Access to clean water is essential to all human beings. The UN has stated in the Millennium Development Goals (MDG) that the number of people who have limited or no access to clean water and subsequently basic sanitation should be halved by 2015. The competition for natural resources has become more and more fierce. Traditionally, this contest has been associated with the fight over oil resources. Even though this struggle has increased in its intensity, as the situations in Iraq or Sudan show, another battle over natural resources has captured the attention of the public. As the former Secretary General of The United Nations Kofi Annan stated “fierce competition for fresh water may well become a source of conflict and wars in the future.”
In the early 1990s new challenges and possible causes for conflict were already becoming apparent. After the surprising (for many decision-makers as well as researchers) end of the Cold War, threats became more and more diverse. Kaplan described in “The Coming Anarchy” that the degradation of the environment would have a very negative effect on security; conflicts over resources like water could actually spark off an anarchic conflict. This article was widely recognized in decision-making circles in Washington DC. The Clinton administration realized the problem and acknowledged in “National Security Strategy of Engagement and Enlargement” that “the dangers we face today are more diverse… large-scale environmental degradation, exacerbated by rapid population growth threatens to undermine political stability in many countries and regions.”. The debate over the last decade has addressed the whole range of environmental issues and included topics related to the problem of water scarcity, like urbanization and demographic trends (mainly population growth). Without any doubt the debate over water scarcity has been affected by and is closely linked to the debate over security issues caused by environmental degradation. Water scarcity’s effect on conflicts can be briefly summarized by the following four criteria:
-The magnitude of scarcity
-The number of states, ethnic groups or interest groups sharing one source of fresh water supply
The relative power of these groups
-The ease of access to alternative sources of freshwater supply and the availability of water saving technology.

Environmental degradation can kick-start a vicious circle that leads from water scarcity to conflict and developmental crisis. As can be seen in the graph, there is a connection between these events. Environmental degradation can have a catalysis effect on the vicious circle of water scarcity, which can cause conflict over water resources and access. The worsening of the humanitarian situation causes many displacements, which in turn cause new water scarcity. This is due to the fact that refugees have generally a hard time finding water resources. Displacement of people can also cause further conflict and vice-versa. This vicious circle often can only be stopped through external aid. The efforts of humanitarian aid organizations focus not only on the supply of medicine and food, but also on the availability of basic sanitation.

Looking to the future, it seems plausible that water could actually replace oil as the prime cause for conflict worldwide, primary because of scarcity of resources. This becomes increasingly likely since water is part of the equation for replacing oil with renewable sources of energy. The production of “green fuel” obviously requires a lot of water and could have a “crowding-out” effect on other water users.

It has to be stressed that the solution to water conflicts must always go hand-in-hand with development efforts. The aim of this management approach must be that all parties have a fair share of the water supply in the region. In a highly politicized environment like the Middle East and in the absence of an overarching and relevant peace treaty between the major conflict parties, this is extremely hard or even impossible to accomplish (the Oslo Treaty of 1994 was a step forward, but has proved to be les and less relevant in recent years). The underlying problem is that transboundary water sources have to be seen as public goods and therefore have to be accompanied by international recognition of the borders by all parties. With the Oslo Treaty, the PLO recognized the right of Israel to exist and Israel accepted in general the foundation of a Palestinian State. But the last decade has witnessed violent conflict, making these historical accomplishments more and more obsolete. In order to achieve a transboundary water management solution, it therefore seems necessary to have a settlement that recognizes the sovereignty of all participating nations. Many of the transboundary water conflicts have been caused by newly formed independent states. This occurred mainly in the area of the former Soviet Union but also in the former Yugoslavia. The Indus River Case has also to do with the separation of a state into two, and subsequently the internationalization of the water conflict. One major prerequisite for sustainable water management is the settlement of all border conflicts. Since water has evolved as one of the biggest concerns in those overarching solutions, it should be addressed right from the start in negotiations.

Project Financing
After identifying political feasibility as a precondition to water resource development, the question of international funding for projects in the developing world has to be addressed. The level of financial and technological resources globally allocated to international water projects must be addressed. It is rather difficult to find reliable figures, but a broad estimate by the Swedish Foreign Ministry sees the investment in water projects in developing countries at $70 - $80 billion per year. Most of these in investments go into irrigation and drainage, as well as sanitation and water supply projects. The domestic investment is made by different government levels as well as private cooperation.

The following table shows the broad estimate of funds allocated in 1996 to water projects in developing countries.

Sunman, 2000 (Global Water Partnership)

Within developing countries, 70 percent is being invested by the public sector; this ratio differs from country to country, but also from sector to sector. Private sector investment into irrigation projects has a long history, whereas water supply and sanitation generally have been public investments. This is mainly due to the characteristic of water supply and sanitation; these are the clearest examples of public goods and, like many other public goods, they are provided by the government or government agencies.

This has changed significantly during the last two decades. The investment of the private sector in water projects has grown substantially. Compared to other sectors that provide public goods, the share of private investment is still low. This is especially the case compared to telecommunications and, to a lesser extent, the power sector. From 1984 to 1990 there were just eight private sector contracts in water and sanitation in the developing world, with the total value of $297 million. Over the course of the next seven years there were 97 projects with a total value of $25 billion. This shows clearly that water projects no longer are only the “business” of governments and (in countries where those fail to provide basic services or public goods) aid agencies, but actually of private companies.

This has triggered some criticism that private corporations do not understand the meaning of water as a public good, and that they treat it like any other commodity. This lack of understanding the nature and importance of water, along with the focus on the return on investment, can cause serious problems for the water supply in developing countries. The increasing investment of the private sector in the water business must be identified as one possible source of conflict.

Aid donors have always played a vital role in the funding and management of water resource projects. The Indus Water Treaty, which was negotiated with the help of the World Bank, highlighted that fact. The World Bank therefore had a dual role. First, it was responsible for the supervision and mediation of the Treaty negotiations; and second, after the settlement it remained in a referee position. This secondary role was supported by ongoing funding efforts by the World Bank. Many projects in the Indus River Basin would not have been possible without the financial support of the World Bank and/or its members. This double strategy has proven to be very successful and should be applied in other areas as well. The World Bank is active around the world and it is disbursements range between $1 billion and $2 billion a year. Other aid agencies are also active like the following table shows.

Flow of funds to all water related activities by selected donors

Various Donors Reports, Transboundary Water Management as an International Public Good, DEVELOPMENT FINANCING 2000, Study 2001:1 Ministry for Foreign Affairs, Sweden

The question here remains whether the aid agencies have the political power not only to fund projects but also to ensure that political progress is made. Over the last decade there has been some advancement in that respect. Mostly the political clout of international development agencies derives from their international role. They have a comparative advantage in providing frameworks to riparian corporations due to their neutrality and technical capabilities. One good example is the Global Environment Facility (GEF), which is providing support for global public goods. The GEF was established after the Earth Summit in Rio in 1992 and has three implementing agencies: the United Nations Development Programme (UNDP); the United Nations Environment Programme (UNEP) and the World Bank. By 1998 the GEF had allocated $1.9 billion in 197 projects but only 10 percent of these funds were allocated to international water projects.

Most of the projects are concerned with the management in a general sense (building of plants, strategies for water utilization, technology and knowledge transfer). Many international bodies try to combine both technical assistance as well as diplomatic pressure.

International Taxation of Water Pollution
Over the last fifteen to twenty years, there has been a change in financing the provision of international public goods. The Tobin Tax, suggesting a tax on international capital transactions, is one example. With the difficulties of agreeing on and enforcing international laws, international taxes seem to be a long way off. Still, the idea for an international taxation of pollution is very appealing. The climate crisis has been described as the “biggest market failure” in human history and an international taxation on CO² emissions would help tremendously against the further degradation of the earth’s climate. There are some steps taken on the national level, such as the Ökosteuer (Ecotax), which taxes the consumption of fossil fuels in Germany. In economic terms this means a short-term comparative disadvantage for the German economy, since other countries that do not have this kind of taxation can go on polluting the atmosphere. The biggest issue in this context is that all countries have to face the consequences of environmental degradation. It is therefore necessary to establish an international tax code for the consumption of international public goods. This also needs to be applied in the case of international river basins. While it has yet to be implemented, there has been taxation of pollution on the national level, though more in developed countries than in developing ones. One of the most prominent examples is the French Agence de Bassin; this agency levies charges on the pollution of surface water. The revenues are used to fund both the clean-up efforts by municipalities as well as the agency itself.

Within the OECD there are a number of countries that levy taxes to support water-related activities. Overall there remain steps to be taken within a national framework. Levying taxes or charges in order to support transboundary river basins, therefore, has proven to be very difficult. The only doable way at the moment would be through transnational water agencies. There are only a handful of agencies that would be able to come up with an international plan for taxation.

Final Suggestions
Concluding, a three-step solution to water related conflicts can be identified:
1. Ensuring political feasibility
2. Financing projects by private, public and international actors (respecting water as a public good)
3. Taxing of pollution on an international basis.

These three broad steps have to be seen as consecutive and must be accompanied by good management and governance, on the international as well as on the local level.

Similar to with other environmental problems we would like to see the “stakeholder” approach applied. That means that we take all parties in consideration without looking at their economic and/or political clout. This is even more important since we deal with a public good.

Sources

Kaplan, Robert (1994), “The coming Anarchy”, Atlantic Monthly, No. 273, Vol. 2, pp. 44-76
A National Security Strategy of Engagement and Enlargement, The White House, February 1996

Sunman, 2000 (Global Water Partnership)

Transboundary Water Management as an International Public Good, DEVELOPMENT FINANCING 2000, Study 2001:1 Ministry for Foreign Affairs, Sweden

Various Donors Reports, Transboundary Water Management as an International Public Good, DEVELOPMENT FINANCING 2000, Study 2001:1 Ministry for Foreign Affairs, Sweden