Honourable Chair and members of the standing committee, thank you very much for your invitation to participate in this hearing today.
I'm a professor of economics and director of the Water Institute at the University of Waterloo, one of the largest interdisciplinary water research and innovation centres in Canada.
I'm originally from a seemingly similarly water-abundant country. It's just many times smaller than Canada and has a long history of freshwater challenges. I advised the Dutch water ministry as an economist for several years on national and European water policies, particularly the water framework directive. What sets this directive apart is its emphasis on the use of economic principles, methods and policy instruments such as water pricing to achieve the environmental objectives for freshwater bodies.
It's my view that if we want to solve freshwater challenges in Canada, we have to focus more on the necessary behavioural changes to more sustainable water use and management by making better use of the available methods and instruments that behavioural economics has to offer. This includes appropriate water pricing. Water has value, but no price. In Canada, the existing price of water does not reflect the true cost and value of water.
Canadians are among the largest water users in the world, with an average water use per capita that is almost twice the amount consumed in Europe. Only 10% of this water is used for drinking and cooking. Approximately a third of our drinking water is used to flush our toilets and another third is used for bathing. Water-saving technologies are readily available on the market, but are hardly implemented because water is relatively cheap. Hence, there is no financial incentive to save water.
Many Canadians, if not most, take water for granted, except if you live in a community with a drinking water advisory. Public awareness levels of the value of water, generally speaking, are low. Based on public surveys in Ontario, I find, for example, that only 25% of Ontarians know how much they pay for water through their water bill. In terms of water affordability, most Canadians do not spend more than 1% of their annual income on water and waste-water treatment. This is the same in Europe, where consumer spending on water and sanitation is less than 1% of the GDP in most member states.
The same applies to industry. For example, when they apply for a licence to extract groundwater, industries pay an administrative fee that is not in any way related to the value of the groundwater.
Notwithstanding the complexities around trade and the definition of commodities, the federal government should consider how best to use economic principles and instruments to ensure water users pay for the value of water. The current low level of public awareness and the low price of water affect how we use, over-exploit and waste Canada's valuable freshwater resources.
These freshwater systems serve both as a source and a sink. We tend to focus on the extractive use of water and often forget that, after we use water, it's treated and discharged, free of charge, into rivers and lakes. We pay for the costs of waste-water treatment in treatment facilities, but not for the water system's ecological purification service or the impairment of this service, just as we pay for the treatment costs of water for drinking but not for the source itself. This is crucial if we want to raise people's awareness about the value of water and the increasing pressure on freshwater resources due to overextraction and water pollution. Appropriate pricing of Canada's freshwater resources will incentivize households and industry to use water more efficiently, increase investment in water saving and use fewer water-polluting technologies.
A final observation is that we lack key indicators that help us transition to a more sustainable water economy. There are no national data about how much Canadians pay for essential water services. This information would allow us to assess the impact of water pricing on water use and the level of cost recovery for sustainable delivery of these services. The latter is crucial to address the grand challenge of replacing aging infrastructure across Canada. Water rates have been unable to cover the depreciation costs of this infrastructure. In 2021, losses from the water distribution systems due to leaking accounted for 17% of all water produced in Canada. This is 828 million cubic metres of potable water, enough to meet the needs of 10 million Canadians for a whole year.
Similarly, with a growing population and increasing freshwater contamination by emerging chemicals of high concern, the need for more advanced waste-water treatment is growing. Although more than 80% of Canadian households are connected to a municipal sewer system, there is a wide variation in treatment levels across provinces. New sustainable business models are needed, based on sound economic principles, to build back water infrastructure better in the future, manage our freshwater resources in a sustainable way and secure water for all Canadians.
Thank you for your attention.