THE SYSTEM IS A MODEL FOR WATER CAPITAL

A common line of thought is that water is too cheap and that a change in behaviour can only be achieved through price increases. The problem is that putting a price mechanism right in the middle of the market results various undesirable side-effects. For example, certain income classes will be severely disadvantaged, meaning that social adjustments will have to be made, which costs money. And more affluent people can justify increased use: “I’m paying for it anyway, so what’s the problem”. So you run the risk of what we have come to call ‘yellow vest sustainability’. At the level of economic actors, however, price mechanisms can be used to keep companies away from the most vulnerable sources. But you are actually shifting the pressure to another water source, which in turn may become vulnerable. Control via price does not give a signal to the type of activity you want, and is definitely not a constructive mechanism to support the development of that type of activity. As long as a company has a well-functioning business model, and can therefore continue to pay the cost of water, chances are that everything will stay as it is. Water is still virtually invisible in the accounts of many companies, because these accounts record its importance in terms of euros, not in terms of dependence. Water may only represent a small budget, but if were to vanish, the company would be unable to function. Small innovative practices and companies, despite their strategic importance, should then try to prove themselves in an environment that opposes rather than supports them.

Based on statistical research into the demand for drinking water according to the applied rates in the past, the price elasticity could be determined on the basis of empirical data. The price elasticity is -0.17; which means that if we increase prices by 10% in Flanders there will be a decrease in demand of only 1.7%. In other words, the demand for water is fairly inelastic and depends only to a limited extent on price, at least at the current price level of water.

Besides the fact that a price mechanism does not provide the desired incentives, we can also highlight that the price of water is highly politically charged, meaning that the price mechanism only has limited room for manoeuvre, which only calls more urgently for other approaches.

Another way of thinking is to consider water as broad social capital. And as with any other form of capital, you want to increase its value. Within the water arena, a thought process was started, with the assertion that three variables must be in a balance sheet in order for the Water Capital to increase.

- Access to water: an indication of the usability (quality dimension) of water for the various users (from industry to nature) and also of the volume (quantity) of available water.
- Water citizenship: the degree to which citizens (water users) are aware of the water challenges, they have knowledge of and insight into the water system, and (as a result) also take their responsibility in managing the water system (and their connection with water also becomes much broader than it is today. Today, the main connection with personal water use is the water bill). An ideal cause and effect relationship between “Access to water” and “Water citizenship” is that increased access does not translate into maximum consumption.
- Ecosystem services (including economic services): the value provided to society via water.
Instead of relying on price, you rely on these three variables to enhance water capital.

We are using system dynamics modelling to explore the potential of this paradigm as a basis for system change. In interdisciplinary co-creation sessions, we are investigating the relationships between the three corner stones of Water Capital, and devise relationships that could be effectively calculated via the model. This would provide the necessary new insights into the possible social and economic benefits if the guiding philosophy for the water system were to be built up from this elaborate analogy with the (purely) economic concept of capital.