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January 13, 2020

Freshwater in New Zealand (3) – 30 years of expanding uses

New Zealand freshwater withdrawals increased dramatically between 1980 and 2010

The purpose of this current BERL initiative is to outline the water resource situation in New Zealand, to generate some ‘taxonomy’ structure to the range of uses, and identify uses for which water can be valued and/or charged for.  We can then later explore practical methods to estimate and negotiate a value for water in situations where a resource rental is warranted and charging is feasible.  The first article posed the question whether water is a free good or valuable, and argued that in an economic sense in some cases the water is valuable.  In that situation the resource owner, Crown or Treaty partner, should be paid a resource rental for the water.

Our second article described the big picture of what our annual water Quota could be in the Global context.  We also provided a perspective of where New Zealand’s water endowment by land area and per person sits compared with water in other countries

This current article shows that the measured total New Zealand freshwater withdrawals increased from just over 1 billion cubic metres per year in 1980 to over 5 billion cubic metres per year in 2010.  We look at the detail behind that increase. 

Scale of main freshwater uses in New Zealand

The sets of data for World Development Indicators published by the World Bank give not only the resource endowment which we have shown but also the main sector uses and users of freshwater over time.  These provide some initial high-level time series sets of information on main freshwater uses in New Zealand. These series cover some or all years from 1980 to 2012, and mainly come from the FAO’s data series AQUASTAT.

We show here the estimated total freshwater withdrawals per year, the withdrawals by the Domestic, Agricultural and Industrial sectors.  There is also a high level relationship between the freshwater withdrawals and the Gross Domestic Product (GDP).  The measure of GDP is inflation and exchange rate adjusted.

Total freshwater withdrawals per year

The total freshwater withdrawals as measured in the World Bank data increased from just over 1 billion cubic metres per year in 1980 to over 5 billion cubic metres per year in 2010.  The estimated track is shown in the graph.

Source: World Bank World Development Indicators

This indicates that New Zealand’s total freshwater withdrawals per annum in 1980 were just over 1,200 million cubic metres per year.  That was 0.37% of-New Zealand’s estimated renewable annual internal water reserves.  By 2012 the freshwater withdrawals were more than four times this number, being 5,200 million cubic metres per year.  This was 1.6% of the estimated renewable internal water reserves. In recent years, the indication from this dataset is that New Zealand’s annual freshwater withdrawals have been relatively constant at just over 5,000 million cubic metres per year since about 2006.

Estimated freshwater withdrawals by Sector 1985 to 2012

The AQUASTAT dataset provides data on the share of the freshwater withdrawals by each of three sectors.  These are the Domestic, Agricultural and Industrial sectors.  We have used the volume measures or where necessary have calculated the volumes from the stated percentage shares of each, and the series from 1985 to 2012 is shown on the graph.

Source: World Bank - World Development Indicators

This chart illustrates graphically that the major increase in the volumes of withdrawals has been by the agricultural sector.  This is not surprising, given the increase in irrigation over this period.  The volume of withdrawals by agriculture have increased from an estimated 835 million cubic metres in 1985 to over 3,300 cubic metres in 2012 an increase by four times.  The Industrial use was at much lower levels in 1985, just 190 million cubic metres per annum, but was 6.7 times larger in 2012 at an estimated 1,280 million cubic metres per annum.

These series indicate that the withdrawals of freshwater for Domestic use in New Zealand are actually less in 2012 than they were in 1985.  This may require some verification.

Estimated ‘GDP productivity’ of water in New Zealand 1980 to 2010

The World Bank also estimates the productivity level using GDP as a proxy for the value added in the production in the economy, and expresses the GDP per cubic metre of water withdrawal.  The World Bank’s estimates for New Zealand indicate that water productivity declined from a level of inflation-adjusted US2010$58 per cubic metre of water withdrawals in 1980 to US2010$28 in 2010.  The track of this change is shown in the graph.

Source: World Bank - World Development Indicators

In essence this may purely be indicating that New Zealand’s Real (Inflation-adjusted) GDP was not increasing as quickly as New Zealand’s water use over the period.  It is not based on a causal relationship between water withdrawals and GDP.

Overview of the 30 year increase

The 30 year increase in water withdrawals from our available resource showed that industrial use quadrupled and agricultural use trebled.  We suggest it is highly likely that such major increases in water use have been driven by increases in value of that water in some of those uses.

Coming up:

We will next look in more detail at the various ways freshwater is used.  We have identified about 20 types of use.  Of these uses we think there are at least 5 types of uses or users which could or should reasonably be expected to pay a resource rental for their freshwater reflecting the value that is economically justified.

See the other articles in our Freshwater in New Zealand series:

1. Free or valuable?

2. New Zealand in a world of water

4. How can we charge for it?

5. How much would you pay?