Nico Grove, King's College London, , nathanial@acquacon.com.br
ABSTRACT
Looking at the world's many challenges in the twenty-first century food supply is one of paramount importance. Given demographic change, social transformations, rapid economic development, urbanisation, and climate change, tomorrow's decisionmakers will need fresh thinking to meet the expectations. One issue that is hardly looked at is the political economy of virtual water in the region. Virtual water is the hidden amount of water that is embedded in all commodities. Rising expectations amongst the aspiring new middle classes throughout developing nations and their demand for water intensive products such as meat, rice, and milk make an integrated economy for virtual water trade inevitable in order to meet the tasks of the future.
The paper focuses on the identification and elimination of welfare losses from inefficient use of the resource water, represented in actual worldwide virtual water streams. In the meanwhile, there exist successful regulatory concepts for the internalization of negative externalities like pollution for industrialized production and individuals‟ utility maximization constraints. However, a traditional regulatory quantity based approach - like in international carbon trade - will not work. In contrast to carbon, fresh water is a locally concentrated resource which is plentiful available in one area and absolutely untraceable in another. The main area of research is now to identify the causes for the inefficient virtual water flows and develop a concept combining reallocation incentives and a resource efficient use of fresh water resources.
With reference to already existing supranational institution-building like the European Union or ASEAN, we propose to the world‟s virtual water tariff and trade economy. A political economy of virtual water trade would require regulation from a suprana- 1) Assistant Professor for Infrastructure Economics & Management, Bauhaus-University Weimar tional virtual water institution that will formulate policies and implement them on all member states, leading an allocation of virtual water, which will transform the entire agricultural sector. This may lead to spill-over effects to other economic, if not political areas and to an increased responsibility for a responsive and sustainable use of resources worldwide.