Why do we have so many Good Reasons to make Wrong Water Decisions?

Many decisions we make may look good on a small scale, yet as soon as we zoom out, we realize that they were the wrong choice in the end. That’s all fine when it’s about eating the last chocolate chunk in the box, but it’s an entirely different story when it comes to Water, its use, and its management worldwide! Why do we have so many wrong incentives? Let’s explore:

with 🎙️ Gonzalo Delacámara, Consultant on Natural Resources Economics for the United Nations and Water Policy Advisor for the OECD, the European Commission, and the World Bank   

💧 Gonzalo is also Director of the Center for Water & Climate Adaptation at IE University, aiming to reinvent education and train the people who will change the World tomorrow.

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What we covered:

🔗 How “Water” doesn’t stop at the water sector itself but is heavily interlinked with the World around it and how “Water People” have a hard time figuring this out

☵ How nobody seeks Water in the end, but rather the benefits Water provides

👴 How the World’s water institutions are not catered to the era we live in and how this has consequences

💵 How we benefit from nature’s services and how those can be assessed in economic terms

♻️ How water circularity doesn’t exist in isolation, and how the World needs to become circular first

🔖 How even if Water doesn’t have a price, it always has a cost – and how we shall better account for that

📅 How getting our s*** together for 2050 will require breaking it down into digestible pieces

🤌 How the largest water challenges may well happen outside of the Water Sector and how to adapt to this new realm

🤖 Water trading, water governance, new technologies, planning for a World that doesn’t exist anymore, the agriculture-energy-water nexus, the roadmap to real sustainability… and much more!

🔥 … and of course, we concluded with the 𝙧𝙖𝙥𝙞𝙙 𝙛𝙞𝙧𝙚 𝙦𝙪𝙚𝙨𝙩𝙞𝙤𝙣𝙨 🔥 

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Resources:

🔗 Send your warmest regards to Gonzalo on LinkedIn

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Infographic

Infographic-Gonzalo-Delacamara-UN-Water-OECD-World-Bank-Redesigning-Water-Incentives-to-Take-Better-Water-Decisions

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Full Transcript:

These are computer-generated, so expect some typos 🙂

Antoine Walter: Hi, Gonzalo. Welcome to the show.

Gonzalo Delacámara: Hi Antoine, how are you?

Antoine Walter: Well, I’m excited,

A Postcard from Madrid

That has a lot to do with your resume, actually, which was pretty impressing to read. But before that, I have a tradition on that microphone, which starts with a postcard, and you’re sending a postcard today from Madrid. So what can you tell me about Madrid, which I would ignore by now.

Gonzalo Delacámara: Madrid is living one of the craziest months of November ever, I would say, because and this is probably one of the unintended outcomes of climate change. It’s extremely warm today. It’s bright and sunny as usual in Madrid. That is extremely warm as compared to other months of November that I can recall.

Antoine Walter: So I guess that’s that’s not good news. That’s maybe pleasant to experience, but not good news.

Gonzalo Delacámara: Yeah.

Introducing: Gonzalo Delacámara

Antoine Walter: I mentioned your very swiftly resume and when I was looking you up I have to say , I didn’t know where to start. You’re a professor; you’re an advisor on many boards. You’re a consultant for the word bank, for the OECD, for the United Nations, for the European Commission.

That makes quite a lot for one person. And there’s still more. So how do you juggle with all of that and what’s your drive?

Gonzalo Delacámara: Yeah, it’s quite interesting. I made a decision several years ago, more than a decade ago, that I would mostly work internationally because I felt that all these challenges that I deal with are essentially global challenges. Whenever it comes to water, we often have the perception, and the same applies to energy, for instance, that because services are delivered locally, we tend to feel that the issue is a local one, but it’s not.

Water may seem local – but it’s not

It’s not anymore. And the same applies, for instance, to climate change adaptation. We know that one of the differences between climate change mitigation and adaptation is that mostly the solutions will need to be implemented locally. Therefore we may have the impression that this is local, but it’s not.

So the idea of being a global citizen and being able to contribute to tackle these challenges at the right scale, which to me is mostly the global scale, was one of my main drivers in making this decision to work internationally.

And therefore, as an outcome of that decision, I ended up working with all these multilateral organizations because there was another decision being made, which is one that is not necessarily working directly with governments because governments change and because the in to some extent is jeopardizes your independence.

And I think that being an academic and being independent should be, you know, part of the equation. And therefore I felt that working through these multilateral organizations that have a more stable , presence in all these countries is sound and healthy.

The scattered ecosystem of Water Agencies

Antoine Walter: So tackling water issues on a global level, not with governments still, you are going with many different organizations. Is it a concern that it, is that scattered or is it. A sign of healthiness of the ecosystem to see all these big organizations looking at the water topic.

Gonzalo Delacámara: there’s really a challenge if you just look at the UN system that you know, that’s taking center stage now because of the un water conference in 2023 early next year you, you can actually see that there are so many more than 40 institutions and buddies within the UN system with a specific mandate on water, which is confusing.

And despite the creation of UN Water, which to some extent you know, was leaning towards the idea of trying to provide a consistent view at a UN level for all these issues and providing global governance for an issue that is global, by definition I think that we still have a significant leeway for improvement.

It can lead to inconsistencies

So it’s true that we’re working with this institution. Sometimes you find that there are some inconsistencies within the institutions themselves and between those institutions and it’s not about not actually working with governments. I do work with governments and I do work with. Global corporations as well.

But it’s very much that my main interlocutor or my preferred main interlocutor should be one of these multilateral organizations because I think that they can provide, let’s say a long term perspective. It’s easier to think in terms of strategy when you are not in government. Yeah. When you run for office, it’s very tempting to think in terms of tactics looking in both sides that, for these issues, you know, if you look for instance at the carbonization roadmap that we’ve all agreed on that’s something looking towards 2050 and therefore you need a long term view.

I’m really committed to that.

What’s a natural resource economist?

Antoine Walter: I’d like to deep dive into this long term view in a minute, but right before, I’d like to make a last step, which is, you are a natural resource economist. I’d like to understand what’s your definition of that? What’s that weird animal?

Gonzalo Delacámara: Yeah. It’s quite interesting. I would actually say that I’m an economist, full stop. Being an economist means that to some extent you want to understand why, you know, our production patrons, our consumption patrons, and how we distribute wealth and income. Yeah. A bad, from my viewpoint that’s too limited.

I think that mostly the way I see my work as an economist is trying to dive into individual and collective preferences. So why we make the decisions we make. What’s really driving and are we actually responding to preference ordering? Are we actually responding to incentives? What is it that happens when we understand that, for instance, in terms of sustainability, we have very good reasons to make really bad decisions.

It is easy to take bad decisions when it comes to sustainability

Sometimes we make these decisions individually. . But the collective outcome of those individual rational decisions might perfectly be unsustainable. So one of the reasons why I decided to approach from economic analysis, natural resources management is because, you know, if you look at the history of economic thought, you will see that an aggregate production function is mostly built around the idea that you combine physical capital with a factor of technology progress.

That’s it. But that was not what classical economy is, what the moral philosophers at the beginning of economics as a discipline of knowledge said. It’s very much that we also need to consider what they call land, and we can now call natural capital.

So when you look at the economic system, you realize that it’s not a closed loop, it’s not a closed system, it’s an open system connected to the biosphere, and therefore benefiting from the fact that biosphere is providing us a number of resources. That it’s also providing us with a natural simulation capacity of some of our residual flows.

Nature is providing economical services

And at the same time, and this is, you know, not a minor element, it’s sustaining life and its diversity. So when you look at that and you realize that it’s critical to conceive the economic system as part of the biosphere, then looking at whatever we do with natural capital, however you call it. .

Natural resources is critical to understand the patterns of social and economic development, which was my main interest. So I want to understand how we create wealth. How we create wellbeing. And I felt the downplay or overlooking of everything that has to do with natural resources was sort of hampering my ability to understand and explain. And this is the reason why I ended up looking at natural resources economics.

Do traditional economic tools apply to natural resources?

Antoine Walter: But can you use the same tools when you’re looking at natural resources? And if you were looking at, I don’t know, car manufacturing.

Gonzalo Delacámara: Not necessarily because you need to understand, and especially when we are talking about water, I always say that water is potentially the most complex natural resource. And this is one of the reasons why, for instance, when becoming the founding director of these I center on water and climate adaptation, that was one of the reasons why I decided to pick up water and not pick up whatever energy or fishing grounds or forest.

Because I feel that water is highly interconnected with the others, and it’s really complex, and there are many emotional issues attached to water. So you cannot actually look at natural capital assets as if you were looking at physical capital assets. But at the end of the day, they’re both capital assets, so they’re both something that we use to produce something else.

It is different yet similar

Yeah. So for me it’s, it is a way of looking. So I can acknowledge the intrinsic value of natural resources, and this is really critical, especially when you talk about traditional knowledge, indigenous peoples, et cetera. But it’s really critical that we have that in mind. But beyond that, there is a specific instrumental value.

Because these are things that we use to produce well-being. I could actually be very controversial, in saying that I don’t know anyone in the world who actually demands water. And you will tell me, oh, you’re crazy. You’re the first person in this podcast to make this statement.

But I can explain that we do not demand water. Because what we actually demand is either security or agricultural income or wellbeing or public health. So water becomes a vector for all that. And this is the reason why I say we not demanding water. No, we not. You see my point, but this is not to undermine the idea that water is a vital good.

It is a vital good. Yeah. But what we do demand is something else beyond water.

Water is a vector for other fundamental needs

Antoine Walter: Actually, you’re the second in that podcast to mention this, the first being John Robinson from Mazarine Ventures, who has built his investment thesis around that. But it’s a very interesting approach, and I have to say that when I discussed that with John, he convinced me. So, you wouldn’t have too much to fight against me.

You, you mentioned the emotional aspect, and that is an interesting one because it might be tricky . To share the message you’re sharing here and to link water as a good, like any other good. Because you’re right, people are not specifically looking for water, but still, if people don’t have water, they die.

So you have this quite empty sentences of water is life, which means that people may have a hard time to see economic principle associated with water. How do you overcome that emotional barrier?

Gonzalo Delacamara: Yeah I mean, I think we definitely need to acknowledge that this is a completely different Good. And it’s not just different because it’s bulky and difficult to transport, et cetera. It’s because it’s connected , to meeting to basic human rights. One acknowledged by the channel assembly the UN in 2010, another one in 2015 as an interlinked but distinct human right.

Dhaka: Unsafe Water becomes a Violence Threat for Women

I could give you some examples of things that I’ve seen in the world. You go to Dhaka, the capital city of Bangladesh. More than 20 million inhabitants. It’s appalling what you see, and there’s a point at which sunset begins, and suddenly you realize that you see hundreds of women going somewhere.

I was really confused about these women. Where are they going? Why now? Why all those many? I tried to find out what was happening. Those women lack a private toilet. In the world, there are more mobile phones than toilets. So still more than 4 billion people lack toilets.

And this especially affects women. Because they have no privacy and therefore they have to wait for the whole day until they can actually go somewhere outdoors to defecate or to do whatever they need to do. At that very point in time, they get sexually assaulted.

So providing them with the toilet is not an issue of acknowledging their human right to water and sanitation is not an issue of public health. It’s also an issue of personal security. It’s a recognition of an additional human right. This is just a striking example, but I could mention many others.

Water is connected to many more aspects of our lives

I think that it’s important that we understand that water is actually connected to cultural identity.

It’s connected to social cohesion, it’s connected to spatial cohesion too, and therefore understanding how water should be dealt with at that level would help because it’s very tempting to be seduced by that water policy goals are just tackling scarcity flooding and water login the decreasing water quality and the laws of biodiversity.

These are all critical. These are all very important. And I would say that these are critical water policy goals, but in fact, meeting those goals is a means to an end. So we need to understand that what we’re dealing with is not a sexual issue, is not an endogamic issue. One of the problems that I’ve got with the water people or the water sector, is precisely that we tend to be really self-indulgent.

We should un-silo the water conversation

It’s water people talking to water people, but it’s important that we understand that water is connected to everything, which does not imply that it shouldn’t have. The right discourse, the right narrative. We need a narrative that connects water to something else. So for instance, today, especially for most advanced economies, the challenge is not that much to be able to provide universal coverage of war sanitation services.

That’s not the challenge anymore. For a country like France or Spain or Germany or the US is not anymore The challenge. The challenge is very much how to tackle long-term water security within a context of climate change adaptation and in the midst of a year political upheaval. Yeah, so. So this is much larger than the idea of having a good water treatment plant and a waste water treatment plant dealing with waste water.

It’s something else. and I think that it’s important that we acknowledge this, that we do not end up with thismy about water discussions.

Is the World ready to go Water Circular by 2050?

Antoine Walter: Actually you, you’re offering me an perfect transition towards our deep dive because we will be sitting together on a round table with a topic which is. How to go Fully water circular by 2050, which has this element of sustainability and going beyond just access today, but also how do we ensure we have this perspective on the long run.

And I’d like to start just with a simple question. Do you think the word is ready today to go fully water circler by 2050?

Gonzalo Delacámara:  It would never go water circular if it doesn’t go circular as a whole. Yeah. So it’s important to understand, I mean, if anyone listening to us opening the tap at home implies that your, you seem to be consuming water, but you are also consuming chemicals and energy when you do that.

When you are eating food. You’re consuming water at the same time. We’d rather go for this nexus approach, a holistic approach, an integrated approach by which we consider that is not just about getting it right with water; it’s about getting it right with water and energy and the climate emergency and by diversity and ecosystem services and all that.

The World needs to become circular to have a chance to be water circular

So the world will never be water circular if it’s not circular as a whole. Secondly, when you actually observe in very specific terms where circular economy has been successful these days, not just in the water sector, but also in the water sector. You realize that a common feature of those projects is that they’re very small-scale projects.

So it’s very easy to find like 1 million successful initiatives in the world in terms of circular economy, but most of them are at a demo site level, at a plant level, at a pilot level, at best, at a catchment level in a living lab.

How do we upscale successfully piloted circularity?

So how come that all these initiatives, really good ones, are difficult to upscale? And I think that the issue of upscaling circular economy is a critical element to be dealt with. One of the reasons why I think that this is not being properly addressed is because we are not considering the optimal scale for those projects.

We are not considering the fact that circular economy can only deliver if it’s within the context of an industrial symbiosis process. So we need to find mutually beneficial relationships between different sectors in order to make this happen. If that happens, so with that binding condition, then we can go circular by 2050.

At what scale shall we aim for circularity?

Antoine Walter: So we need to upscale because the other approach would be to say it’s a system of systems and if the bottom of the systems are already circular, then the system of systems become circular by essence, which would be the distributed way. But you’re saying we have to go on the upper scale and the upper scale needs to be circular itself.

Gonzalo Delacámara: Absolutely. When you increase the scale, not only you capitalize economies of scale and scope, which means for the layman that you reduce the unit cost of delivering a service or producing a good. So this has a lot of economic meaning. But it goes beyond that. But it’s also that you start understanding that clustering different economic activities is relevant.

New Technologies enable sustainable approaches beyond geographical boundaries

In the past, the only possibility that we had to aggregate those economic activities to make circular economy properly deliver for societal challenges was to do that spatially. So we needed to have all those initiatives within the same space. Now through Industrial Revolution 4.0, through the use of new technologies, we can use those information systems, very advanced systems in order to integrate even if some of these economic activities are distant.

So we don’t need anymore just a spatial clustering of initiatives as in the past. We can do that now through new technologies, but the challenge of enlarging the scale of these initiatives still remains an issue. So I feel that this is something we definitely need to deal with. And I could give very specific examples, if I may.

Describing circularity for a Wastewater Treatment Plant

Think about a wastewater treatment plant. . A wastewater treatment plant that uptakes a circular economy approach. That wastewater treatment plant is not anymore about just treating wastewater effluents. It’s also about reclaiming water that’s been properly regenerated through advanced treatments and that can be reused.

That’s one element. The second element is that in the process you can also reclaim and reuse some solids. For instance, nitrate phosphorus. So nutrients to be used by farmers in agriculture. The third element is that you can also reclaim biogas, and you can use that biogas to become self-sufficient on energy crowns and also to have some surplus energy that you can sell as an independent power producer back to the grid through them feeding tariff.

If you don’t create three markets, one for water to be reused, another one for nutrients and another one for biogas, this never delivers. No matter how smart you are in terms of technology, so you can have the best technology in class and still be unable to deliver on circular economy grounds.

And there’s a fourth element to be mentioned. If someone’s reusing that water that has been regenerated through advanced treatments. You definitely need to create a market for those products being produced in agriculture with reused water. Unless we address this institutional economic challenge with redesigned proper incentives, nothing’s going to happen no matter how smart your technology is.

What prevents the World from going Water Circular?

Antoine Walter: why is the uptake of that approach not happening today? Because we have the technologies to reuse the water. We have the technologies to extract phosphorus and nitrogen. We have the technologies to produce biogas, and biogas is already injected into the grid in certain places. You can already have these energy purchase agreements.

And since the European Union finally enabled us to reuse water in agriculture, which was forbidden for a while, but now it’s something that is permitted. All the various bricks exist. So why, if all the bricks exist and why, if technically feasible, why don’t we step into that new realm?

Gonzalo Delacámara: I think that mainly if I had to give you a very brief answer is because we have very significant governance failures and when I mention governance… So I fully agree with you. It’s not an issue of technology anymore. Most technological drawbacks regarding all circular economies are overcome.

Not an issue of money. There’s a lot of liquidity in international financial. There’s an unprecedented fiscal stimulus effort in most of the main economies in the world. Let alone in the European Union with next-generation U and their recovery and facility. To me, those are not like the key constraints.

Governance comes in the way

The key constraint is one of governance. And every time that I say governance, I’m a member of the OECD Water Governance Initiative. And I’ve seen like three levels of discussion about the concept of governance. The first one being you need to be transparent, accountable, you need to promote meaningful stakeholder engagement, and you need to commit to integrity.

Okay. This is critical. This is important. It’s very difficult to find a country that would comply with all this, but you know, we accept that this is a necessary condition, but it’s not a sufficient one. So some people would, at a second level of discussion say governance is very much about having the right institutional set.

So we need to have everyone doing the right thing at the right time. And for that we need an institutional mapping. Yeah. That is sound and efficient and equitable and great. Difficult to find again, that again, this is a means to an end. So what’s the third level of most advanced discussions about water governance?

There is a hell of complexity to manage

Water governance is very much about mastering complexity is about embracing complexity and uncertainty. Accepting that complexity and uncertainty are here to stay. That we are not anymore any kind of orthodox economists or engineers thinking that we can mitigate uncertainty. No, uncertainty is here to stay.

We accept that and therefore you need to create enabling conditions for the uptake of innovations. Not just technological innovations, but also social institutional financial innovations that you also need to create the right conditions for three financing frameworks. so it’s not just about ensuring that you’ve got the money upfront to kick off a project.

It’s also that you connect that with bright finance mechanisms so that the project is sustained throughout time. It’s also about redesigning incentives.

Rethinking incentives to nudge the right outcome

Sometimes, as I said before, we have very good reasons to make really bad decisions. So for instance, if a farmer in Southeast Spain or in South Italy or in Cyprus, can just take water, withdraw water from a well, just paying for the energy cost of that.

And that’s around 9 to 12, maybe 15 cents of a euro per cubic meter. And we give that person the opportunity to either use reused water or desalinated salt water. And that goes up to, let’s say, 50 cents in the case of water reuse, or one euro per cubic meter in the outlets of the desalination plant. That person has no incentives to behave properly.

So it’s more tempting to unsustainably withdraw water from an over-exploited aquifer, even if it has very high salinity levels, than use water from these unconventional water supply sources. So this issue of diversifying water supply sources is what the circular economy in the water sector is about, diversifying water supply sources.

Creating new revenue streams is impossible. In the absence of this kind of third-level governance, I’m referring to.

Could water trading create the right incentives?

Antoine Walter: the last example you give rings a bell’s, something we’ve discussed on this microphone with Ellen Bruno.

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One of the examples she mentions is an experiment that they did, in the District of Coachella, of trying to put a price on groundwater and trying to trade this abstraction of groundwater so that you would have the right incentive to put water reuse in place and recharge the aquifer.

And aside from the anecdotes I guess it is clear to everyone that it’s not sustainable to just draw water from an overused aquifer. Even the agriculture people doing that notice that it’s not sustainable. But still, it’s the best solution they have today because of economic reasons.

So I guess nature putting together that aquifer is natural service and it’s one of these assets which are provided today and which are priceless. So what is the right solution to that? Is it to put a price on nature services so that you don’t just have the price of energy to take that water, but also something else? But then you need to find a suitable scheme to be able to invoice the services of nature. Do you see a Martingale, which would help solve the issue?

Putting a price on water would help realize there is a cost

Gonzalo Delacámara: I would say that putting a price in context in where there’s no one, I think this would be important because we need to understand that even in the absence of a price, there is a cost. So using water always has a cost. Whether we price it or not is a completely different issue, but it’s connected to the one I mentioned before.

But in those places where we already have prices for end users. And therefore they’re being charged for either withdrawing water or consuming water services. I think that it’s really critical that we go beyond, for instance, pricing is not just about recovering costs, so it doesn’t just have a financial aim.

The second point is, there’s a second dimension of pricing that has to do with creating the right incentives for people to be more efficient. And this is not properly working because we have a lot of talking about price levels and we never discuss about price design and structures.

Tariff structures are a way to create the right incentives

So tariff structures are as important. For instance, having a progressive multi blog tariff structure is as important as having a high price to be faced by water users. But the third element that I would like to mention beyond the fact that we also need to consider that it’s not just about recovering financial costs, but it’s also, especially within the European Union, that we need to recover resource and environmental cost.

But beyond that, I think that it’s important that we start understanding that it’s not just about pricing water or water services. It’s also about pricing a new public good that I would call long-term water security within a context of climate change, adaptation and pricing. Water security is something different because this gives you an idea of how we need to go from investment models that still, in many countries, are relevant because you need to bridge the gap in terms of coverage of basic services.

So you go to Columbia, rural Columbia, and sometimes you find that in one of the countries with more abundance in terms of fresh water, 70% of the population is not connected to improved water service. So this is happening in some areas, and we still need investment models to bridge that gap to take everyone to a basic level of water service.

The real challenge is not with the water utilities but with the entire watershed

But even in those areas, you realize that the challenge is not so much for the water utility itself, but for the watershed, for the River Basin. So just to give you an idea, in Latin America, for instance, most of the most important metropolitan areas, Mexico City, Rio de Janeiro, Sao Paolo, the province of Buenos Aires, Lima, Santiago…

They do not have long-term water security. And in some cases, we’re talking about 10 million people. So the challenge is not one specifically for the water utility delivering water services, but it’s something happening upstream. And this is becoming an issue in that part of the globe, in which we know that by 2040, 25% of the population will be facing extreme water stress.

This happens in all the Pacific, in Latin America, in the Northeast of Brazil. This occurs in the 17 Western states of the US. This happens in Singapore and, in republics of Central Asia, and in vast areas of China and India, south Australia, all Mediterranean basins, regardless of whether they’re North African or South European.

So, I mean, this is not a minor issue. And in those places, the challenge. It is in the basin. It’s not in the city itself.

Is there a mechanism that could help solve these Water Issues?

Antoine Walter: Would you have a mechanism to, to propose there? Because. The water security elements makes me think of the water futures, the trading of water futures, but that is rather on individual basis more than the basin basis. When you speak about basin, you mention South Australia, there is the Murray Darling River Basin, which had this water trading.

And I know that you are a board member at the IDA and you were sharing a conference with Katrina Donaghy. Wasn’t that microphone to explain a different approach, which she’s piloting right now in Australia as well. And out of these initiatives, did you recognize something which sounds like a promising prospect to address that water security on basin level?

Gonzalo Delacámara: Yes I think that, for instance, for those bases that we called whether is what we call Reba basin closure, so where, you know, long term renewable resources are not able to meet current and future demands in those areas. It’s important to recognize the closure. It’s important to recognize there are no more resources, and therefore we need to make an effort to reallocate those resources in a much better way.

In a much better way. Doesn’t just necessarily mean meeting traditional assessment criteria such as efficiency or cost effectiveness or equity. These are really critical. This is a very important, but we need to go beyond. We’re in a different world. Yeah. We cannot plan for a world that does not exist anymore.

“We cannot plan for a World that doesn’t exist anymore”

So we need to think in terms of adaptability, flexibility, rawness, sustainability, enhancement resilience, and all these assessment criteria. Are pretty different to the conventional ones we were using. Yeah. So it’s not anymore as creating, for instance, trading schemes that are just efficient. No. We need to make sure that those trading schemes can actually contribute beyond. You can actually implement trading schemes. Both in terms of quantity and quality of water. But if you look at the examples of where this has happened, one is where Katrina is actually working; I was with her not long ago, and was part of the World Congress on Desalination in Sydney.

And we were part of a joint session and we were actually discussing this. You look at Australia or you look at Chile, the most extreme examples of water trading in worldwide, what you see is that you can’t neglect the fact that there was a macroeconomic success to some extent through the expansion of agricultural development.

Governance adapts to new water trading schemes

So this is clearly an issue for both countries to very different countries, to very different microeconomic outlooks, but it worked out. But in terms of unintended environmental outcomes this was not a success at all. This has led to a very interesting discussion in the amendment of the Constitution in Chile.

The new constitution has not been passed, and therefore there’s an ongoing discussion about the role of water trading in Chile. And it went through a major, probably the most important legal reform in the water sector in the world, in Australia after the millennium drought. So when you look at those examples, you realize that water trading can actually play a role.

But you continuously need to make that compatible with strong public regulation so that you can align the automate individual interest with collective goals. And when I say that water security is a new public good, it’s not new because I name it as a new public good. I mean, water security has always been important, but it’s just new because now we tend to acknowledge.

Paying for water services, not water resources

Visas are public good and we understand that no one’s paying for that. So we do pay for water services at best. But we don’t pay for water security. Our reflection is really shortsighted. We look at water services and we say, okay, what are we going to do to deliver water to the city of Toulouse today?

No, but what about delivering water to the city of ES in Germany or to the city of Lagos in Nigeria in 25, 30, 50 years? I think this second issue is not probably being dealt with.

Breaking down 2050 goals in digestible bits

Antoine Walter: I would see why it’s tricky because if you are just at the beginning of your career at best, you’re still 40 years in the position, which means what happens in 50 years is not your problem. But beyond the anecdote, I see how it’s tricky to set 2050 or 2060 goals if we don’t just break them down into what happens next year, what happened in five years and what are in between steps.

So, What would be a good way to move forward for you?

Gonzalo Delacámara: I think the idea of redesigning incentives is critical, not just because I’m an economist, but because I see that through redesigning incentives you can create good reasons to make good decisions. Yeah. Let me, lemme just give you an example. Think of the most important copper mine site in the world.

The example of the World’s largest Copper Mine

It’s called Escondida Mine and it is in northern Chile in the desert of Atacama. It’s at an altitude of, let’s say, something like 3,400 meters of altitude. They need a significant volume of water. There is no water. It’s the Atacama desert. So in the plains of the Andes, there is no water.

They’ve already over exploited some of the aquifers that you could actually find there. So, you know, there’s no way out. And they still need to use water for that suppression, for the cooling of industrial facilities and for the washing of the mineral. What do they do? They go to the Pacific Coast like 200 kilometers away.

And they take water as zero meters of altitude from the Pacific. They desalinate that water, they pump it up and they take it to the open mining pit. They end up paying $7 to $8 per cubic meter of water. So you could actually say don’t try this at home. This is crazy. This is insane.

Insane water management but… profitable

But it’s all private equity. So it’s not posing any pressure , on public spending. In principle is not creating any significant externality to any third parties. So why can’t you do that? Yeah, you can actually do that. The reason why they do that, and they pay that outrageous amount of money to have water at the mining site is because international commodity market is paying off.

Copper pays for that. If you look at some of the regions in the world where irrigated agriculture is more successful, you can actually see that this idea of JFK in the sixties when there was a drought event in Texas still prevails. He went back to the White House and he said: we will make deserts bloom.

 And some people believe that, you watch out metaphors because people tend to believe in metaphors. So you look at whatever happens in Mediterranean basins or you look at what happens in the Middle East countries. By the way, a geopolitical point of interest for the world.

Irrigated agriculture is happening in all the wrong places

And you see where irrigated agriculture is happening, and it’s happening precisely in those areas where water is more scarce. So again, is it that we are ignorant? Is it that we avail. Is there a conspiracy theory? No, there’s not. There’s a very powerful set of incentives. Why? Because you’ve got, in those areas, you’ve got many competitive advantages to make agricultural vibrant and thrilling and, you know, exciting.

Yeah. Why you have abundant blend. You have, regrettably low cost labor, and you’ve got more solar radiation that in other areas of the world. Therefore, you’ve got all the elements that you need for agriculture. But one, the critical input water, this explains why water productivity in those areas is so high.

So unless you understand this reason why we make those bad decisions, unless you change the incentive. And you change whatever the crop mix or you change the way these people obtain income. Nothing’s going to change. So for me, the main message would be try to look at incentives, why we make the decisions we make, and then amend those incentives towards more sustainable solutions.

Shall we rethink the agriculture-water nexus?

Antoine Walter: you mentioned the crop mix and you mentioned the incentives. It makes me think of two studies. One study I think is from the IDA directly, which made a study of what’s the value of every kind of crops for a cubic meter of water, which was used to grow that crop. And what they showed is that basically every single crop can be profitable today.

I mean, you could be growing tomatoes in a desert. It would come at $5 per cubic meter. If you desalinate that for $2.20, then your cash positive, even if it is probably not the most sensitive way, to do agriculture and not the best crop , to grow at that place. And there’s a second study from Palolo d’Odorico from 2020 where his team tries.

To relocate crops worldwide and to say look, if we were to grow the right crop at the right place, and he showed that in places like Europe you could multiply by four the yield of water. And in places like Northeast Asia, by surprising replacing rice, you could multiply the yields of the crops used and the water used by almost eight.

And when I’m seeing that, it sounds so obvious that there is a better way. And still it is a 2020 study. And to my knowledge, there is no big international effort to say, wait, let’s sit on a table and I’m gonna produce just wheat for my region because wheat makes sense here and not in other places.

So where should these discussions happen? Should they happen and if I’m provocative, is it really a bad decision to desalinate water at level zero and bring it to the Atacama Desert if it’s profitable?

Will we struggle to feed the World by 2050?

Gonzalo Delacámara: the challenge even goes beyond what you mentioned. What you mentioned is extremely relevant. And in fact, if you realize, we now discussing about how to connect water security to food security globally. So follow me with this logical sequence, if you look at estimates by FAO, for instance.

So the UN agency dealing with food, agriculture in the world, they say that by 2050 we need to increase production of calories by 69%. How do you do that? So it’s intuitive to look at where crops are being produced, world. When you look at that, you realize that arable land in the world is growing not at a very significant pace, and is growing only as a result of the efforts in emerging countries.

It’s not growing anymore. It’s decreasing in the most advanced economies. So you start being slightly concerned because we need to produce 70% more calories and we don’t have enough arable land doing that effort. Yeah. When you look at that number per capita, you realize that it’s collapsing.

That arable land per capita is actually collapsing worldwide. So when you connect resources and population, you see that we are not going to meet that target. It’s impossible. We hit the target. Okay. So, How do you find a way out in this equation? Well, it’s very easy. You have less land, you need to produce more, and therefore you need to increase your deals, your productivity per hectare.

How do we increase agricultural productivity?

Okay. Right. Are we actually, do we know how much we need to do that? Yes. There are estimates, for instance, by the World Resources Institutes are Washington, DC think tank. And they say, yes, we know what the estimates are for the main crops to be produced to meet food security in the world. Okay?

In some places it’ll be rice in some others it’ll be potato in some others will be wheat. Whatever. We know that, okay, is this actually happening? And you look at the trend and you see that deals are increasing for those crops, but they’re not increasing at the pace that would be necessary to hit that number.

Okay, so again, let’s try and find a new way out to this equation. And the way out is significantly putting additional pressure over water and soil resources. So what we do is to over exploit water. Because we know that as our results of that, we may have higher productivity in our land and get closer to the idea of that increase of 70% of calories.

It’s not just that, it’s also about agriculture, it’s also about whatever synthetic food being produced. But the main idea is putting additional pressure on soil and water. Do we have a good reason to make a lousy decision? Yes, we do. This is one of the reasons why you find places where there’s significant water stress.

Yeah. And where irrigation is increasing and increasing is intensity. To put it in another way We fish where there’s no fish. Is this a miracle or a tragedy?

Food security also means water and energy safety

Antoine Walter: I fully subscribe and agree with what you said. nevertheless, I’m very tempted to play the devil’s advocate here. So if we were to be absolutely rational when it comes to the use of water and arable land, we would go to this ultra specialization of every single place. And that is also something which is highly debated today in developed economies because that is the way agriculture has tends to develop itself.

For instance, I’m living in the Rhine Valley, in the Rhine Valley, you are only growing corn because we have lot of water and a good place to grow corn. But people would fight against that and say it’s bad for biodiversity. And probably it is. So will we have like collateral damages in. Very dedicated and really looking at that target and taking as a North Star, which is arguably very good North Star, to say We need to have enough food for humanity by 2050, but that will come at some expense. How do we integrate that?

Gonzalo Delacámara: By now we should know that food security, long term food security globally is absolutely unfeasible in the absence of long term energy security in the availability to avoid the disruption of critical supply chains. . Including fertilizers that the global food security is connected to global geopolitics and that global food security is absolutely impossible in the absence of long-term water security.

There is a broader Nexus to cope with

So if we start by accepting that all these societal challenges cannot be addressed in isolation, I think this would be a very significant step.

Antoine Walter: also makes it much more difficult because you’re enlarging the size of the challenge to overcome. Sorry, didn’t want to cut you off.

Gonzalo Delacámara: Yeah but not necessarily. Let just give you an example. If you look I mean, I feel tempted to say I don’t want to be a celebrity with all these statements. I think that I’m trying to provide arguments on the basis of the statements, but before I said that, no one’s demanding water.

And now I would like to say that there is no such thing as the energy or the food sector or the water sector. This idea of a silo is anachronic. It doesn’t work for the world nowadays. Okay. So I feel that it’s important that we look at these things in a different way, and if we accept that there is no such thing as a water sector, then for instance, look at a desalination plant.

The nexus helps us rethink desalination

A desalination plant was conceived in the past as an industrial facility. Producing desalinated water with a byproduct that becomes a headache that we call brine. that was the conventional perception. Now we know that a desalination plant can properly be a brine mining site, reclaiming lithium, which is essential for the energy transition in the world, and reclaiming potassium, which is essential for fertilizers, for agriculture, and therefore for food security, giving us a byproduct that we called clean water. You see my point? business model, you know, changes completely as a result of accepting that we’ve got science. We’ve had science for the last 50 years to do brine mining. We knew that we could reclaim lithium and potassium. Now we had the technological applications to make that happen. And if we make the necessary investments to upscale these initiatives, it’ll pay off.

And we will have brine mining facilities delivering water at almost no cost as a byproduct. To me, this is outstanding. Yeah, and it shows that if we’re actually thinking in an integrated way, then the challenge is not anymore just about producing water, but it’s also about producing water for cooling of thermal power plants or producing water, not necessarily for thermal power plants.

Will we have water for Green Hydrogen?

This is not politically correct in a world of decarbonization, but why not having the necessary water supply sources for the production of green hydrogen? If you look at green hydrogen, it’s funny. You look to any engineer working on green hydrogen and they say, they tell you the engineering process and they tell you given a water supply, Yeah, we break the molecule and I say, well, excuse me given a water supply source, why do you take that for granted?

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You may not have water to do that. The same applies to digitization. You look at data centers in the last two years, humanity has processed more data that in the rest of human kind. And this is an increasing rate. Okay. So if we want to process so many data for instance, now talking through this podcast.

The use of data requires energy and requires water. So if you look at the whole issue of localizing data centers worldwide, you will see that many of them are being localized in places like Texas or Kansas, Nevada Southeastern Spain, you know, African countries, well, excuse me, there’s no water.

Breaking siloes will be the only way

How are you going to address that? So is this de utilization will be hindered by our inability to provide long-term water security. So I think that if we break all these silos, we will always be able to move away from very significant lock-ins. There’s a technological lock in, there is a financial lock in, and there is also an institutional lock in.

Yeah. It’s very often the case that we’ve got 19th century institutions making decisions about 21st century challenges. .

Antoine Walter: I think you, you make a very compelling and very convincing list of arguments if now I take my water sector hat, so the silo we have to break up, I might be concerned because it sounds to me like I’m in the side car of something bigger happening because you mentioned mining, but brine mining becomes economical because the lithium price went through the roof of the past years and was multiplied by five and will continue to rise and at some point it’ll become profitable.

So we can do our brine mining. You mentioned green hydrogen, but green hydrogen. If you do it in the desert with an ocean to the west, and so you have the wind and the solar and all the power to make green hydrogen, then you also have salt water, which means that the big problem is energy. Once you have the energy available, you can also use a bit of the energy to desalinate some more water.

The largest water challenges are happening outside of the Water Sector

And then I’m again, as the water sector in the side car because if the project happens, then I might be doing some desalination. is there a way that any water people listening to that, not calling them water sector, not calling water industry, how they can be proactive and participate in that change and in that almost revolution that you’re calling for

Gonzalo Delacámara: I’m not a preacher, so it is not, it’s not that I have all the answers to, to these but I feel that acknowledging this is important, acknowledging that most of the most significant challenges in the water sector are actually happening outside the water sector itself. Is important.

Let me just give you a couple of examples. Anytime you talk about cost recovery, financial cost recovery, and the financial sustainability of our water, you know, urban water systems, anytime you discuss about putting prices up, you order to send the right signals in terms of water efficiency because we need to be more sustainable.

all these discussions happen within the water sector, but there’s a point in which you get to a wall and the wall is called affordability. And some people tell you, oh, you should be sensitive. There are some people in society. We will not be able to pay that water bill. . Because, you know, it’s been a very long recession since 2008.

The economic context will play an increasing role

Now we’re going through sluggish growth rates stagflation. So it’s becoming difficult for some people to deal with this. My question is it a problem of the level of the water tariff or is it a problem of population exposed to poverty and social exclusion? If the white elephant in the room is poverty and social exclusion, there’s nothing to do with the water sector itself.

The water sector can put its 2 cents in this debate, but it’s something happening outside the water sector. And therefore we should be accepting as a modern society that we’ve got a challenge in terms of people being exposed to the risk of poverty and social exclusion. And when you sort that out, then you realize that the level of the water tariffs is very low.

Okay. The same applies to the use of new technologies in the water sector. The water sector. We need to accept that. Maybe we don’t like what I’m going to say, but we need to accept that is a late comer. In the use of new technologies. It was not the case in telecommunications, transport energy.

There were not latecomers to the fourth industrial revolution. But the water sector is a latecomer and you can actually think, you can dream of a city.

How would the digital water revolution look like in Berlin?

Let’s say whatever Berlin. A full-fledged system of microsensors providing you with real time information about how much water you consume, where you have water leakage, et cetera.

This is a dream. This is fantastic. Can you think of how to raise the money to make that happen? Yes. Can you think of the right procurement to make that happen? Yes. Do we have other service companies being able to deliver that and technological partners that can deliver all the internet of things stuff and big data management and all that.

Great. Does artificial intelligence deliver? Of course. Can we think of global twins? Yes. But. The problem is that this smart technology scheme has to be encompassed by a smart pricing scheme that gives you a price that provides you with a reward Antoine because you’re efficient and penalizes me that I’m not.

If we are not being charged through that smart pricing, scheme, then the smart technology does not deliver, and therefore you lose legitimacy in your effort to use taxpayer money to pay for all those microsensors. So again, This is not an issue that is indogenous to the water sector itself.

We have to embrace economic battles and realities

It’s happening. And it has to do with public policy. It has to do with PPPs, it has to do with procurement. It has to do with the economic regulation of water services. It goes beyond the water sector. So I would not say being in the side car, what I would say is you drive your motorbike. But a lot is happening in your site car.

You see my point? But you can drive, you can be a protagonist in all this. Because in fact, we are dealing with the most relevant and complex natural resource in the world. So we, you know, we can be protagonist of all these, but we need to go beyond our boundaries and accept that we need to create dialogue with others.

I think it was Albert Einstein. So not anyone who said in his autobiographical notes is a short essay, is a fantastic book. And he says that the. Consistency of discipline of knowledge should not be assessed as a result of its internal coherence. It should be assessed as per its ability to create dialogue with all the disciplines.

Yeah. So, you know, I follow Einstein on this.

How to kick-off the road to 2050 circularity?

Antoine Walter: Sounds like the good North Star honestly, Gonzalo. discussing that with you for hovers, but I have to be koy of your time. So I have a last question for you in that deep dive, which is the title of our round table goes toward 2050, and I’m firmly convinced that is a distant target, which might be dangerous because yeah, in French we say tomorrow everything’s gonna be free.

But we live today. So what would be a sound target and a sound timeline to get us started on the right path? According to you?

Gonzalo Delacámara: In terms of circular economy,

Antoine Walter: Yeah. Running out this right. Incentives and building this, yeah. Circular.

Gonzalo Delacámara: I think we made significant progress in the European Union having the, you know, standard technical specifications for the quality of water that we should be expecting because these includes a higher level of accountability. So I think the decision being made by the European Commission at the European Parliament is a good step.

The right example of the EU Urban Wastewater Treatment Directive

The recent amendment of the urban wastewater treatment directive goes in the right direction from my viewpoint. And this is connected to the SLU directive as well. So good policy signs from that viewpoint. I think that it’s important that we address the issue of spatial planning. That we understand that managing water resources is not getting it right and striking the balance in hydrologic.

It’s not about supply meeting demand. This is too basic. It’s very much about managing the drivers, putting pressures or on our water resources. And this is happening in the territory, and this is one of the reasons why I strongly believe that we need to build an equivalent road for climate change habitation, which is the poor ca and international climate discussions as the one we have for climate change mitigation.

Everyone knows that climate change mitigation is only feasible if we go through decarbonization of the economy. The most significant structural change in our economy, in our lives. That this can only happen through energy transition and that the energy transition is only possible through a, an equivalent transition in the mobility sector.

Having a Roadmap is one thing – Complying another one

We know that we’ve got a roadmap. Whether we comply with it or not is a completely different story, but we know that we have it. We don’t have it for climate change adaptation. And I think that energy is to mitigation, what water is, to adaptation water and the reconnection reac, acknowledging that water is connected to the territory.

So I think that many significant steps could happen in terms of amending our spatial planning procedures. so that we can benefit from this complex view that I’ve been discussing throughout the interview.

Antoine Walter: I’ve been taking so much notes. I’m looking forward having a sequel with you because that is just incredible knowledge you share today and it’s connecting some dots with some of the people I had the chance to have on that microphone. It’s also creating new avenues and new alley. So, so thanks a lot for opening new doors.

Goza was a said. I’m trying to be cautious of your time. To round off these interviews. I have rapid-fire questions, if that’s fine with you. I’d like to transition to that section.

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Rapid fire questions:

Antoine Walter: here I’m asking short questions, which aim for short answers. Usually I’m the one side tracking. I’m never cutting the microphone, but those are usually the rules.

my first question is, what is the most exciting project you’ve been working on and.

Gonzalo Delacámara: There was quite an interesting project being funded by the European Union. It was a research project through Horizon 2020 called Qua Cross, in which we connected all the different water res going from fresh water to coastal and marine watchers. So everything connected as it is in nature, and therefore overcoming all these artificial barriers in terms of, you know, legal issues, political issues, economic issues.

That was really exciting. Aqua Cross

Antoine Walter: Can you name one thing that you’ve learned the hard way?

Gonzalo Delacámara: That it’s all about emotions, , that in the end technicalities matter, but it’s very much about being able to understand why other people make the decisions they make. So it’s all about emotions. It’s all about preferences and incentive.

Antoine Walter: Is there something you’re doing in your job today that you will not be doing in 10 years?

Gonzalo Delacámara: Hopefully not traveling so much because my carbon footprint is appalling sometimes. So, yeah, I would definitely try not to travel as much as I do today.

Antoine Walter: What is the trend to watch out for in the water sector?

Gonzalo Delacámara: I think that it’s critical to see that it’s not about technology. It’s not about just financing that it, it’s very much about being able to understand these complex interlinkages between water and other sectors. So that’s, for me, that’s the trend and adopting more holistic views on water.

Antoine Walter: You mentioned the UN water conference. In the opening of our discussion now I’m giving you the opportunity to place one topic on the agenda of that conference. What is that topic?

Gonzalo Delacámara: We need to progress towards surprising water security. Acknowledging that water security can only happen with the diversification of water supply sources, and that the use of unconventional water supply sources such as water reuse or advanced water treatments, or desalination of salt water and brackish water should have a more significant role to be played in the water mix, especially in, in, in areas suffering extreme water stress.

Antoine Walter: And finally, would you have someone to recommend me that I should definitely invite as soon as possible on that micro.

Gonzalo Delacámara: Yeah, absolutely. Yeah, of course. Professor Michael Heman, I would say he’s born in Manchester, but he spent he has spent most of his life in the us He was, and he is a professor at the University of Bedley, California, but he is now based in Arizona and he’s a professor at the University of the State of Arizona.

And Michael Heman is, is a bright mind. He’s a fantastic scholar and he has a very luci approach to what resources management. And of course as a result of that, he connects water to climate change adaptation or to agricultural development and all that. He’s fantastic mate.

Antoine Walter: Well, thanks a lot for the advice. Thanks a lot for everything you shared over this a bit more of an hour. And I’m looking forward to be in that round table with you because it sounds like we have much to explore.

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