Water to be the next commoditised resource

The right to use water will soon follow in the footsteps of carbon emissions and become a commodity, like the right to pollute, that industry will have to pay for, executives have warned.

"In the not too distant future, we will see a price on water just like there is now for carbon and carbon emissions," said Ditlev Engel, chief executive of Vestas Wind Systems. "It will have to be factored in as a cost."

Mr Engel is not alone in his prediction. Whether it is Arizona or Darfur, water rights have become an increasingly contentious issue – the United Nations has warned water will become the primary cause of conflict in Africa unless agreements are struck or a regulatory system is established.

As the world's population soars, economic growth and the resulting demand for energy have led to a growing consensus that the days of unfettered and unregulated extraction and usage rights will come to an end.

Neil Eckert, chief executive of Climate Exchange, the carbon trading system, believes a cap-and-trade system like the one Europe has established to regulate CO2 emissions could be a solution. "If there is not enough of something, you ration it. Once you ration it, you create a secondary market, and it starts to be traded," he said.

As head of the world's largest wind turbine manufacturer, Mr Engel has an interest in water being assigned a price. Wind generation requires just five litres of water to generate five megawatts, the average amount of energy consumed by a household per year. Coal requires 10,000 litres, while nuclear needs 12,500, to produce the same amount of power.

Last year, Coca-Cola made a public pledge to cut its water usage in response to harsh criticism amid a drought in Atlanta, where it is based, that threatened to dry up Lake Lanier, the reservoir that supplies one of America's fastest growing metropolitan areas.

Mr Eckert has begun a pilot programme into capping extracting rights from the Great Lakes, which hold one-fifth of the world's fresh water. Heavy industry, such as America's automakers, has long had major sites near the shores of the lakes where they enjoy free and unlimited extraction rights. Mr Eckert said: "Right now you have companies buying and selling the right to emit a pollutant. With water, you can do the same."

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