Water credits offer an innovative solution for sustainable water management. By assigning economic value to water-saving measures, it will encourage conservation and efficient use
India has 18 percent of the population but has just 4 percent of the world’s freshwater resources. India is also the largest extractor of groundwater, extracting over 253 billion cubic metres annually, rapidly depleting the resources. CWC estimates that per capita water availability has reduced by 1/4th over the last 70 years. Almost 54 percent of the assessment units are experiencing water stress. As per the 2021 CAG report, groundwater extraction exceeds the recharge rate, and over-extraction will threaten ~80 percent of drinking water over the next 2 decades.
In this scenario, it is important for us to conserve and efficiently manage groundwater sources. We are a country blessed with abundant rainfall, and we must replenish the water tables through rainwater harvesting and conserving run-off rainwater.
Agriculture accounts for 85 percent of India's freshwater consumption, followed by 8 percent by industry, and 7 percent is consumed for domestic use.
The Government of India launched Mission LiFE (lifestyle for the environment) in 2023 as an India-led global mass movement to drive actions to preserve the environment. The rewards for these actions are to be traded, like carbon credits, and the framework and trading platforms are being developed. It proposes a transition to a circular economy, driving change in demand, supply, and policy. A list of 75 individual LIFE actions across 7 categories is defined.
One of the key categories in missions LiFE is water conservation. Water credits has the potential to emerge as an innovative approach that can work as a mechanism to promote and reward efforts in water conservation.
Carbon credits vs Water credits
These are both mechanisms designed to address environmental challenges through market-based approaches to incentivise efforts. However, they target different issues and operate under different frameworks. Carbon credits focus on reducing emissions of greenhouse gases, while water credits address water scarcity and quality.
Entities that reduce their emissions below a certain baseline can earn carbon credits. These credits can then be sold to those entities that are struggling to meet their emission reduction targets. The model has matured over time and is well established now.
Similarly, the concept of water credits aims to address water scarcity and promote sustainable use. It involves both water conservation and water quality improvement. Entities that adopt water-saving measures or implement projects that improve water quality earn water credits. These can be sold to others who need to offset their water usage or improve water management practices.
Benefits of Water Credits
Apart from encouraging efficient water use and reducing pollution, it also provides a flexible mechanism for meeting regulatory obligations. It will promote investment in water-saving technologies and infrastructure creation. It will address Sustainable Development Goal 6 (Clean Water and Sanitation), which aims to ensure universal access to safe and affordable drinking water, improve water quality, and promote sustainable water use.
Water credits: The challenges in defining baselines.
Unlike carbon credits, where emissions are universal in nature, water has a local context of a watershed. A watershed is an area of land where all the water that falls and drains off it or converges to a single point, such as a stream, river, or lake. The boundary of a watershed is determined by the land’s topography, such as hills and valleys, which direct the flow of water.
The rainfall and groundwater availability need to be factored in along with current consumption levels to arrive at baselines. Defining a baseline for water credits requires assessing the virtual water of a product, i.e., the ‘total water consumed relative to the place of production’.
Defining the water footprint, 3 aspects are to be used in this evaluation
Green water is Rainwater that is at the root level of plants used in production of crops.
Blue water: surface and ground water used in the processing of goods or services,
Grey water: fresh water polluted in terms of effluents or discharged in the process.
All three together highlight hidden water usage in products and helps in making informed decisions on water-intensive products & their trade.
This method captures the overall water consumption from end to end and not limit it just to the water efficiency of the unit; it will also factor in the raw materials and packaging materials along with water overheads of the entity.
It is important to define the baselines using this method, as 2 distinct manufacturing units making the same product but located in different terrains of water sufficiency or scarcity will indicate different water footprint baseline values. Hence, it is important to define baselines for different industries in relation to water sheds or the assessment units. as regulatory authorities have charted the country.
Implementing Water Credit Systems
Designing an effective water credit system requires strong legal frameworks and regional adaptation to address specific water scarcity and quality challenges. Verification processes must ensure that reported savings are genuine and not overstated. Water rights and regulatory administration differ widely across states and need to be harmonised before implementing a standardised water credit market. The water credit market may adopt the principles of the carbon credit platform but may need to pass through a maturity phase before stabilising. Defining an economic value will be challenging and will require studies to establish baselines across sectors.
Ensuring equitable access to water credits for all stakeholders, from small farmers to large commercial enterprises, would be another challenge. It shouldn’t result in wealthier entities dominating the water credit market. The system must ensure that water credits lead to tangible improvements in water sustainability across the board.
Water credits offer an innovative solution for sustainable water management. By assigning economic value to water-saving measures, it will encourage conservation and efficient use. As the world continues to grapple with significant water challenges, the successful implementation of water credit could help in the sustainable management of water resources for the future.
(Angelo George is the CEO of Bisleri International Pvt. Ltd.)