Wednesday, 1 March 2017

A Quick Response To Michael Turton's Article On Water Policy Published In Taiwan News, February 10th

On February 10th, earlier this month, Taiwan News published an opinion piece by Michael Turton on water policy in Taiwan. It contains numerous factual errors and distortions and several dubious claims but rather than list every single one of these, I'll just look at four of them. There are three points I want to look at first which concern factual errors or distortions and a final point I want to discuss at slightly greater length concerning a difference of opinion.

1. Reservoirs and sedimentation.

The first of these is a claim that you can often see made in Taiwan's media concerning Taiwan's reservoirs, which is that precipitation from typhoons causes landslides high up in the mountains resulting in large sediment volumes drifting downstream into the reservoirs. This does happen and as Turton rightly points out, this sedimentation process reduces the capacity of a reservoir and requires a very expensive clean up operation. Here is Turton in his own words...
"An Academia Sinica analysis showed that the incidence of severe and extremely severe precipitation has increased 100% in just 45 years, much higher than the global average. By making extreme weather events more severe, it increases the silt flows into Taiwan's reservoirs, reducing their capacity and necessitating costly silt removal programs, like the NT$16 billion program to clean up Tsengwen and Nanhua Reservoirs after Typhoon Morakot."
However, in making this claim in the generic - by referring to Taiwan's reservoirs in general - Turton neglects to mention a crucial fact: most of Taiwan's reservoirs do not actually suffer from this problem. Shihmen reservoir in Taoyuan certainly has this problem as do Tseng-wen, Nanhua and Baihe reservoirs in Chiayi and Tainan, and there are considerable sedimentation problems along Taiwan's longest river - the Zhuoshui river - starting high up in the mountains of Nantou, including Wan-Da reservoir, the bend in the river at Wuchieh and the barrage downstream at Jiji. So that amounts to five reservoirs with sedimentation problems, and seven if you loosen the definition of "reservoir" to include those two areas of the Zhuoshui river behind dams at Wuchieh and Jiji.

Taiwan's other reservoirs do not suffer from sedimentation problems either because of design, peculiar river topography or strict watershed management (or a certain combination thereof). Sixteen of Taiwan's reservoirs were actually designed "off-stream" so that water inflow can be shut off in the event of catastrophic rainfall. These are Xinshan, Baoshan I, Baoshan II, Yongheshan, Liyutan, Minghu, Mingtan, Sun Moon Lake, Hushan, Renyitan, Lantan, Wushantou, Agongdian, Fongshan, Cheng-Ching and Longxi reservoirs. A further seven reservoirs avoid this problem owing to some combination of strict watershed management (e.g. Feitsui reservoir) and peculiar topographical features that limit the inflow of water. These are Feitsui, Dapu, Mingde, Deiji, Guguan, Tianlun and Mudan reservoirs. A further nine reservoirs are comparatively much smaller and so much so that they are either rain-filled rather than fed by rivers, or their feeder rivers are so small as to not be able to carry much sediment in the first place. These are Xishe, Neipuzih, Luliao, Jianshanpi, Yenshuipi, Hutoupi, Manzhihmanpi, Jingmian and Longluantan reservoirs.

The reason I know this is because I have personally visited each and every one of the reservoirs on the main island of Taiwan with only two exceptions (the remote Longxi and Guguan reservoirs).

2. Funding, maintenance and administration of Feitsui reservoir.

The second point on which Turton is wrong concerns his claim that central government policies are biased toward Taipei city at the expense of other areas of Taiwan. I do not dispute the claim itself, but the example he uses to illustrate it. He writes that Feitsui reservoir's maintenance operations are funded by the central government and insinuates that this is unusual because Feitsui reservoir is the major reservoir which supplies water to Taipei city. Here is Turton in his own words...
"The cost of maintaining Feitsui Reservoir, which supplies the capital, is paid for by the central government, not the city, one of the many ways Taipei continues to be a colonial capital that maintains its lifestyle by draining resources from elsewhere in Taiwan."
The problem with this claim is that the maintenance costs of Taiwan's other major reservoirs are also borne by the central government. There are two relevant agencies here; the first is the Taipei Feitsui Reservoir Administration, which is funded by the central government, and the second is the Water Resources Agency, which is split into three regional offices - the Northern, Central and Southern Taiwan Water Resources Offices and all three of these offices are funded by the central government too. These three offices of the Water Resources Agency are responsible for the maintenance and upkeep of all major water-related infrastructure in their respective regions and this includes the major dams and reservoirs as well as major rivers and their flood-prevention levees, coastal erosion defenses and large underground aquifers. Taiwan's various local municipalities also have their own water resources bureaus but these offices are responsible for smaller-scale infrastructure such as minor rivers, ponds and smaller reservoirs, underground sewage systems and flood prevention mechanisms.

Now if I wanted to draw the same point, what I would point out would be the priority of funding to Taipei's Feitsui Reservoir Administration and contrast it to the long-delayed construction of the new sluiceway at Baihe reservoir down south here in Tainan. For those who don't know, Baihe reservoir is a major reservoir built during the 1950s to provide water for irrigation for sugar and rice fields in the areas in northern Tainan east of the Chianan canal. It also provided water for industrial paper mills and for the residential areas of Baihe, Dongshan and Xinying which was once the county capital. However, the reservoir and dam contained two serious design flaws that are only now being corrected with remedial engineering, and this is because maintenance of the reservoir had been kept at a bare minimum for decades as a result of budgetary constraints upon the Southern Region Water Resources Office.

3. The problem of land subsidence and the insinuation of water hording

The third point on which Turton is incorrect occurs when he writes about the problem of land subsidence. Again for those who don't know, there are certain areas of three counties in central and southern Taiwan that suffer from relatively severe forms of land subsidence, and these are the western areas of Changhua county, Yunlin county and one particular northwestern stretch of Pingtung county in Jiadong township. For a number of reasons the local farmers often pump out groundwater from underground aquifers for use in irrigating their fields and local people also rely on pumped groundwater for their own residential use. The combined overuse of groundwater creates air-filled cavities underground which cannot support the soil above and eventually collapse, which is what we call land subsidence. Turton correctly points out that when rice paddies are flooded through irrigation, the process is extremely inefficient with most of the water seeping through the soil and replenishing the underground aquifers. On this basis he then claims that not releasing agricultural water in order to save water is a false economy, since most of the water would go to replenishing underground aquifers. Here is what Turton says about it...
"It will then have to implement concrete changes in the government's administration of water, putting a halt to industrial use of groundwater, making sure that rice fields are regularly flooded to enable water to percolate back to groundwater reservoirs to curb subsidence (not releasing agricultural water to "save" water is a false economy), and investing in new pipes, treatment plants, and other facilities."
This is wrong on several grounds. First, saving water does not mean transferring water from one place to another, rather it means using less water. The problem in these areas is that the incentives for local farmers and local residents are skewed toward pumping groundwater at little to no cost to themselves and with no mechanism for assigning individual responsibility for the resulting land subsidence. It is a classic "tragedy of the commons" scenario. Secondly, it is not clear how "agricultural water" is "not being released". Neither of the three areas with land subsidence problems - western Changhua county, Yunlin county and Jiadong township in Pingtung county are served by reservoirs that can hold water back (though I must include the caveat that Yunlin county contains Taiwan's newest reservoir just completed but it is not scheduled to commence operation until the end of this year). So presumably what he means by water "not being released" is water contained in the local irrigation canals and controlled by the irrigation associations. Yet the irrigation systems in these areas are fed entirely by local rivers (Yunlin's very substantial irrigation system being fed by two large intakes on the Zhuoshui river), and so the water either enters the irrigation canal or is lost to the sea. The canals themselves do contain a series of locks and gates to control the flow of water, but their function is not to conserve water but to control the volumes of flow and prevent damage to the smaller, subordinate water channels and dikes. So Turton misleadingly writes as if water is being deliberately withheld either in reservoirs or in irrigation canals, but neither scenario is true. There are no reservoirs in these regions and the only purpose of the gates in the irrigation canals is to make sure you don't destroy your water channels, not to conserve water and prevent rice paddies from being "flooded".

4. Water Prices

The fourth point on which I take issue with Turton concerns his claims about water prices. Here we are not dealing with a factual error or distortion as such, we are dealing with a difference in opinion. He insists that water prices in Taiwan are so low as to encourage the wasteful use of water and should be raised considerably in order to prevent water shortages during times of drought. It is, on the face of it, a reasonable opinion. The implication he draws from this is that the government (or rather the Taiwan Water Corporation and Taipei Water Department more specifically) should begin to raise water prices. This is Turton in his own words...
"Water in Taiwan is strongly mispriced. When Chen Shui-bian came to power, he vowed not to raise water prices, even though at that time water in Taiwan was cheaper than in Malawi. Such policies have been followed by subsequent administrations, and Taiwan's water prices remain at about one-fifth of the global average."
And here...
"With such low prices, it is inevitable that Taipei once experienced frequent water shortages. As any economist will say, when the price of something is lower than it should be, demand will be unreasonably high." 
My difference of opinion with Turton here arises over those two words "should be"; what should the price of water be, and how should that price be determined? This boils down to a difference in political premises. Turton is arguing for government control of prices, whereas I believe prices can only be efficiently calculated in a free market. Another way of putting this is to say that Turton thinks that there are "correct" prices that can be determined relative to at least two political ends - one is allowing consumers as much water as possible and the other is preventing water shortages. The task is to discover what the "correct" or most efficient price should be that allows you to maximize both of these values. I, on the other hand, think that prices ought to be variable and set on the open market.

The problems with Turton's advocacy of continued government control of water prices are several, and it puts him in the rather odd position of arguing that water shortages have occurred due to government control of water prices and that nevertheless the solution is still government control of water prices!

One of the most obvious problems is that consumers differ in price sensitivity, so more price sensitive consumers (e.g. lower income people and industries that require large volumes of water for cooling purposes) are more likely to curb their water use at lower rises than less price sensitive consumers (e.g. higher income people and industries that use relatively little water). To address this problem he needs the Taiwan Water Corporation to charge different rates to different users, so high-volume users would have to pay more per liter of water than low volume users and perhaps people on higher incomes would have to pay more per liter of water than people on lower incomes. This does not really solve the problem however, as there are likely differences in price sensitivity within those groups and not just across them as well as differences in price sensitivity over time. And because the Water Corporation must get its' data from consultations with various different consumer groups rather than prices reflecting changes in supply and demand, it cannot therefore have sufficient data to accurately calculate and recalculate again and again what the various prices should be in order to get the most efficient use of water.

A second problem with this top-down, centralized approach to managing prices is that it ignores the possibility of water transfers and thus variable quantities of water to be consumed. Instead there is the assumption that the supply of water for industry, agriculture and residential use is fixed at certain, set quantities for a definite period of time and prices are then calculated as to how to best avoid shortages given these fixed quantities of water. But what if it were possible for one of several privatized water companies serving residential areas to act on behalf of its customers and bid for additional water from industrial or agricultural users? And vice versa - you could have industrial users bidding for additional water from privatized residential water companies. In this kind of situation, the quantity of water from which prices are to be calculated is not fixed but potentially variable, and the water economist David Zetland has written extensively about what he calls auction markets in water as the most efficient means of allocating water resources and avoiding the shortages that come from inefficient use. A good off-hand way to think about this is to consider agricultural goods that require large volumes of water to grow such as rice and then compare the price of those goods with the price residential water consumers would pay to be able to take a shower during water shortages. What would you prefer - more expensive rice, but the ability to take a shower - or cheap rice but the inability to take a shower?

Turton is right that water shortages are driven by public policy, but it is because public policy remains fixed on the premise of top-down management and fixing of prices by a State-owned utility that prevents a market emerging that would allow for more efficient transfers of water resources between different consumers at different times.

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