multiplication of modes ofmarketization, and the limits to the liberalization of environmental governance. Specific attentionis given to unresolved questions and tensions in the debate over market environmentalism, notablythe tension between human rights and environmental rights and the tension among state, market,and community roles in water management. Prior to exploring these issues, the review summa-rizes recent scholarship examining the history of market environmentalism, which emerged as aresponse and successor to the state hydraulic paradigm in water management.

THE RISE AND FALL OF THE STATE HYDRAULIC PARADIGM

To analyze the origins and causes of market environmentalism in the water sector, scholars haverecently devoted increasing attention to analyzing the rise and fall of the state hydraulic paradigm(15). Perspectives drawn from (and often combining) history, science and technology studies,geography, law, political ecology, political economy, sociology, and anthropology have beenmobilized to analyze the dramatic and unprecedented global growth of state involvement duringthe twentieth century in the management and ownership of water. As discussed below, scholarshave documented how state dominance of freshwater supply management in the twentiethcentury was justified by a set of interrelated economic, ethical, and geopolitical arguments (16,17) that have influenced water management in countries as diverse as the United States, Yemen,India, China, Spain, Peru, and Greece (18–22).

Earlier work emphasized the impacts of urbanization and industrialization in the late nineteenthcentury and analyzed the factors (such as water pollution, fears of water-borne diseases, and firehazards in urban areas) motivating calls for state oversight and ownership of water resources (23).Historians have studied the interactions between hydraulic development and municipal water sup-ply development, justified by the (rarely met) goal of universal water supply (24, 25). Sociologists

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and engineers have studied the command-and-control management and governance practicesassociated with this paradigm, analyzing the interrelationship between hydraulic technologies de-ployed at a range of governance scales and the (assumed-to-be) inevitable growth in water demandsengendered by industrialization, agricultural intensification, and population growth (26, 27).

Sufficient supplies of safe water enabled populations to achieve a basic, dignified livingstandard and facilitated social inclusion; as such, access to sufficient amounts of clean water cameto be viewed as a precondition to participation in public life (28). This was particularly the casegiven that nineteenth-century experiments with privatization tended to result in the exclusionof poor neighborhoods by private companies, which cherry-picked profitable neighborhoodsand types of consumers (29). The potential risks—particularly acute in the large urban centersof the nineteenth century ravaged by water-borne diseases such as cholera and typhoid—werean important justification for producing water as a quasi-public good through the provision ofuniversal networks (30). These arguments continue to play an important role in the analysis ofaccess to water supply—and political claims to extend access—in the context of contemporarydevelopmental states (31). For example, scholars draw on the concept of natural monopoly, a keyjustification for expansion of state involvement in the twentieth century, to argue in favor of stateownership and/or extensive state regulation (32).1 In summary, scholars have documented thepositive contributions of the state hydraulic paradigm to both public health and equity and havemobilized their analyses of the successes of the state hydraulic paradigm to argue for more (notless) state involvement in water supply worldwide.

Simultaneously, however, scholars have turned their attention to critiques of the state hydraulicparadigm. Geographers, for example, have documented the reconceptualization of water as asinew of development as states actively sought to extend control over and develop water resources,focusing on subsidized supply-side, large-scale, state-run hydraulic infrastructure projects for arange of (at times conflicting) purposes, including hazard (flood and drought) mitigation, irrigatedagriculture, drinking-water supply, and hydroelectricity (33). Ecological economists have critiquedthe assumptions embedded within the state hydraulic paradigm, demonstrating, for example, thatthe ever-increasing supply-side logic served to create (rather than solve) water crises (34). Politicaleconomists have analyzed the social and economic impacts and have documented political protestsassociated with large hydraulic projects around the world, from the Hoover Dam (United States)to the Ataturk Dam (Turkey) to the Aswan Dam (Egypt) (35, 36). Economists have criticized thecosts (and cost-benefit methodologies) associated with hydraulic projects (37).

In a parallel research development, scholars have examined the politics of state-led water man-agement, linking geopolitical agendas to processes of economic development, state formation, andidentity formation at multiple scales (38). States, of course, are eager to assume control over waterresources given their strategic political and territorial importance, and the conflicts that aroseover water—as a flow resource required for multiple functions (agricultural, industrial, drinkingwater)—often pitted upstream and downstream neighbors against one another. Wolf (39) hasdocumented the hundreds of twentieth-century bilateral water treaties signed in order to securegeopolitical advantage. The question of water wars has been of particular interest: Political scien-tists, for example, have explored how water has become a flash point for contested transnationalpolitics and global institution building—an incentive for both conflict and cooperation (40–43).

1State ownership and oversight were also justified by the high economic costs of supplying water through purpose-built,dedicated infrastructure. Water is expensive to transport relative to its value per unit volume, and so it requires large capitalinvestments in infrastructure networks (sunk costs), such that duplication of the network is inefficient. A single firm using onenetwork can supply a service at a lower total cost than two or more firms using separate networks. Water supply is thus highlysusceptible to monopolistic control and is open to the abuse of monopoly power (e.g., overcharging).

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Associated with debates over delegated governance (and the shift from government to governance),several scholars have explored the possible contributions of social learning in distributed networksas a means of resolving some of the perceived governance shortcomings associated with conven-tional (top-down, expert-dominated) state-led water management processes (44, 45).

Associated with this critique, scholars have also documented growing concern about the impactsof the state hydraulic paradigm and have called for new paradigms of water management (46).Against the backdrop of an increase in environmental concern, greater awareness has emergedabout the effects and costs of hydraulic development, particularly large dams, including impacts ondisplaced communities, ecological impacts (e.g., extirpation of fish species), destruction of culturalsites, and unexpectedly high rates of siltation upstream as well as salinization in downstreamagricultural areas fed by hydraulic schemes (47). Others have critiqued the supply-led focus andthe underlying assumption that economic growth necessarily implies increasing consumption ofwater resources (46).

A unifying theme in these debates is the assertion that environmental considerations weregenerally overlooked within the conventional state hydraulic paradigm. Predicated on assump-tions of abundant water supplies, the self-purification capacities of the hydrological cycle, andthe (mis)characterization of water as a renewable resource, the state hydraulic paradigm paidrelatively little attention to environmental impacts—whether water quality– or quantity–related.Indeed, state management was sometimes associated with significant environmental degradation,irrespective of broader political economic regimes, as the cases of the Aral Sea and the ColoradoRiver suggest (48). Some studies have documented the fact that state management has been asso-ciated with systematic deterioration of water supply infrastructure in both low- and high-incomecountries (24). Several commentators pointed out the difficulty of balancing revenue-generationimperatives with environmental protection goals given low-income consumers’ inability to pay,the high capital costs of water supply infrastructure combined with relatively low economic ratesof return, and weakening fiscal capacity in the context of underpriced water resources (49, 50). Atthe same time, broader debates over the need for new approaches to water governance, includingthose more ecologically sensitive, participatory, and focused on water conservation, have emerged,deepening the critique of the state hydraulic paradigm (46).

An important synergy between academic and policy debates is observable; many aspects of thiscritique were crystallized by internal debates within multilateral financial institutions regarding thefailure of many governments to effectively manage water resources (51). For example, in the 1990sthe World Bank signaled a new policy direction in which privatization and decentralization were tobecome central elements of the Bank’s water agenda, in line with the broader strategy at the Bankand the then-emerging Washington Consensus, which was succeeded by the Bank’s adoption of theDublin Principles (including the assertion that water should be recognized as an economic good) in1994 (52).2 The Bank’s subsequent development of an active private-sector development strategyfor water in the 1990s, aligned with the Bank’s broader private-sector development strategy (29),was associated with similar agendas at other multilateral development banks and bilateral aidagencies (e.g., the United States Agency for International Development and the UK’s Departmentfor International Development) (29). This, in turn, spurred scholarly interest both in promoting

2The 1992 International Conference on Water and the Environment set out what became known as the Dublin Principles,including Principle 4 that “water has an economic value in all its competing uses and should be recognized as an economicgood.” The three other principles were: 1. “Fresh water is a finite and vulnerable resource, essential to sustain life, developmentand the environment”; 2. “Water development and management should be based on a participatory approach, involving users,planners and policy-makers at all levels”; and 3. “Women play a central part in the provision, management and safeguardingof water.” The Dublin Principles have been adopted by numerous international, multilateral, and bilateral agencies.


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and critiquing privatization and market environmentalism, particularly by a range of scholars whoactively participated as policy activists in the intense international debates that ensued (e.g., 53, 54).

These issues are best understood within the context of broader political economic debates:Market environmentalism came to the fore at the height of the Washington Consensus, whichemphasized financial liberalization, privatization, deregulation, the creation of secure propertyrights, tax reform, the introduction of competition, and public-sector fiscal discipline (includingthe selective redirection of public funds toward public goods that facilitate income redistribution,such as education, primary health care, and infrastructure) (55). These debates were associated(in the water sector and beyond) with a broad-ranging critique of government provision of water,rooted in the state failure hypothesis. The state failure criticism of public water provision echoedthe widespread neoliberal turn in public policy and development policy of the 1980s, shaped bypublic choice theory and the new institutional economics. The government failure argument (asit is sometimes called) posits that states are less efficient and effective than private-sector organi-zations and markets. In the water sector, the state failure argument takes many forms. In someinstances, emphasis is placed on the poacher-gamekeeper problem—governments that own andmanage water are likely to exhibit poor performance (particularly with respect to the environment)because they have no incentive to self-penalize. In other instances, the state failure argument fo-cuses on the fact that expensive, capital-intensive hydraulic works are particularly susceptibleto pork-barrel politics and associated problems: overdesigned “white elephant” projects, over-staffing (or, worse, “ghost” employees), bribery, and corruption. Others point to the track recordof governments in managing water supply and resources. Despite notable legislative advances,such as the Clean Water Act in the United States and similar legislation on water quality in theEuropean Union, water quality and freshwater aquatic biodiversity have continued to decline inmany countries (56). Greater awareness also emerged about the (still hotly debated) effects and(often unquantified) costs of hydraulic development (47). This concern has been heightened bya growing realization that the postwar economic boom had obscured the systematic deteriora-tion of water supply infrastructure in many countries (24) because of governments’ inability (orunwillingness) to finance infrastructure combined with public environmental concern and tech-nological innovations to increase the appeal of alternative approaches to water management. Inlower- and middle-income countries, concerns have been focused on the impacts of infrastructureunderinvestment, water scarcity, pollution, and public health—particularly in the context of rapidurbanization in recent decades, which has often overwhelmed municipal governments’ abilities tosupply networked water services (57).

The scholarly literature on the state hydraulic paradigm is characterized, in short, by an in-teresting tension. On the one hand, the impacts of the state hydraulic paradigm have come undermultidimensional critique—environmental, socioeconomic, and geopolitical—over the past twodecades. The response, on the part of some scholars and policy makers, has been to promotemarket environmentalism as the solution to the ills of the public sector. On the other hand, thesuccess of the state hydraulic model in industrialized countries has motivated continued calls forits expansion (and resistance to market environmentalism), given that the only examples of near-universal domestic water access have been state-led efforts. Both perspectives share one point incommon: The state hydraulic paradigm entered into crisis by the 1980s, creating an opportunityfor the rise of market environmentalism.

DEFINING MARKET ENVIRONMENTALISM

For the purposes of this review, market environmentalism is defined as a doctrine premised onthe synergies between environmental conservation and protection, economic growth, market

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economies, and neoliberal governance (58, 59).3 The goal of market environmentalism, sim-ply put, is to achieve positive environmental outcomes through the introduction of markets andmarket-derived institutions and organizations. The rapid increase of market environmentalismover the past few decades has incited controversy. Drawing on a broad-ranging critique of theshortcomings of governments (state failures), proponents argue that markets and private actors willoutperform governments in resource management, creating a virtuous feedback loop between eco-nomic growth and environmental protection. By contrast, opponents point to the shortcomings ofmarkets (market failures), arguing that private actors—particularly those motivated by profit—willfail to conserve resources and will cause negative environmental impacts over the long term.

Before exploring these arguments in greater detail below, it is important to discuss the multi-faceted nature of market environmentalism. In its application, market environmentalism consti-tutes a diverse, interrelated set of processes, which may unfold concurrently, although not alwayssimultaneously, and often with internal inconsistencies (Table 1). As indicated in Table 1, fiveprocesses make up the core of market environmentalism: the privatization of resource ownershipand management, the commercialization of resource management organizations, environmentaleconomic valuation and water pricing, the marketization of trading and exchange mechanisms,and the neoliberalization of governance. These processes are described as follows:

� Privatization entails the transfer of ownership or management of resources to privateindividuals or companies, such as the patenting of genetic material unearthed throughbioprospecting (60). This may involve a full transfer of ownership (full privatization) or a tem-porary transfer of control through long-term leases or management contracts (private-sectorparticipation).

� Commercialization entails the incorporation of market-derived business models and insti-tutions (rules, norms, and customs) in resource management organizations with the goal ofreforming their performance (and evaluation) in line with commercial principles. Corpora-tization is one example; another is new public management (NPM) in which market-basedallocation, performance measures, and incentive structures are introduced in governmentdepartments.

� Economic valuation entails the (frequently controversial) pricing of resources and associatedecosystem services, often using nonmarket valuation techniques (61). Closely associated withthe subdisciplines of environmental and ecological economics, a range of techniques (e.g.,contingent valuation) is used to determine prices and to incorporate these prices into thecosts passed on to consumers with the goal of inducing more environmentally friendlybehaviors, such as reductions in resource consumption (62).

� Marketization entails the creation of markets as trading and exchange mechanisms withthe goals of improving the efficiency of resource allocation and/or reducing resource con-sumption or pollution emissions. There has been a notable increase in the use of marketsin resource management over the past several decades, including the application of marketsto hitherto unmarketized sectors (e.g., carbon markets) and the expansion of preexistingmarket models (e.g., tradable quotas in fisheries, water markets).

� The liberalization of governance entails the retreat and/or strategic reconfiguration of gov-ernment roles in decision making, usually via a combination of deregulation, devolution,decentralization, and delegation to nonstate actors. This may entail, for example, the in-troduction of market- and agent-focused instruments to deploy market-based, individual

3Synonyms include free market environmentalism, liberal environmentalism, and green neoliberalism.


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Table 1 Market environmentalism in the water sector

Strategy Examples Details (references)Privatization/appropriationThe transfer of ownership ormanagement of resources to the privatesector, often associated with the creationor reallocation of private property rights

Divestiture (also termed asset sale) Sale of water supply infrastructure to privatesector [e.g., England and Wales (178, 179)]

Land/water grabbing Corporate land/water rights acquisition[e.g., sub-Saharan Africa (96)]

Private-sector participation orpartnerships

Outsourcing of water supply systemmanagement to private companies (29)

CommercializationThe incorporation of marketinstitutions and models in resourcemanagement organizations

Corporatization Conversion of the business model formunicipal water supply from a localgovernment department to a publiclyowned corporation (114)

New public management Introduction of alternative service deliveryin water supply management [e.g.,Ontario, Canada (180)]

Environmental economic valuationThe introduction of full-cost pricingand associated technologies for chargingconsumers

Full-cost pricing Water pricing for irrigation water andassociated private property rights (126)

Environmental valuation/ecosystemservice pricing

Environmental valuation of waterincorporated into decision making (29)

MarketizationThe introduction of water markets astrading mechanisms, predicated on theexistence of secure private propertyrights

Creation of water markets Introduction of a water market [e.g., inChile (145)]

Liberalization of governanceThe transfer of decision making andoversight from governments tonongovernmental actors viaderegulation, devolution,decentralization, and delegation

Deregulation Cessation of direct state oversight of waterquality mechanisms [e.g., Ontario, Canada(181)]

Delegation and decentralization ofdecision making authority

Delegation to nonstate actors, oftencombined with rescaling from national toprovincial/state and/or local authorities(182)

incentives to change behavior, which contrast the hierarchically organized, command-and-control regulatory mechanisms typically associated with state-led governance (63).

Market environmentalism thus includes—but is broader than—environmental governance,which refers to “the set of regulatory processes, mechanisms and organizations through whichpolitical actors influence environmental actions and outcomes” (4, p. 298). In turn, governance isbroader than government; hence, market environmentalism is enacted by a range of governmen-tal, private-sector, and civil society actors. In short, market environmentalism—if fully applied—entails a wide-ranging set of transformations in how we manage, allocate, and make decisionsabout resources and environmental management (64). But it is important to emphasize that thesefive processes are not necessarily deployed simultaneously. Many assume that market environ-mentalism automatically entails privatization—the transfer of ownership to private hands. Yetfull privatization is, in fact, relatively rare; market environmentalism entails a much broader setof strategies and may in some instances not involve privatization at all. Payments for ecosystemservices, for example, might be implemented without privatization, or the liberalization of gov-ernance (61). Moreover, market environmentalism is neither straightforward nor uncontested, asthe discussion of the water sector, below, illustrates.

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THEMES IN MARKET ENVIRONMENTALISMIN THE WATER SECTOR

To analyze emerging trends in market environmentalism in the water sector in a manner thatis sufficiently general yet concise for a review, this article focuses on the five dimensions ofmarket environmentalism. For each dimension, the discussion addresses a topic of contem-porary academic interest and of policy and political relevance: privatization and protest; thecontradictions of commercialization; the distinction between valuation and commodification;the multiplication of modes of marketization; and the tensions at the heart of debates over theliberalization of environmental governance, particularly the tensions between human rightsand environmental rights, as well as those among state, market, and community roles in watermanagement.

Privatization: Protest and Partnerships

Davis (5) provided a comprehensive summary of water privatization debates across the range ofdifferent forms (e.g., service, leasing, build-operate-transfer, and complete privatization contracts)(see also 65–67). In the past decade, the debate has evolved. One question of interest has beenwhether the involvement of private-sector companies (either through various types of managementcontracts or outright asset sale) can contribute to solving the global water crisis. Indeed, one of thecentral justifications for privatization in the 1990s was the fact that more than one billion peoplearound the world lack access to clean, safe drinking water (12, 68). Despite expensive investmentprograms funded by governments and bilateral aid agencies, morbidity and mortality from lack ofsafe water access remain significant public health issues (69).

Proponents of market environmentalism argue that private finance, management, and own-ership are necessary to meet the challenge of human water security and claim that governmentmanagement of urban water supply is beset by several interrelated problems, including low ratesof cost recovery, low tariffs, underinvestment, deteriorating infrastructure, overstaffing, inefficientmanagement, and unresponsiveness to the needs of the poor. From this perspective, proponentsof market environmentalism argue that it is unethical not to involve private companies if they canperform better than governments at providing water, particularly to the poor. An additional setof incentives pertains to politicians, as privatization (in theory) offers the opportunity to devolvepolitical accountability for price increases and to obtain financing—incentives that coincide, insome instances, with theoretical arguments in favor of market environmentalism.

In contrast, opponents argue that the involvement of private actors tends to decrease, ratherthan increase, water security. In particular, opponents of private ownership and management arguethat government-run water supply systems, if properly supported and well resourced, are moreeffective, equitable, and responsive; have access to cheaper forms of finance (and thus lower tariffs);and perform just as well as their private-sector counterparts. Proponents and opponents of marketenvironmentalism disagree not only on the goals of water management (e.g., efficiency, equity,environmental protection) but also on the methods for comparative assessment of the performanceof different providers and the impacts of distinct regulatory regimes.

To assess these claims, researchers have conducted meta-analyses of privatization, assessing theperformance and outcomes of private-sector participation in developing countries (67, 70, 71).Scholars have reviewed the effects of privatization on a range of issues, including prices (54, 72,73), coverage for the urban poor (74), governance (75), and—controversially—public health (31,76–79). The politics of privatization also received intensified attention from, for example, studiesof the incentives of various stakeholders, the politicization of government bureaucracies, and theknowledge networks via which privatization was disseminated and promoted (80–82).


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As the numbers of privatization contracts decreased in many regions (with the exception ofChina), scholars also began scrutinizing the limits of privatization, particularly as a means ofproviding universal coverage (notably to the urban poor) (29, 83, 84). Following the financialcrisis of 2008–2009, private companies strategically reconfigured their approach, changing modesof financing (e.g., from equity to debt financing) and opting for lower-risk contracts (85). Newoperators emerged in middle-income countries (e.g., Brazil, China, Russia, Malaysia) to challengethe oligopolistic structure of the sector, dominated by European and American firms. Althoughthe number of customers of private companies continues to grow, this new growth is concentratedin more profitable (usually middle- and high-income) cities, regions, and countries—particularlyin China (86).

A balanced assessment of the record of private water companies suggests that hopes that pri-vatization would solve the world’s water crisis were overblown but that privatization will continueto be pursued as an option for water supply access in communities and countries with sufficientability to pay, and will thus continue to raise ethical concerns (87). Given this continued influence,scholars and donors have increasingly been focusing attention on the potential for partnerships(public-public, public-private, and community/social-private) in filling gaps in water supply pro-vision, including informal water vendors and community-based organizations (88–91). Criticismsof this new emphasis on partnerships have included the claim that they endorse state inaction,exacerbate gender inequality with respect to household labor and livelihoods, and create two-tiersystems of water supply (31, 92, 93). Proponents argue, in response, that hybrid environmentalgovernance strategies are the new normal: Purely market-, government-, or civil society–basedstrategies are rare (and perhaps even fictitious); the governance of water requires the articulationof organizations and actors in multiple domains (4).

The debate over privatization has also taken a new turn. Originally focused on water supply,scholars have increasingly turned their attention to the issue of water resources in the past decade.Of particular interest has been the topic of water grabbing (associated with land grabbing) (94,95). Water grabbing entails the diversion of water resources by companies (and in some instancesgovernments) without due process and/or appropriate compensation, thereby depriving local com-munities that depend on water for livelihoods. Recent interest in water grabbing has arisen becauseof the trend in land grabbing associated with large-scale agricultural investments for biofuel andfood production, often driven by food speculation and/or extraterritorial strategies for increasingfood security by actors from relatively wealthy yet land- or water-poor countries (e.g., Saudi Arabia,China) that purchase land and/or water rights in low- and middle-income countries (96–98).

Water grabbing may take multiple forms, including land purchases (to which water rights areoften legally attached) and the subsequent conversion of that land into large-scale agriculturalproduction, outright purchases of water rights and water infrastructure, or appropriation by dis-possession in which community rights to water (often not formally recognized in law) are deniedas corporate (or state) actors expropriate land and/or water resources for agricultural or hydraulicdevelopment (99–101). The recent debate over water/land grabbing, for example, frames the ap-propriation of water as an economic strategy carried out by extraeconomic means, which is deeplyembedded in political—and at times coercive and violent—relationships (102).

As with private-sector participation in water management in the 1990s, water grabbing hasgenerated controversy and protests (53, 93, 103–107). Although grievances vary (and are highlycontext specific), a set of common themes emerges in these protests, notably concerning the im-pacts of privatization on consumers and workers (e.g., pricing and access to services, employment)as well as on the environment. In many instances, a nascent red-green alliance (e.g., labor andenvironmentalists) has cohered around the antiprivatization agenda (as in Cochabamba, Toronto,Jakarta, and Vancouver). Unsurprisingly, antiprivatization protests are often articulated with, and

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amplified by, more generalized political economic protests. Latin America (e.g., Argentina andBolivia) experienced significant public protests on a range of water-related issues from the late1990s onward, and southern Africa has also seen sustained protests, in some cases associatedwith high-profile court cases (e.g., Phiri/Soweto in South Africa) (103, 108–110). This ongo-ing resistance indicates that privatization—in its varied forms—continues to be a contested andcontroversial topic.

The Contradictions of Commercialization

Civil service units and public sector organizations have been subject to significant reform pressuresover the past few decades. In many instances, these reforms are associated with NPM and alter-native service delivery (ASD) models, including, for example, corporatization and outsourcing ofactivities previously provided directly by government agencies or departments. In turn, these areassociated with the broader trend of neoliberalism (the doctrine that the market can, and indeedshould, act as a guide and medium for all human action) in policy (100).

In the water sector, commercialization often entails the involvement of private companies inmanagement (but not ownership) of water supply infrastructure; corporatization or the intro-duction of private-sector business models and market principles into government management;the contracting out of other water-related responsibilities to nongovernmental actors; and theintroduction of market-based allocation, performance measures, and incentive structures. Suchreforms have been introduced around the world, in countries as diverse as Germany, India, andZambia (111–113), often creating hybrid models that mix aspects of public- and private-sectorgovernance and delivery (e.g., 114).

Frequently, advocates of such reforms argue that they will improve efficiency, lower costs, and(in some instances) enhance other aspects of service delivery. Proponents of reforms also arguethat some forms of commercialization, such as corporatization, may, under the right circum-stances, reduce political interference in water prices (115). Critics, in contrast, argue that NPMand ASD may attenuate accountability, reduce transparency, and devolve responsibility without aconcomitant reallocation of resources (116).

Market failures. Proponents of commercialization are usually well aware that—despite the grow-ing trend of market environmentalism—many aspects of water management are likely to remainunder state ownership and management. This is because there are several market failures usu-ally identified with respect to water supply, including natural monopoly, externalities, and publicgoods (117, 118).

First, water supply is cited as an example of what economists term a natural monopoly insofar assupply by one firm entails lower costs than supply by more than one firm. The incumbent firm willhave an overwhelming cost advantage compared with any new entrant, and thus the market tendsto be characterized by only one seller, with all of the problems associated with monopoly power.

Second, externalities—defined as the costs or benefits arising from water production not ac-counted for in the price mechanism, which thus do not accrue to the producer—are another typeof market failure that characterizes water supply. Externalities may be both negative (pollution)and positive (the social benefits gained from the widespread availability of safe and adequate watersupply and sanitation) (50). Externalities pertain to both quantity and quality; lack of access towater has important (and potentially disastrous) consequences for hygiene and public health, andpollution of water sources by one user can quickly affect others.

Proponents of the market failure argument typically refer to a third characteristic of watersupply: that the public health outcomes associated with water supply infrastructure—particularly


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sanitation—are a public good (nonexcludable and nonrivalrous).4 Given that negative externalitiesare widespread in the water sector, markets typically fail to provide for public goods; furthermore,profit-making strategies raise serious ethical concerns. This appears to be the case in the watersector because private companies tend to focus on water supply and are very rarely involved insolely sanitation-related operations (at least on a concession contract basis).

Water insecurity. As described in the preceding section, market failures pose significant chal-lenges to those seeking to pursue commercialization. Another important reason that commer-cialization in the water sector is likely to be limited pertains to the broader security concernsassociated with water resources.

Given population growth and forecasts of increasing per capita consumption, as well as thepotential impacts of climate change, many scientists and policy makers predict increasing waterinsecurity. Water stress is already a widespread and growing phenomenon (12, 119). This is notlikely to be offset by increased water efficiency, as many of the gains have been made in wealthycountries (such as the United Kingdom and United States, where water withdrawals per capitabegan declining in the mid-1980s, dropping to 10% below their peak by 2000) and increases inefficiency are often extremely costly (46). Furthermore, water insecurity may be exacerbated insome instances by threats to drinking-water supply from a range of sources (e.g., human impactson the aquatic environment, contamination, or even terrorist attacks) (6, 120). Concern over wateravailability has thus given rise to concern over threats to economic growth, human livelihoods, andthe environment from water-related hazards (e.g., floods and droughts), as well as from growingwater stress and scarcity (56, 121, 122). In addition, a newer concern has emerged regardingthe water-energy-food nexus, which highlights the challenges in meeting the energy and fooddemands of growing populations, given constraints on water availability. Water security, fromthis perspective, is linked to food and energy security; commentators have focused on the trade-offs that are likely to arise in the next 20 to 30 years (123, 124).

This debate over the global water crisis is likely to imply intensified concern over water securityon the part of national governments. The United States, for example, recently launched the USWater Partnership (under the leadership of then-US Secretary of State Hilary Clinton), whichlinks concerns over water security directly to American geopolitical and national security interests(8). Given these concerns, states may be less willing to cede control over the development of waterresources and large-scale hydraulic infrastructure to nonstate actors.

There is thus a deep contradiction at the heart of contemporary commercialization initiatives.On the one hand, governments desire the putative efficiency increases that might come with theadoption of private sector–style incentives, management techniques, and organizational/businessmodels. On the other hand, governments are increasingly concerned over water insecurity and theassociated potential threats to broader security interests; hence, there is a powerful impulse towardincreasing government oversight and control. This contradiction is deep-seated and not (at leastin the short term) resolvable; there is likely to be a push-pull approach to commercialization onthe part of governments seeking to balance these competing interests and demands.

The Pricing Debate: Valuation Versus Commodification

Rapidly rising water consumption by humans has led to significant impacts on the environment,including freshwater biodiversity and water-related ecosystem services (122, 125). These impacts

4Water supply itself is technically not a public good because it is rivalrous, i.e., one person’s consumption may diminishanother person’s ability to consume.

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are likely to be exacerbated in the future given population growth and increased hydrologicalvariability, particularly in the context of climate change (12). The global water crisis is, in otherwords, a crisis for nonhumans as well as humans.

In response, advocates of market environmentalism call for the economic valuation of water (theprocess of calculating monetary values for environmental goods and services and incorporating thisvaluation into policy and management) (126). Proponents argue that environmental valuation (e.g.,of the ecosystem services provided by wetlands) is urgently required to provide the correct pricesignals necessary to incentivize changes in behavior, notably reducing both water consumptionand pollution, as well as allocating water to its highest-value uses. Others argue that economicvaluation can also serve to engage stakeholders and address governance failures (such as lack ofaccess to information) that negatively affect attempts to improve water resource allocation (e.g.,127). Valuation, in short, is advocated as a means of improving water security and potentially evenwater governance.

Environmental valuation is one component of full-cost pricing models for water wherebyprices should reflect the full cost of infrastructure and maintenance and consumers pay for whatthey use. The implementation of full-cost pricing requires the introduction of technologies (e.g.,water meters) for measurement and billing (128). Full-cost water pricing may radically alter therelationships among consumers (users), water providers, and the environment. For example, full-cost pricing may involve the introduction of economic equity (the benefit or willingness-to-payprinciple), displacing a commitment to social equity (the ability-to-pay principle). Consumer accessis legitimated not by a citizen’s entitlement to water as a service but rather by a customer’s purchaseof water as a quasi commodity. Thus, market environmentalism implies a reconfiguration of thehydrosocial contract between users and their environment; in response, accountability mechanismsand governance processes evolve, framing consumers as customers rather than citizens. Treatingwater as a business, in short, reconfigures not only water management but also our decision-makingprocesses, our views of our environment, our water suppliers, and one another.

Given the large-scale inefficiencies and outright waste associated with the underpricing of wa-ter in key sectors (such as irrigated agriculture in many countries), these arguments for valuationhave gained much support. However, examples of implementation of pricing based on full marketvaluation are rare, in part because of the technical difficulty of pricing and in part because ofthe political consequences, given that valuation subverts the subsidized pricing and social equityprinciples that tend to be associated with public utility systems. For example, valuation has gener-ated controversy when it affects (in general implying the reduction of ) cross subsidies; previouslywidely accepted, cross subsidies are now more frequently debated, particularly when urban waterutilities seek full-cost recovery. This, in turn, leads to ambiguity in policy and legal approachesto valuation. Take, for example, the case of the EU’s Water Framework Directive (WFD), whichmandates full-cost pricing, the devolution of governance (through creating local watershed coun-cils), and cost-benefit analyses (129, 130). The WFD cannot be neatly framed as an exercise inmarket environmentalism; despite the recommendation of pricing and valuation, it simultaneouslyasserts the nonmarketization of water in its first clause: “Water is not a commercial product likeany other but, rather, a heritage which must be protected, defended and treated as such” (131, p. 1).

As the case of the WFD illustrates, valuation raises complex political issues. The existence ofa “noncommercial” clause in the WFD reflects the views of opponents of market environmental-ism, who sometimes (incorrectly) assume that valuation is synonymous with privatization and/orcommodification. From this perspective, valuation is undesirable because it opens the door toprivatization; opponents argue that this enables profits to be made from water, which is unethicalgiven that water is a substance essential for life and human dignity (132). These opponents ofvaluation often argue that environmental protection and water conservation should be fostered


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through an ethic of water use, whether based on solidarity, scientifically determined limits to wateruse, traditional (often indigenous) water-use practices, or various forms of eco-spirituality.

Here, it is important to inject some clarity into the debate. Valuation is not synonymous withprivatization or commodification. The goal of economic valuation may be to enable environmentalprotection, remediation, and restoration through introducing environmental values into the cost-benefit analyses that guide water supply management decision making. Economic valuation isintended to provide incentives for water conservation and for the use of alternative supplies (graywater, reclaimed wastewater, desalinated water, recycled water). The prices developed throughvaluation techniques may also be used as a tool for educating consumers in a new ethic of wateruse.

None of this, it should be emphasized, implies the full commodification of water, which onlyoccurs when private property rights, full-cost pricing, and marketization (the introduction of watermarkets as trading mechanisms) are in place (133, 134). Water is, in fact, a difficult resource tofully commodify because it is difficult to exchange—given that it is expensive to transport relativeto unit volume and is hence relatively inefficient and expensive to transport in large quantities overlong distances. If we assume that commodification requires the conversion of a class of servicesor goods into discrete, interchangeable units that can be abstracted from their socioecologicalcontext, priced, traded and sold, transported, and privately owned, then the commodification ofwater appears to be extremely difficult for several reasons.

First, as a flow resource, water plays an important ecological role and equally serves as anecological vector; mixing of waters from different sources (as in bulk transport, using waterways asconduits) poses significant ecological challenges, which may be a barrier to the large-scale transferof water resources. Second, the market failures referred to above (natural monopoly, externalities,public goods) pose significant challenges to full commodification.

One exception is the bottled water market, which is in part made possible by the physical bound-ing of water in containers, temporarily halting the flow of water and rendering more straightfor-ward the creation of private property rights, standardization, transportation, and pricing per unitvolume. Reputedly one of the fastest-growing segments of the beverage industry, bottled waternow represents an estimated $70 billion in sales worldwide (135, 136). Traded globally, with aproliferation of brands and offerings (from vitamin-infused water to glacier water), bottled wateris the best example of complete commodification of water. Academic studies of bottled watercharacterize it as a social phenomenon associated with heightened anxieties about health, de-creased public trust in government, and successful marketing linking bottled water consumptionto consumer aspirations regarding physical appearance, exercise, and identity (137–141). Despitesignificant consumer resistance and public campaigns opposing water as a commodity, the growthin the bottled water market seems to be significant and sustained (142–144).

This exception aside, full commodification of water is relatively rare. Valuation, by contrast, ismuch more widespread. But it is important not to confuse the two; valuation, in short, does notnecessarily imply commodification. However, the water-pricing debate has been complicated bythis confusion; it remains to be seen whether the useful aspects of valuation can overcome thesepolitical (as well as technical) barriers to implementation.

Marketization: Water Markets, Water Rights, and the Human Right to Water

Ironically, while water markets are emblematic of market environmentalism, they are the most rare(at least numerically) of the trends discussed in this article. Formal water markets exist in countriesas diverse as Australia, Canada (Alberta), Chile, South Africa, Spain (the Canary Islands), and theUnited States (specifically in some of the western states) (145–151). Even though practices vary

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significantly, water markets may be defined through three key elements: water rights, water tradingmechanisms, and physical infrastructure for transferring water.

Water rights are legally defined water access entitlements; simply put, a water right grants theuser the right to use water from a specific source. The form of these rights may vary significantly.Common forms include land-based water rights (for example, giving the user the right to usegroundwater under the land he/she owns), riparian rights (allowing a user to access water flowingthrough their property), and the “first in time, first in right” system used in the western UnitedStates and Canada.

Water rights, in isolation, do not constitute a market. Rather, a market exists when a tradingsystem is set up, whereby rights may be bought and sold. These trades can be temporary orpermanent, depending on the legal status of the water rights. Pricing techniques vary; somejurisdictions use environmental valuation, whereas others allow supply and demand to determineprices (within certain limits).

The third key element of a water market is a mechanism for transferring water between users.In water markets organized around a surface water body (e.g., river, stream, or lake), the waterbody serves as the mechanism for transferring water. To sell to downstream users, for example,upstream users simply refrain from abstracting the amount of water that they have traded. In otherwater markets, artificial transfer mechanisms (such as canals) are used.

Proponents of water markets argue that they are critically necessary as a means of allocatingever increasingly scarce resources to their most efficient uses. In particular, proponents arguethat water markets are useful in water-scarce areas, allowing communities to respond to watershortages by purchasing water (for example, urban communities purchasing water from ruralfarmers). This, proponents argue, may allow urban areas to avoid supply-side solutions (e.g., dams),which are increasingly expensive and difficult, given the decreasing availability of cost-effectivesites for dam construction and increasing awareness of the negative environmental impacts ofdams. Governments are often keenly interested in water markets because they may offer theopportunity to shift extremely expensive operations and maintenance costs for water transferinfrastructure schemes (such as canals) to private users. Proponents of Australia’s water market,for example, argue that the market has allowed Australians to increase the efficiency of water usewhile avoiding expensive new infrastructure projects (146).

In response, opponents argue that water markets raise concerns that, taken together, requirestate oversight of resource allocation and sectoral trade-offs. One such concern is the urban-rural divide: Rural users (often farmers) are vulnerable to political pressure from cities to transferwater, often threatening the sustainability of rural livelihoods. Underpricing of rural agriculturalcommodities may make trades seem economically efficient, but the broader economic impactson rural communities are not included in water-pricing models. Another concern focuses onenvironmental justice issues related to water quality (152, 153), given that nonhuman actors do nothave the same ability to participate in the market and secure water for their needs (e.g., in-streamflow minima). And yet another concern focuses on environmental impacts; in many instances, thequestion of the ecological integrity of the receiving watershed has not received sufficient scrutiny.Moreover, environmental needs are often undervalued (or not valued at all); even when they arevalued, the price paid by urban and industrial users may outweigh water pricing as determined byconventional environmental valuation methods. Budds (148), for example, raises these points withrespect to water markets in Chile; rural farmers were disadvantaged, and environmental impactswere poorly integrated into the Chilean water market, raising serious distributional justice andequity issues. Haddad’s work (154) on California suggests that water markets are difficult to create,even under favorable governance and economic circumstances, which in turn suggests we shouldbe skeptical of their potential elsewhere.


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For these reasons, debates over water markets (and indeed privatization and commodificationmore generally) are often associated with broader debates over the human right to water. As anonsubstitutable resource essential for life, water is discursively framed as a human right by thosecampaigning against market environmentalism (although it was not explicitly included as a humanright in the original UN Declaration of Human Rights) (155). It is worth noting that the literatureon the human right to water and on water markets share a concern in common for equity andinclusion with respect to water access and water safety. However, those who favor the humanright to water tend to prefer state involvement, whereas those who favor water markets tend to beproponents of private-sector delivery.

After more than a decade of being hotly debated, the issue of the human right to water remainscontroversial. Some governments (including the Netherlands and the United Kingdom) expresstheir public commitment for a human right to water, and a few (such as France, South Africa, andUruguay) have taken the bold step of embedding the right in legislation (156, 157). But these arethe exceptions, and some governments (such as Canada) have rejected calls for the creation of ahuman right to water.

Nonetheless, the case for the existence of the human right to water appears to be gainingground, notably through the work of the UN Special Rapporteur on the Human Right to Water(158). International human rights law seems set in the near future to recognize the human rightto water, although critical legal scholars and activists have noted that the fulfillment of this right,in practice, still faces significant difficulties (159).

The relevance to the debate over market environmentalism is threefold. First, the human rightto water has been mobilized as an argument against water privatization (although with limitedsuccess, given that human rights law is compatible, at least in its current formulation, with privateprovision of basic services) (160). Second, human rights are not necessarily sufficient criteria forthe fulfillment of universal, equitable access to water supply; for example, those countries whodo have a human right to water (e.g., South Africa) have nonetheless encountered significantpolitical, financial, and technical barriers to the achievement of universal access (103). Third, thehuman right to water implies that water may not be defined in narrowly economistic terms. Eventhough water has economic value, it cannot be defined simply as a commodity, for ethical as wellas technical reasons.

Liberalization of Governance: Balancing Harmonization and Subsidiarity

The final theme to be discussed in this review is that of governance reform, where governance isdefined as the “range of political, organizational, and administrative processes through which com-munity interests are articulated, their input is incorporated, decisions are made and implemented,and decision makers are held accountable in the development and management of water resourcesand delivery of water services” (161, p. 2). The debate over alternative governance architectures(162) in the water sector has attracted significant scholarly attention. Much attention has beendevoted, in particular, to the reform of institutions, defined as the laws, rules, norms, and customsthat govern decision-making behavior. Of particular interest to this article is the fact that marketenvironmentalism–inspired calls for governance reform stress the importance of liberalization.Although complex, liberalization usually includes delegation to nonstate actors, combined withdevolution and sharing decision making with lower (or higher) scales of governance (Figure 1).5

5Governance typologies often include some combination of the following categories: (a) top-down versus bottom-up (hier-archical) or (b) market-led versus government-led schemes. Both of these approaches are problematic, as they conflate rescaling

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Single stakeholder,usually government

Minimaldelegation

Significantdelegation

Multiple stakeholders,including nongovernmental

Traditional governance:

• Single governmentalstakeholder controlsdecision making

• Limited participation ofnonstate actors

Consultative governance:

• Single stakeholder(usually government)controls decision making;

• Extensive participation ofnonstate actors

Multilevel governance:

• Distribution of decisionmaking between state actors

• Limited participation ofnonstate actors

Delegated governance:

• Significant delegation ofdecision making to multiplestakeholders

• Extensive participation ofnonstate actors

Pa

rticipa

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(stak

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nt)

Delegation of decision-making power Delegation of decision-making power Delegation of decision-making power

Figure 1Delegation of decision-making power, focusing on the two key axes of reforms and excluding references tomarkets and the private sector.

A frequent justification for these reforms is that they will enable better achievement of good gov-ernance principles, including accountability, equity, environmental and economic sustainability,participation and empowerment of stakeholders, and transparency (163).

The reforms proposed in Figure 1 must be contextualized within broader debates over watergovernance, notably evolving approaches to Integrated Water Resources Management (IWRM).IWRM perspectives traditionally stressed the importance of integrated management (of land andsurface and groundwater use, across organizations and scales), given the importance of balanc-ing trade-offs between protection of ecosystems and economic development (in line with theBrundtland Report–inspired conceptualization of sustainable development) (164). More recently,IWRM advocates have begun debating systems perspectives, framing governance as a complexsystem that interacts with biophysical, technological, and social systems (165). Briefly, this systemsapproach emphasizes the inevitability of uncertainty and the limited predictability of socioecolog-ical (inherently complex) systems to which governance frameworks (and managers) must adapt.This, in turn, motivates the adoption of adaptive governance (166), a form of social coordinationin which governance is enacted through networks that connect individuals, organizations, agen-cies, and institutions at multiple scales; is characterized by nested polycentric institutional anddecision-making arrangements; and requires collaborative, flexible, learning-based approaches to

with delegation to nonstate actors (in the former case) and artificially separate two actors in a broader continuum of distributedgovernance (in the latter case).


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management (167). The goal of this approach to governance is greater resilience (168), under-stood as the capacity of a socioecological system to resist (successfully maintain equilibrium inresponse to) external shocks. Many scholars argue (although not uncontroversially) that delegatedand devolved water governance frameworks will engender greater resilience, in part through theprocesses of social learning that they foster (44, 45, 167).

IWRM debates, in other words, overlap with processes of the liberalization of governance. Asa result, some scholars have argued that IWRM has been discursively captured by a neoliberalagenda (169, 170). Others argue that this is a myopic perspective and that it is imperative forwater governance to foster resilience (using whatever governance reforms necessary) given thesignificant challenges facing the water sector at multiple scales (171). This debate has, in someinstances, been characterized by a lack of analytical clarity regarding the definition and scope ofwater governance (172). For example, the scale and complexity of water management issues areoften much broader than the scale of debates over water availability for drinking and domesticpurposes, and many debates fail to clarify this scalar distinction. This has led some scholars toquestion the degree to which governance reforms are indeed associated with positive outcomes,noting that relatively few empirical studies have been conducted to date (173).

A central point of contention in this broader debate is the appropriate balance between sub-sidiarity and harmonization. Harmonization may be defined as a process of standardization andcentralization of standard setting, intended to achieve regulatory clarity and efficiency. Subsidiar-ity may be defined as the principle whereby a central authority does not take action (except inthe areas that fall within its exclusive competence) unless it is more effective than action takenat lower scales, in some instances by nongovernmental actors. The range of existing water gov-ernance arrangements is vast: from highly decentralized approaches that emphasize subsidiarity(e.g., Canada), to systems that seek to balance harmonization and subsidiarity (e.g., the EuropeanUnion), to systems that are highly centralized (174).

The limited amount of empirical evidence on governance reforms suggests the need for cautionin drawing conclusions. However, it is clear that reforms have proceeded in numerous jurisdic-tions; the scope and nature of this trend is worth briefly discussing. First, governance reformshave generally tended to encourage polycentrism: A broader range of nongovernmental actorsand stakeholders is playing a role in decision making, justified by the argument that social learningis enabled and improved through the involvement of a greater diversity of actors in on-the-ground management and decision-making processes. This justification underpins, for example,calls for public participation in water governance (and, indeed, in environmental governance moregenerally). Polycentrism implies the involvement of multiple actors at multiple scales. Hence, asecond innovative aspect of water governance reforms is the emphasis on multilevel governance,such as multistakeholder watershed management platforms, which have been initiated in manyjurisdictions for a variety of reasons, including increased emphasis on watershed-based and in-tegrated management of environmental issues, awareness of the multilevel causes and impactsof water-related threats (particularly, although not uniquely, with regard to the water-energy-food nexus), and concern over the multiscalar implications of climate change for water resources(175).

These issues provide interesting challenges to the watershed-focused emphasis of traditionalIWRM governance models; in emphasizing multiscalar linkages, the watershed loses its centralplace as the primary unit of analysis and water management. In other words, the liberalization ofgovernance may, at times, challenge the notion that the watershed is the optimal scale from whichto address complex water security challenges. For example, the focus on the watershed is potentiallyundermined by the growing importance of virtual water flows—notably those associated withglobal trade (176). Given the multiple scales at which these trade-offs occur, reliance on watershed

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management alone may be insufficient. This is exacerbated because aquifer/groundwater bound-aries (and subsurface hydrological gradients) and ecological boundaries (e.g., biomes) do not neatlycoincide with watersheds (177). The most important (and controversial) insight from the debateover water governance reforms, in short, may be the claim that a watershed-focused approachis insufficient for adequately addressing the water security challenge, which is to balance humanand environmental water needs in order to safeguard essential ecosystem services and biodiversityacross the global water system.

CONCLUSION

This review of the changing terrain of market environmentalism in the water sector has empha-sized four points. First, market environmentalism entails a broad range of processes and is notsynonymous with (or limited to) privatization. Rather, market environmentalism is a complex setof interrelated processes that may include (in addition to privatization) commercialization, envi-ronmental valuation and pricing, the marketization of trading and exchange mechanisms, and theliberalization of governance.

Second, market environmentalism is relatively recent and is by no means hegemonic. In manycountries, it has only partially displaced a state hydraulic paradigm of water management. Indeed,many aspects of the sociohydrological cycle are still owned, managed, and regulated by govern-ments. Debates over the business of water should bear this in mind and avoid exaggerating thedegree to which private, nongovernmental activity has displaced traditional state involvement.

Third, market environmentalism is difficult to implement in practice, with tensions arising inattempts to privatize, commercialize, value, market, and liberalize water governance. This reviewdiscussed some of these tensions (for example, the tension between the desire for less governmentcontrol and drivers for greater governmental control, spurred by water security–related fears).Some of these tensions arise from contradictions that are difficult to resolve in practice, notablythe contradiction between monetary and nonmonetary values of water and the tension betweenframing water as an economic good versus incorporating noneconomic uses. These tensions,which have acted as a brake on market environmentalism, are inherent to water managementand are unlikely to be effectively resolved. The question is whether—through institutional in-novation, governance reforms, and political mediation—these tensions will be well or poorlyhandled.

Fourth, this review has explored some of the controversies and questions surrounding marketenvironmentalism. Significant protest has arisen in many places, and coordinated campaigns havebeen launched at a global scale (particularly regarding the human right to water). This does not, asthis review has emphasized, imply that water will return to public ownership and management. Thedefaults of conventional state governance are well documented; hence, a return to past practiceis unlikely. Rather, the delicate balance of roles among the public sector, private companies, andcommunities will continue to be renegotiated, ideally with (a) less ideological extremism thanobserved in the privatization debate of the 1990s; (b) greater emphasis on the key imperatives atstake; and (c) prioritization of distributional justice, equity, and socioecological resilience for waterresources at multiple scales for present and future generations.

DISCLOSURE STATEMENT

The author is not aware of any affiliations, memberships, funding, or financial holdings that mightbe perceived as affecting the objectivity of this review.


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ACKNOWLEDGMENTS

The author thanks Leila Harris, Corin de Freitas, Julian Yates, Michelle Kooy, Katherine Furlong,and other members of the Program on Water Governance at the University of British Columbia.Funding from the Social Sciences and Humanities Council of Canada is gratefully acknowledged.

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EG39-FrontMatter ARI 8 October 2014 23:26

Annual Review ofEnvironmentand Resources

Volume 39, 2014

ContentsIntroduction � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �v

Who Should Read This Journal? � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �vii

I. Integrative Themes and Emerging Concerns

Environmental Issues in AustraliaAlistair J. Hobday and Jan McDonald � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 1

Gender and SustainabilityRuth Meinzen-Dick, Chiara Kovarik, and Agnes R. Quisumbing � � � � � � � � � � � � � � � � � � � � � � � � �29

II. Earth’s Life Support Systems

Implications of Arctic Sea Ice Decline for the Earth SystemUma S. Bhatt, Donald A. Walker, John E. Walsh, Eddy C. Carmack, Karen E. Frey,

Walter N. Meier, Sue E. Moore, Frans-Jan W. Parmentier, Eric Post,Vladimir E. Romanovsky, and William R. Simpson � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �57

Modeling the Terrestrial BiosphereJoshua B. Fisher, Deborah N. Huntzinger, Christopher R. Schwalm,

and Stephen Sitch � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �91

Tropical Forests in the AnthropoceneYadvinder Malhi, Toby A. Gardner, Gregory R. Goldsmith, Miles R. Silman,

and Przemyslaw Zelazowski � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 125

Life’s Bottleneck: Sustaining the World’s Phosphorus for a FoodSecure FutureDana Cordell and Stuart White � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 161

Tropical Intraseasonal Modes of the AtmosphereYolande L. Serra, Xianan Jiang, Baijun Tian, Jorge Amador-Astua,

Eric D. Maloney, and George N. Kiladis � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 189

III. Human Use of the Environment and Resources

Dynamics and Resilience of Rangelands and Pastoral Peoples Aroundthe GlobeRobin S. Reid, Marıa E. Fernandez-Gimenez, and Kathleen A. Galvin � � � � � � � � � � � � � � � � 217

Carbon Dioxide Capture and Storage: Issues and ProspectsHeleen de Coninck and Sally M. Benson � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 243

viii

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Consensus and Contention in the Food-Versus-Fuel DebateMark W. Rosegrant and Siwa Msangi � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 271

Energy for TransportMaria Figueroa, Oliver Lah, Lewis M. Fulton, Alan McKinnon,

and Geetam Tiwari � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 295

The Environmental Costs and Benefits of FrackingRobert B. Jackson, Avner Vengosh, J. William Carey, Richard J. Davies,

Thomas H. Darrah, Francis O’Sullivan, and Gabrielle Petron � � � � � � � � � � � � � � � � � � � � � � � 327

Human Appropriation of Net Primary Production: Patterns, Trends,and Planetary BoundariesHelmut Haberl, Karl-Heinz Erb, and Fridolin Krausmann � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 363

Consumer End-Use Energy Efficiency and Rebound EffectsInes M.L. Azevedo � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 393

IV. Management and Governance of Resources and Environment

Environmental EthicsClare Palmer, Katie McShane, and Ronald Sandler � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 419

The Psychology of Environmental DecisionsBen R. Newell, Rachel I. McDonald, Marilynn Brewer, and Brett K. Hayes � � � � � � � � � � � � 443

The Business of Water: Market Environmentalism in the Water SectorKaren Bakker � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 469

V. Methods and Indicators

Advances in Measuring the Environmental and Social Impacts ofEnvironmental ProgramsPaul J. Ferraro and Merlin M. Hanauer � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 495

Concepts and Methodologies for Measuring the Sustainability of CitiesMarıa Yetano Roche, Stefan Lechtenbohmer, Manfred Fischedick,

Marie-Christine Grone, Chun Xia, and Carmen Dienst � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 519

Measuring the Co-Benefits of Climate Change MitigationDiana Urge-Vorsatz, Sergio Tirado Herrero, Navroz K. Dubash,

and Franck Lecocq � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 549

Networks and the Challenge of Sustainable DevelopmentAdam Douglas Henry and Bjorn Vollan � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 583

Water Security and Society: Risks, Metrics, and PathwaysDustin Garrick and Jim W. Hall � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 611

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Citizen Science: A Tool for Integrating Studies of Human and NaturalSystemsRhiannon Crain, Caren Cooper, and Janis L. Dickinson � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 641

IndexesCumulative Index of Contributing Authors, Volumes 30–39 � � � � � � � � � � � � � � � � � � � � � � � � � � � 667

Cumulative Index of Article Titles, Volumes 30–39 � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 672

Errata

An online log of corrections to Annual Review of Environment and Resources articles maybe found at http://www.annualreviews.org/errata/environ

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Stephen M. Stigler, University of ChicagoThe Annual Review of Statistics and Its Application aims to inform statisticians and quantitative methodologists, as well as all scientists and users of statistics about major methodological advances and the computational tools that allow for their implementation. It will include developments in the field of statistics, including theoretical statistical underpinnings of new methodology, as well as developments in specific application domains such as biostatistics and bioinformatics, economics, machine learning, psychology, sociology, and aspects of the physical sciences.

Complimentary online access to the first volume will be available until January 2015. table of contents:•What Is Statistics? Stephen E. Fienberg•A Systematic Statistical Approach to Evaluating Evidence

from Observational Studies, David Madigan, Paul E. Stang, Jesse A. Berlin, Martijn Schuemie, J. Marc Overhage, Marc A. Suchard, Bill Dumouchel, Abraham G. Hartzema, Patrick B. Ryan

•The Role of Statistics in the Discovery of a Higgs Boson, David A. van Dyk

•Brain Imaging Analysis, F. DuBois Bowman•Statistics and Climate, Peter Guttorp•Climate Simulators and Climate Projections,

Jonathan Rougier, Michael Goldstein•Probabilistic Forecasting, Tilmann Gneiting,

Matthias Katzfuss•Bayesian Computational Tools, Christian P. Robert•Bayesian Computation Via Markov Chain Monte Carlo,

Radu V. Craiu, Jeffrey S. Rosenthal•Build, Compute, Critique, Repeat: Data Analysis with Latent

Variable Models, David M. Blei•Structured Regularizers for High-Dimensional Problems:

Statistical and Computational Issues, Martin J. Wainwright

•High-Dimensional Statistics with a View Toward Applications in Biology, Peter Bühlmann, Markus Kalisch, Lukas Meier

•Next-Generation Statistical Genetics: Modeling, Penalization, and Optimization in High-Dimensional Data, Kenneth Lange, Jeanette C. Papp, Janet S. Sinsheimer, Eric M. Sobel

•Breaking Bad: Two Decades of Life-Course Data Analysis in Criminology, Developmental Psychology, and Beyond, Elena A. Erosheva, Ross L. Matsueda, Donatello Telesca

•Event History Analysis, Niels Keiding•StatisticalEvaluationofForensicDNAProfileEvidence,

Christopher D. Steele, David J. Balding•Using League Table Rankings in Public Policy Formation:

Statistical Issues, Harvey Goldstein•Statistical Ecology, Ruth King•Estimating the Number of Species in Microbial Diversity

Studies, John Bunge, Amy Willis, Fiona Walsh•Dynamic Treatment Regimes, Bibhas Chakraborty,

Susan A. Murphy•Statistics and Related Topics in Single-Molecule Biophysics,

Hong Qian, S.C. Kou•Statistics and Quantitative Risk Management for Banking

and Insurance, Paul Embrechts, Marius Hofert

Access this and all other Annual Reviews journals via your institution at www.annualreviews.org.

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