What are water credits? How can it help fund climate action?

Water credits are a predetermined amount of water that is preserved or created that may be traded between water deficit and water surplus organisations within a sub-basin. It works in the same way as carbon credits. However, the primary distinction is that for water credit, the transaction’s geographical limit must be contained inside the same hydrological unit, i.e., a river basin or watershed.

Water credit:

• One way to finance group effort toward shared climate adaption objectives is through the use of water credits. 
• A global non-profit organisation called Water.org works to provide clean water and sanitation for everyone. 
• A similar idea is employed by the UN GEMS/Water Program under the name “Green Water Credits.” This is being implemented in nations including China, Kenya, and Morocco. 
• In order to decrease runoffs, increase groundwater recharge, and stop sedimentation in reservoirs, this initiative incentivizes upstream farmers to implement green water management methods. 
• To bridge the gap between the farmers’ initial investment and the downstream end-users’ receipt of benefits, the public and private beneficiaries have established an investment fund.
• With the help of IFAD/International Fund for Agricultural Development and other organisations, the UN is anticipated to spread this concept to other nations as well.

Advantages:

• The idea could raise public perceptions of water’s “worth.” People might be persuaded to use resources more sparingly by giving them a monetary value. 
• It is regarded as a successful strategy for discouraging water pollution on the one hand and promoting the most sustainable use of water on the other. 
• A similar strategy may enhance the current recycling infrastructure. Instead of being dumped into water bodies, the used metals, plastics, phosphates, and other materials would be transferred into recycling facilities. 
• A variety of enterprises can purchase water credits from financially strapped towns and Finance significant wastewater treatment or floodwater gathering projects. 
• City-level freshwater resource preservation 
• Encouraging the reuse of wastewater 
• Achieving water resilience through innovative adaptation funding.

Challenges:

• Water commercialization is a contentious topic. If water is made marketable, a quandary concerning pricing in relation to quality will develop. 
• Richer organisations would just purchase the water credits and carry on polluting while making environmental claims. The carbon credit system is another example of this tendency for the status quo to retain production rather than moving toward sustainability.

Way forward:

For the world to achieve a more sustainable future, adaptation finance requires innovation. Water credits might be one of several viable techniques for achieving water resilience. However, the model’s adoption must take into account a full knowledge of the local circumstances and global model experience.