Bottling water and cutting out the middle-cow

Over at the Christchurch Press, I went through the current controversies about an Ashburton water bottling plant. New Zealand allocates water drawing rights through a consenting system. Government allocates drawing rights for water, but those rights aren’t really tradeable other than by selling the land that goes with the consent.

All over the Canterbury plains, farmers have drawing rights for water for irrigation. New ones don’t draw that much ire, but there are growing worries about nitrates leaching into groundwater and about streams drying up in Christchurch.

If another typical-sized dairy operation opened up, though, there wouldn’t be much hoo-hah.

But open up a water bottling plant to ship water directly to China instead of running it first through a cow to turn into milk to dry and turn into powder and waste water, well, folks get upset.

Me:

The plants draw water from the aquifer, put it in bottles, and sell it in Asia. Because New Zealand awards consents to draw water but nobody puts a price on water, critics see this as profiteering on an unpriced resource.

At the same time, over a thousand Canterbury dairy farms put water into cows. Dr Daniel Collins estimated that it takes about 250 litres of river and aquifer water, through irrigation, to produce a litre of Canterbury milk. That will not be a net measure, as some of the irrigation does flow back into the aquifer.

But it will take many more litres of water to produce a litre of milk than it takes to produce a litre of bottled water. The milk is collected, the water extracted, and the powder is sold in China.

And so we come to what might be the Canterbury Trabant plant. Does anyone really know whether water from Canterbury’s aquifers is more valuable when put directly into bottles and sold to Asia, or when it routes through a cow along the way?

How low does the price of milk have to be before it would make more sense to leave out the middle-cow?

It is a tough question to answer, and especially where water allocation is set by consent rather than through markets. East Germany allocated iron by something not that different from consents, rationing scarce resources across various industrial uses, and wound up making cars that were worth less than the inputs that went into them.

New Zealand allocates scarce water by consents, and hopefully does a better job of it. Trabants were ghastly; New Zealand milk is delicious.

I argued for a water trading scheme. Fritz Raffensperger designed one when he was at Canterbury, when Canterbury had an operations research team.

Main point of the article: why are y’all getting so upset about water being put in bottles and shipped to China when it takes (ballpark) 250 times as much water to make a litre of milk, which is then dried out and shipped to China? They’re both selling water.

Main critique of the comments section: Selling water is wrong.

I’m constantly amazed that policy isn’t worse than it is.

Tune into NBR Radio’s Sunday Business with Andrew Patterson on Sunday morning, for analysis and feature-length interviews.