Canada West Foundation Blog

The goal of the Water Pricing: Seizing a Public Policy Dilemma by the Horns project is to explore the current state of water pricing in Canada and take a closer look at water pricing in the Canadian context. Although Canada is not facing a national water crisis, some parts of the country are beginning to experience water challenges. Strains on water supply can impact both regional economies and the Canadian economy as a whole. Examining this issue is critical to ensuring that Canada’s water policy is proactive rather than reactive.

The results of the project are summarized in a series of backgrounders and two reports:

Two new publications released by the Canada West Foundation examine the current and future state of Canada’s water supply and the impact that market-based instruments in water resources management have on policy innovation.
 
Charging for Water Use in Canada: A Workbook of the Central Principles, Key Questions, and Initial Steps provides a workbook that outlines the questions policymakers must answer in order to build a comprehensive water system from interviews of 42 water policy experts in Australia, Canada and the United States.

Our Water and NAFTA: Implications for the Use of Market-Based Instruments for Water Resources Management determines whether using market-based instruments as a solution for water allocation will impact Canada’s participation in the North American Free Trade Agreement.

“Canadians are some of the heaviest users of water in the world and we also pay some of the lowest prices for that water. Yet, the nation’s current supply of clean and safe freshwater is not guaranteed given the prospect of climate change and our critical water and wastewater infrastructure in many areas of the country is in a clear state of disrepair,” noted Vander Ploeg. “More rational and appropriate pricing strategies for water are one way to resolve some of these concerns.”

Canada’s water supports diverse and significant ecosystems, is essential to almost all aspects of the economy and has great social and cultural significance. With that said, global trends including climate change, population growth and urbanization are creating apprehension about the future of one of our greatest resources. By creating a comprehensive framework for water management, we will be able to successfully manage coming stresses and strains on Canada’s water supply.

Download Charging for Water Use in Canada: A Workbook of the Central Principles, Key Questions, and Initial Steps or Our Water and NAFTA: Implications for the Use of Market-Based Instruments for Water Resources Management.

The latest research conducted by the Canada West Foundation shows that a small locally-levied sales tax, dedicated to municipal infrastructure and implemented only if voters agree in a referendum, would help western Canadian cities close the gap between their huge infrastructure needs and the funding dollars available.

The Penny Tax: A Timely Tax Innovation to Boost our Civic Investments by Casey Vander Ploeg, Senior Policy Analyst, measures the projected infrastructure needs facing western Canadian seven biggest cities over the next ten years at over $40 billion.

“Our work shows that a small voter-approved penny tax, combined with regular and comprehensive reporting by governments, could be the most visible, transparent and accountable tax in Canada,” author Casey Vander Ploeg explains. “It has so many benefits to recommend it. One that is very important is how the tax would ensure that all individuals coming into a city and use the infrastructure also help pay for it.”

The penny tax would be a tax unlike any other in Canada because of the unique features built into the tax. Such features include a capped rate so the tax cannot be raised, voter-approval for implementing the tax, and dedicating all revenue to specific municipal infrastructure projects that would also be subject to voter-approval.

“The features I like the most in our proposal is the automatic sunset and the refund of excess revenue back to taxpayers,” said Vander Ploeg. The penny tax could only be used across two municipal election cycles, after which the tax would lapse. For the tax to be used any longer than six years, voters would have to vote the tax back in along with a new set of infrastructure projects. A sales tax can also produce revenues that exceed expectations. This tax revenue could be returned to local taxpayers.

While there are challenges that require further exploration before a penny tax could be implemented, it is clear that this innovative tax option would do much to maintain, renew, and rehabilitate existing infrastructure, as well as invest in new infrastructure. Across the globe, local governments are implementing such innovation tax solutions.

This report is part of the Canada West Foundation’s Smart Financing Project, which focuses on innovative solutions to Canadian public financing challenges.

To download The Penny Tax: A Timely Tax Innovation to Boost our Civic Investments, click here.

In the coming month, the Canada West Foundation will be releasing an extensive new research report entitled From H20: Turning Alberta’s Water Headache to Opportunity. In the lead up to this important event, we are releasing a series of water background information sheets to help set the context of the water debate.

The following is an excerpt from the seventh release entitled “The Evolution of Water Policy in Alberta.”

“Water allocation systems decide who gets to use what water, especially in times of scarcity.  The heart of Alberta’s system is “prior allocation,” which is common in most western Canadian and American jurisdictions, and has been used in Alberta since passage of the Northwest Irrigation Act (1894). Systems of prior allocation grant the right to use water based solely on a “first-come-first-served” basis.  Prior allocation is often called “first-in-time-first-in-right” or FITFIR.  Systems of prior allocation grant first right over water to the first or most “senior” license issued.  Water is allocated year by year based on the available supply, and then parceled out among users.  A water license or allocation does not guarantee the right to water, however. An allocation only guarantees the right to take water if sufficient water is available.  Under prior allocation, that right falls first to those who hold the oldest or most senior license, who have the right to use all of their water allocation before “junior” license holders can exercise their water right.  In Alberta, private individuals, corporations, organizations, and municipal governments all hold water licenses.  Some of the most important are held by Alberta’s 13 irrigation districts, which then transfer water to irrigators based on their amount of acreage.  License holders do not pay for the water that they withdraw.  In applying for a water license, a one time payment is made based on the volume of the water involved.

• Advantages: Under prior allocation, Alberta has been successful in harnessing its water resources for economic and social development.  Prior allocation provides an assurance to water users that they will have enough water in the future to justify and recoup their investments in water infrastructure, whether that be a self-supply system or a modern and water-efficient centre pivot.  Prior allocation provides a measure of economic security, and ensures that investments are made and used, rather than abandoned or made unprofitable due to a lack of water.  Prior allocation is simple to understand, largely accepted, and allows everyone to know “where they stand.”
• Disadvantages: At the same time, no system of allocation is perfect.  Prior allocation, left to itself, has no mechanism to share water in times of scarcity, does not prioritize water based on its intended use or purpose, and provides little incentive to conserve.  Prior allocation does not easily address new water issues that may arise, and works against accommodating new needs for water or even the changing use of water.  Prior allocation entrenches senior rights and a particular type of water usage at the expense of new usages—even if the new usage is more economically or socially important, beneficial, efficient, productive, or highly-valued.  In times of scarcity, the ecosystem can also become compromised if the usage rate of allocations rise despite lower flows of water.  However, government certainly has the option of restricting water taking during such times, and has often done so.  The bigger concern during scarcity is a certain amount of inequity that comes with the system.  In times of water scarcity, those with “junior” licenses may not be able to access water as “senior” license holders have the priority.”

Click here for the full text of “The Evolution of Water Policy in Alberta.”

Posted By: Casey Vander Ploeg

In the coming month, the Canada West Foundation will be releasing an extensive new research report entitled From H20: Turning Alberta’s Water Headache to Opportunity. In the lead up to this important event, we are releasing a series of water background information sheets to help set the context of the water debate.

The following is an excerpt from the sixth release entitled “Issues in the Major Rivers in Alberta.”

“Each of Alberta’s major rivers and river basins are experiencing their own unique set of stresses and strains. While there can be some overlapping concerns, the challenges of one river system are not identical to those of others. A quick overview of some of the key issues affecting each of Alberta’s major rivers:

North Saskatchewan River Basin: The North Saskatchewan supports the industrial heartland of Alberta, including the great majority of the province’s thermo-electrical generation. The basin is home to two large dams including the Big Horn Dam (creating Lake Abraham) and the Brazeau Dam (creating the Brazeau Reservoir). The biggest concerns center around huge withdrawals for cooling in thermal power plants and the effects of return flows on downstream water. Studies show water quality upstream from Edmonton at 98 out of 100, but quality downstream falling to 74 out of 100.

South Saskatchewan River Basin: The South Saskatchewan River Basin is the most concentrated and fastest growing region in the province and contains Alberta’s most productive soils and climate. At the same time, the Bow, Oldman, and South Saskatchewan rivers have been closed to new surface water allocations since 2006. The Bow is the most densely populated sub-basin, and the most actively managed. There are 11 hydro facilities on the Bow and numerous dams and reservoirs. Concerns on the Bow include water shortages, elevated nutrient and pesticides in downstream reaches and ongoing development in the sub-basin’s headwaters. The Oldman is also heavily managed, home to one of Alberta’s largest dams, and is used heavily for agriculture, which holds almost 90% of all allocations on the river. Concerns include nutrient loading from crop cultivation as well as intense livestock production. There is also growing pressure on groundwater resources. The Bow and Oldman converge to form the South Saskatchewan River, which is used less for agriculture (30% of all allocations) and more for municipal purposes (60% of all allocations). A key issue for the South Saskatchewan is water quality impacts from water use on tributaries upstream. The Red Deer River is the least used river in the SSRB. Concerns here include the need to reserve capacity to possibly meet apportionment requirements in the future (this has rarely happened to date, however) and pressure to supply additional water to regions both south and the north.”

Click here for the full text of “Issues in the Major Rivers in Alberta.”

Published By: Casey Vander Ploeg

In the coming month, the Canada West Foundation will be releasing an extensive new research report entitled From H20: Turning Alberta’s Water Headache to Opportunity. In the lead up to this important event, we are releasing a series of water background information sheets to help set the context of the water debate.

The following is an excerpt from the fifth release entitled “Doing More With Less.”

“Almost 80% of all water allocated for the petroleum sector is reserved for the oil sands, with 65% allocated for oil sands mining and 12% for thermal or in-situ recovery through cyclic steam stimulation (CSS) or steam assisted gravity drainage (SAGD). Another 13% is allocated for gas and petrochemical plants, and 10% for oilfield injection purposes. Here too, there have been some dramatic changes in how water is being used.

As conventional oil and gas reserves decline, Alberta has seen an increase in oilfield injection to enhance recovery. This has not, however, correlated with an increase in water used for this purpose. For example, in 1975 about 80 million m3 of water was injected for enhanced recovery. In 2007, less than 60 million m3 was used. This is a clear gain in water efficiency. Perhaps more important, the type of water being used for injection has also changed. In 1975, about 80% of the water used for oilfield injection came from fresh surface water sources. In 2007, about 40% of all oilfield injection came from fresh surface water sources. The use of saline or brackish groundwater for oilfield injection has grown from 2% in 1975 to over 40% in 2007 (Alberta Energy Resources Conservation Board 2006).

The search for water efficiencies is also ongoing in the oil sands. Petro-Canada’s Mackay River in-situ project is instructive in this regard. Mackay River is a fully-functioning zero liquid discharge SAGD operation where brackish groundwater comes up with the bitumen. This water is treated and then heated to produce steam. Petro-Canada claims that more than 90% of this water is continuously recycled, and the operation withdraws very little water from underground aquifers. While the oil sands industry standard is typically 2-5 barrels of water for each barrel of oil produced, Petro-Canada’s Mackay River operation uses 1/6th of a barrel of new water for each barrel of oil (CAPP 2008). If oil sands expansion is to continue to any large degree, such efficiency gains will become even more important.”

Click here for the full text of “Doing More With Less.”

Published By: Casey Vander Ploeg

In the coming month, the Canada West Foundation will be releasing an extensive new research report entitled From H20: Turning Alberta’s Water Headache to Opportunity. In the lead up to this important event, we are releasing a series of water background information sheets to help set the context of the water debate.

The following is an excerpt from the fourth release entitled “Placing Water Use in Context.”

“Across the Canadian water policy community, cheap water has been fingered as a significant contributor to Canada’s heavy use of water. In terms of residential use, this may indeed be the case given the large number of Canadian homes that remain unmetered, and for those that are metered, municipal water rate structures that do little to promote efficient use or conservation.

But again, municipal water use is only about 10% of the total water withdrawn, and residential use itself is only about half of that 10%. What is more important—and often overlooked—is Canada’s role as a global exporter of “virtual” water embedded in the production of goods and services exported internationally, whether that be grain and other agricultural produce, manufactured goods, auto parts, and even oil or natural gas.

There are few if any products and services that do not require water as an essential input in the production process, and with 80% of Canada’s GDP resulting from international exports, it is clear that a lot of the water “used” in Canada is water actually “used” by foreign consumers of Canadian exports. The same applies to Alberta. Agriculture in Alberta currently uses about 35 km3 of water per year. But 27 km3 of that water—over 75%—is exported abroad as “virtual” water (Zehnder 2008.) Of course, Canada and Alberta imports a lot of “virtual” water as well.

The point here is not to defend the profligate use of water by Canadians, argue against the merits of water conservation, or forestall ways to improve water resources management practices. Far from it. In fact, all of these goals are of paramount importance. If the world is indeed to become more water-short in the future, then Canada’s role as virtual exporter of water—one of the world’s few remaining “lifeboats” for water—will only grow in importance. Given the role played by Alberta within the larger Canadian export economy, this fact is as relevant here as anywhere else.”

Click here for the full text of “Placing Water Use in Context”

Published By: Casey Vander Ploeg

In the coming month, the Canada West Foundation will be releasing an extensive new research report entitled From H20: Turning Alberta’s Water Headache to Opportunity. In the lead up to this important event, we are releasing a series of water background information sheets to help set the context of the water debate.

The following is an excerpt from the third release entitled “Climate Change.”

“The specific effects of climate change on Alberta’s water supply are not crystal clear, but there is growing agreement on the broader pattern, and certainly, the range of possibilities. Seen individually, none of them are particularly pleasant. When combined, the entire nest presents a serious challenge for water resources management and policy in the future.

Warmer Temperatures: Although the term “global warming” has given way to “climate change”, the expectation is that most places around the globe will experience a warming trend, although the effect will vary from one place to the next. Warmer temperatures are expected to increase rates of evaporation and transpiration, and are expected to hit hardest in locations that are already dry.

Drought: Of all extreme weather possibilities, drought is the biggest risk for Alberta. While drought can occur in any climate, semi-arid regions like southern Alberta are the most vulnerable as they already have a moisture deficit and variable precipitation patterns. Fueled by warmer temperatures and lower precipitation, droughts in the future are expected to be more frequent, more intense, more persistent, and of longer duration. Western Canada has seen at least 40 severe droughts in the past 200 years. Multi-year droughts were seen in the 1890s, the 1930s, and the 1980s. The 1930s is generally considered a severe drought, where precipitation was 40% less than normal. But in 1988, the precipitation received was only 50% of normal. The most recent drought of 2001–2003 was quite unusual, both in its vast spatial extent and its intensity. The drought stretched from southern BC through the prairies and into the Great Lakes. This may be a sign of things to come—the western Canadian prairies have been identified as one of the locations where climate changes will bring a much higher risk of drought.”

Click here for the full text of “Climate Change”

Published By: Casey Vander Ploeg

In the coming month, the Canada West Foundation will be releasing an extensive new research report entitled From H20: Turning Alberta’s Water Headache to Opportunity. In the lead up to this important event, we are releasing a series of water background information sheets to help set the context of the water debate.

The following is an excerpt from the second release entitled “Canada’s Water.”

“… while it may indeed be true that Canada has the largest surface area of freshwater of any country, that statement—left standing on its own—is somewhat misleading.  The real question is not how much water there is in Canada.  The more relevant question is whether there is enough water where it is needed, whether that water is readily accessible, and whether that water is of sufficient quality.  For all the reasons above, securing adequate supplies of quality water for Canadians has required the investment of considerable financial resources and the application of expensive technology and infrastructure to harness water, treat it, move and distribute it, and protect it.

In many ways, Canada can only be considered relatively water rich.  With 6.5% of the world’s renewable freshwater and less than 0.5% of the world’s global population, Canada does have more water than most countries and can be considered generously supplied comparatively speaking (McFarlane and Nilson 2005).  But this does not mean that Canada is water-rich in an absolute sense, particularly when considering certain provinces and certain localized areas within those provinces.  And, Alberta is a case in point.”

Click here for the full text of “Canada’s Water.”

Published By: Casey Vander Ploeg

In the coming month, the Canada West Foundation will be releasing an extensive new research report entitled From H20: Turning Alberta’s Water Headache to Opportunity. In the lead up to this important event, we are releasing a series of water background information sheets to help set the context of the water debate.

The following is an excerpt from the first release entitled “Earth’s Water.”

“Across history, human beings have always had to grapple with the physical and geographical scarcity of freshwater, and even today, we are not always succeeding. Across the globe, the World Health Organization estimates that 3.6 million people die every year from water-related disease (Pruss-Ustun et al. 2008) and almost 900 million people live in a state of “water stress” lacking ready access to a safe supply of freshwater (World Health Organization 2008). This means that 1 in 8 of the world’s 6.8 billion people do not have access to clean, safe, and secure water. According to the 2006 UN Human Development Report, some 1.4 billion people live in river basins where current patterns of water use exceed sustainable levels (Hadjigeorgalis 2008).

Some of the problem here relates to very real concerns with water scarcity in certain parts of the world. However, many also maintain that the larger problem is fueled less by scarcity and more by improper water governance, fragmented decision-making, outdated and ineffective water policies, and a lack of rational water resources management. All of that will have to change quickly, because if the current situation represents a very real challenge, then the future could very well represent a full-blown crisis. While the world’s population grew three-fold in the 20th century, our use of renewable water resources has grown six-fold (World Water Council 2010). For the past 100 years, water demand and water use has outpaced population growth two to one. Current demographic trends indicate a global population of 8 billion by 2025 and 9 billion by 2050, and much of that growth is expected to occur in already water-short areas (United Nations 2008).”

Click here for the full text of “Earth’s Water.”

Posted By: Casey Vander Ploeg