Cities versus Agriculture: Revisiting Intersectoral Water Transfers Potential Gains and Conflicts

Research Report Series - Report 10, 2006

Water demand management, or making better use of the water we have—as opposed to augmenting supply—is increasingly proposed as a way of mitigating water-scarcity problems. Moving water away from agriculture to uses with higher economic value is one of the main measures widely seen as desirable. Sectoral “allocation stress” is often identified as resulting from four different observations: a) agriculture gets the “lion’s share” of all diverted water resources; b) agriculture is not only the main water user but also an activity that incurs by far the largest wastage; c) cities are “thirsty” ; and d) water productivity in nonagricultural sectors is far higher than in agriculture. This apparent misallocation is often attributed to the failure of the government to allocate water rationally.

This report revisits this commonly-accepted wisdom and examines the nature of urban water scarcity, the relative importance of both physical and economic scarcity, and how cities secure funds for the development of their water infrastructure (or fail to do so).