The letters to the editor on Friday 16th about John Mackay’s comments point out the difficulty with a voluntary system. Most of us agree that we should to do something about green house gases, even if it is only an insurance that global warming may be real, but we are not willing to be one of the few bunnies willing to sign up to Green Choice (although I have:). To tackle green house gases effectively means we all have to contribute. This means making green house gas producing energy include a cost for carbon emissions. We can do this as a tax, but we are suspicious that the government will just collect the tax and spend it on something else. Also a tax to make a difference to investment decisions on producing green energy would be too high to be readily accepted – and unnecessary. A simpler solution is to put a surcharge on all green house gas producing energy and call them green points. We leave the green points under the control of the purchaser. The purchaser has to spend their greenhouse gas points on something that will reduce green house gases – like insulate their house, buy shares in a wind farm, put it into research into photo voltaic cells, or anything else that we agree will help solve the problem. We could have it in operation almost immediately and so start to make a difference now and not wait 10 years for nuclear or clean coal.
Background to Water Rewards
In Australia, urban water is supplied to consumers by monopoly water authorities. To increase the use of available water we have to invest in ways to make better use of existing mains water through consumer behavioural changes and we have to fund costly new supplies from sources such as desalination, storm water collection or new dams. An economic challenge is to manage the disparity between the cost of cheap water supplied by a water authority from rainfall in catchments and existing dams and the higher cost of water obtained by other means – such as rainwater tanks, recycling, desalination etc.
The existing approach relies on governments to invest wisely through monopoly water authorities in new infrastructure paid from profits from the sale of inexpensive water. Governments, through their water authorities, initiate and pay for investments in recycling systems, rebates on rainwater tanks, education in water savings and other ways to enable sustainability of water supplies. Unfortunately, governments have failed to achieve the goal of supplying enough water to meet demand in most urban areas of Australia. These areas are now under permanent water restrictions. There are many reasons for this failure but some reasons are:
- Governments set water prices below the cost of recycling and other methods of making more use of existing water supplies
- Governments tend to place profits from the water authorities into their consolidated revenue and do not apply sufficient funds to reinvest in or build more water infrastructure
- Governments divert political attention away from this situation by supporting economically inefficient methods of addressing water use and supply by spending funds on schemes such as tank rebates
Another approach to the funding of infrastructure is to establish prices for water through trading water entitlements and to use the sale of entitlements to fund infrastructure development and through pricing encourage the development of recycling and water savings systems. Water trading has the potential to set a market price for water entitlements and will result in some infrastructure development by large organisations. Unfortunately there are practical human factor issues associated with establishing and policing entitlements for households which makes water trading difficult for most households.
Water Rewards is an approach designed to change the water consumption behaviour of urban households. Reducing urban water consumption requires education of and cooperation from consumers. It also requires continuous capital investment to develop recycling and significant water saving systems, which on their own are not economically viable when competing in a water market characterized by monopoly water authorities selling under-priced water and failing to address future water needs.
Water Rewards is a voluntary system which households opt into. Each member of a household is given a notional sustainable entitlement of water. The sustainable level of water per head is chosen by the water authority and is based on the region’s water balance and its saving and consumption targets. Households pay for their water use but if they consume less than their entitlements, the participants receive Water Rewards. A household can use more water than its entitlement providing it is willing to pay higher charges for excess water, which in turn helps pay for the Rewards program.
Water Rewards are electronic vouchers that can be spent on any approved water savings method. Water Rewards are transferable to others and if a consumer cannot use them they can sell them or donate them to those who need more water.
The system does not mandate how water conservation is to be performed and makes no recommendations on the methods used. It simply offers economic incentives in an equitable and politically acceptable manner.
The Water Rewards Pilot Project – http://www.waterrewards.org
The Pilot Project will test the efficacy of the Water Rewards concept through a trial program to measure if it achieves its expected objectives. Measures that will be used to test the system are:
- consumer satisfaction
- increase in utilisation of water resources
- economic efficiency
Consumer opinion, attitudes and satisfaction with the program will be measured by surveys before, during and after the trial to assess it in terms of convenience, cost, effectiveness, and fairness. Economic efficiency will be the cost per kilolitre to achieve a reduction in consumption of mains water.
The proposers of the pilot project, Edentiti, EWater CRC and Ecos (Easy being Green), will initially supply services in IT infrastructure, water research and evaluation of water savings schemes and consultancy on the administration and promotion of Rewards systems.
Water trading and entitlements
Setting water entitlements is a central part of a water trading system. But setting water entitlements for use in water trading by household consumers is most likely unworkable. Focus groups say that household water entitlements must be made on a per capita basis. This means it necessary for the entity running water trading to obtain a head count for each household to allow individuals to buy and sell water entitlements. But because the system is compulsory it is likely to meet strong resistance and be difficult to police.
Some advocates of water trading for households suggest a two-tiered entitlement regime where part of the entitlement cannot be traded. This will involve further restrictions and again will be difficult to police those who sell their entitlements. Households will resent having to estimate entitlements before they consume water, and pay larger water fees if they make initial under estimations. In practice, it is likely most households will consume up to their entitlement volume and be both unlikely to trade and ignore voluntary water savings measures in addition to those rationally consequent to price signals. A household water trading regime is difficult to implement and for most households, water trading is likely to be too complicated to utilise.
Water Rewards and entitlements
Water Rewards use entitlements per head to set nominal household water entitlements. This can help develop “water literacy” and are part of the operation of Water Rewards. Water Rewards is an opt-in system requiring a statement of numbers in a household (with spot-checking) and because the household will get Rewards for participating there is an incentive to accurately state the number in the household, particularly as the penalty for abuse of the system will be expulsion from Water Rewards.
As Rewards are seen as a “gift” the exact calculation of the household water entitlement is not as politically sensitive as it would were limited volumes of real water involved.
There is no need for the household to pre-calculate its required level of water use. It simply needs to try to save water and if successful it is rewarded. This contrasts with water trading schemes where households need to pre-calculate their entitlements and if they exceed or underuse their use estimates they are penalised by needing to pay for more water or having bought water which is not consumed.
For these reasons notional entitlements used in Water Rewards are less controversial than they would be in a trading scheme.
Water Rewards as a Method of Exchange
The first part of this background paper outlined how Water Rewards operates from the point of view of the householder. Here we describe how Water Rewards operates in economic terms.
Water Rewards is a method of exchange incorporating both the management of the exchange system and the exchange of units for goods and services between participating entities. In contrast, a water entitlement as used in trading systems represents a volume of water.
The Water Rewards system requires a water authority or government to create a ‘Water Rewards Backing Account’ which acts as the funding pool against which households holding Water Rewards units can redeem the units to buy water saving goods and services. A unit of Water Rewards is created and becomes available to be issued to a household when a unit of regular currency is deposited into the Water Rewards Backing Account.
Water Rewards must be spent on approved methods of increasing water savings or water supply. These can be any type of projects. They can be household based (a new shower head) community based (a storm water system to provide water to a school oval), or system based (money to the water authority for a recycling system). The central feature of spending Water Rewards is that individuals will decide how to spend their money. Thus it is possible to envisage a water authority competing for funds for water infrastructure development sourced from purchase of Water Rewards against a householder seeking to use their Water Rewards to buy a shower head or a water audit. Where a water authority purchases Water Rewards to fund infrastructure it makes transparent where a water authority’s initial profits (or the part of them cycled through Water Rewards) are being spent.
Water Rewards units can only be claimed from the Backing Account when they are spent on approved goods and services which increase the utilisation or supply of water. The water authority, government and the Water Rewards program manager all help establish a list of goods and services and identify approved providers.
Units of Water Rewards are transferable. When a Water Reward unit is transferred regular currency can be exchanged between the parties to the transfer. Water Rewards will tend to move to those who get the best value from spending on the approved products or services. Water Rewards creates a new market to achieve better utilisation of water supplies by moving funds to where they have highest use-value.
The Water Rewards program can grow to cope with more voluntary members. Additional money to fund Water Reward units can be deposited in the Water Rewards Backing Account in different ways. Money can come from a water authority’s profits from the sale of water or from government if it sees value in further facilitating water saving behaviour. The money from new tradeable water entitlements sold to a large user could be deposited in the Backing Account so ensuring the money will be spent on ways to increase utilisation. Importantly, the Backing Account is a fund specifically associated with the operations, stability and guarantee of the Water Rewards program. Governments still decide how much is spent on water sustainability measures but the amount spent becomes more transparent and much passes through to consumers directly.
Who controls Water Rewards
The entity managing a Water Rewards program administers the Backing Account. Expenditure of Water Rewards units on the approved list of goods or services is subject to the approval of the body (or bodies) depositing funds in the Backing Account. This could be the water authority or the state or local government. However, if another organisation or entity (such as the Federal government) deposits money in the backing account they can specify how those Rewards are used and distributed.
The Water Rewards manager receives records of water use from the water authority, allocates Rewards units to households and administers the spending of Rewards according to the rules agreed by the funders. The price of water is set with existing mechanisms and there is no change to existing billing systems. However price regulators are unlikely to veto any price increase if the extra profits resulting from the price increase are passed back to some consumers as Water Rewards units.
Compliance in spending Rewards is achieved by the Water Rewards manager monitoring transactions between consumers and the organisations supplying approved services or goods. Because Rewards are electronic and all transactions are available electronically, auditing is simplified.
Who runs Water Rewards
Water Rewards should be run as a not for profit organisation which would have an independent board drawn from government, water authorities, water experts and consumers. Its ongoing operating funds will come from the Water Rewards Backing Account. It is expected that the cost of operating Water Rewards will be the same or less than other rewards programs like frequent flyer points or about 5% of total funds involved in the system.
The Rewards system is made possible by the use of low cost Internet transactions that leaves most administration in the hands of the consumers. The critical components in the IT infrastructure are web-based information systems, identification services and account management services which are Edentiti’s areas of expertise and experience.
All three parties see part of their future in the ongoing supply of infrastructure services to other similar programs both in Australia and overseas.
Recent papers and Water Rewards
An important paper by Young, McColl and Fisher http://www.myoung.net.au/water/droplets/Urban_trading.doc states
Either, a quantity limit – a cap – can be placed on the water supply and the market left to help decide who gets to use water; or the charge per kL fixed and restrictions used to reduce consumption in times of scarcity.
Water Rewards provides another way of reducing the need for restrictions. It achieves a similar result of giving price signals to households as does existing pricing regimes or water trading but households recover value from their actual water savings as well as reduced expenditure.
Peter Cullen in his paper to the Water Services Association of Australia on 2 February 2007, “The Urban Water Agenda in 2007” http://www.wentworthgroup.org/docs/Urban_Water_Agenda.pdf outlines ways of achieving better urban water use outcomes. To implement these requires, in most cases, investment funds. Water Rewards can provide funds for water infrastructure and be transparently managed to create public expectation that the funds are spent efficiently.
Cullen points out that urban households are paying large sums of money for water which is transferred into consolidated revenue rather than being tagged to improve urban water outcomes. To implement Cullen’s range of practical household initiatives requires investment funds to be put in the hands of households. Water Rewards does this by passing back to consumers funds converted from their Water Rewards unit accounts. While Water Rewards does not prevent local and state authorities using water profits for other purposes, it increases the visibility of their allocative decisions.
Water Rewards is an innovative system. The pilot project is designed to test assumptions on human behaviour, the efficiency of spending funds through giving control to consumers, the transparency of the disposal of some if not all profits made by water authorities and to reveal the degree of consumer acceptance for such a program. The project has the potential to make a major contribution to helping urban Australia towards a sustainable water future.
A cost effective approach to improve identity security
The Federal Government has numerous programs to improve the handling of citizen’s identities. Major initiatives include the Access Card and the new AML/CTF anti-money laundering legislation. The majority of these programs are based around organisational control and allowing organisations to better know their clients. Such approaches are necessary, but could be enhanced through the introduction of a complementary strategy that increase the identity security of individuals at the same time as reducing opportunities for criminals to perpetrate identity crime.
The proposal is:
If a physical document is used for identification then other approved organisations can confirm with the originating organisation that the record actually exists.
Most identity fraud is perpetrated by criminals forging paper or plastic documents, or by stealing legitimate documents and changing them in some way. This proposal would reduce this method of identity fraud as criminals would have to change both the physical documents and the database records of the issuing organisations. This would be extremely difficult to achieve, virtually eliminating a major method of identity fraud – that created by changing or forging physical documents.
Australian organisations are subject to the Privacy Act 1988 which, according to Commonwealth Government guidelines, requires that:
Under IPP 5.1, an Agency must take reasonable steps to allow any person to find out whether it has any records that contain personal information, and if so, the nature of that information; the main purposes for which it is used; and the steps that a person should take if they want to obtain access to it.
A person requesting an organisation to respond yes or no to the question of whether certain personal information is held about them would appear to be a minimum requirement for any organisation to meet this guideline. For example it appears that the Passport Office should be required tell a citizen if it holds a passport in that person’s name with a particular passport number, a given birth date and place of birth. This information is printed on the passport and if the holder of the passport gives permission for an organisation to check with the Passport Office, then the request should be honoured. This will enable the passport holder to prove that the passport is genuine.
The organisation requested can allow registration of the request so that if any change is made to the document the requestor is notified. This simple measure will enable an individual to detect whenever someone attempts to take over their identity through changing existing information. It can also strengthen the electronic identity of an individual through the electronic confirmation of relationships a person has with organisations and with other people.
It is not an invasion of privacy as the person holding the passport (or any other document that can help confirm their identity) is the person requesting the information. That is, it is the person themselves requesting that the originating organisation confirm the validity of an identifying document to a third party.
It would appear that if an organisation was not prepared to offer this facility – which is simple, cheap and easily implemented – it would be unreasonable violation of the privacy principles which state that a person has the right to find out if information is held about them.
How this could be implemented cheaply and simply
There is an industry standard SAML protocol that allows assertions to be made and answered between computer systems. To verify information on a physical document the originating organisation simply implements one or more requests for Yes or No answers.
To ensure the right to privacy is maintained, only organisations that can prove that the request was made with the permission of the individual would be allowed to register with the providing organisation.
Standard templates to implement such a scheme are not difficult and can be made available. If necessary the requests could be processed through registered Identity Providers. The cost of such a service is very low and even for the most secure and private of organizations, would involve minimal cost.
Implications of this facility being available
As well as reducing the incidence of identity fraud based on false documents this approach will enable the rapid creation of verified electronic identities. This is achieved by an individual establishing that confirmed records exist about them in a variety of organizations (for example, a student may have verified records at the Passport Office, a bank and educational institution).
Extending the concept, the individual could then choose to have other people with whom they are acquainted verify that a photograph of them is a true representation. Reliable and proven technology also exists to enable the individual to record their voice and have this verified in the same way.
As an individual establishes verified organisational relationships based on documents and also establishes verified personal relationships, so the strength of the individual’s electronic identity becomes more reliable.
Organisations using the facility would be required to offer the same access to any physical documents that they produce relating to the person’s identification. This will encourage rapid deployment of the system, continually making the process stronger and further removing any opportunity for fraud. For example if the Passport Office provided the facility, every organisation using passports for identification would become part of the system.
It is recommended that
All organisations which produce physical documents for identification purposes should provide an electronic facility for the yes/no verification of the information appearing on the physical document.
All organisations wishing to use the facility for identification must provide the same facility for documents they produce.
These two steps will help reduce identity fraud at the same time as establishing a framework that protects the individual’s right to privacy, particularly in the growing area of electronic identify verification.
Letter to the Editor published 12th March 2007
Crispin Hall in Saturday March 10th CT argues that government cannot reduce the cost of housing because it cannot afford to alienate the electorate through engineering a reduction in house prices. A solution to this dilemma is a variation on the shared equity proposals of Malcolm Turnbull. We leave the price of housing the same but delay the realisation of profits being made by the government on new land releases. The profits from the sale of new releases of land disappear into consolidated revenue. The government could defer the profits on new land sales to enable new home owners to get into the market or old home owners to build new homes. It could do this immediately by giving a no interest loan to the value of the profits from new land sale to the home builder. The loan is repaid when the new owner sells the house or land or in the case of developer the loan would be transferred to the first genuine dweller. The government would still get its profits from the sale of the land – but it would be deferred. People would be able to afford to build new dwellings, and the price of existing residential dwellings would not reduce. It would encourage home ownership, increase the stock of housing, be easy to police and be done “tomorrow”.