Essential frameworks for the sustainable development of common goods

Proposing the construction of multi-value system level agreements and structured economic instruments as frameworks for the sustainable development

Words by Dark Matter Labs | published in EWSC Research & Insight

Illustration by Arup for the EWSC project.

Key Takeaways:

This article proposes the construction of multi-value system level agreements and structured economic instruments and frameworks for sustainable development of common goods. Here the key takeaways:

• Systems-level agreements refer to an agreement or an integrated collection of agreements that pertain to an arrangement that encompasses an entire system or a broader set of stakeholders rather than focusing on isolated components or individual actors within the system
• Constructing multi-value system level agreements and structured economic instruments and frameworks is essential for the sustainable development of common goods
• System-level agreements involves a more comprehensive and collaborative approach to address complex challenges and achieve shared objectives among multiple stakeholders.
• Identification of system boundaries and interdependencies is critical at the outset, considering both the physical and social aspects, as well as identifying the interconnectedness and interdependencies between various components and actors within the system to understand the broader context.
• Constructing multi-value system level agreements and structured economic instruments and frameworks is crucial for promoting sustainable development, ensuring equitable access, protecting the environment, and fostering collaboration among stakeholders. These efforts are necessary to safeguard the well-being of current and future generations while preserving the planet’s common goods.

1. What is a systems-level agreement?

A systems-level agreement refers to an agreement or an integrated collection of agreements that pertain to an arrangement across as broad set of stakeholders rather than focusing on isolated components or individual actors within the system. It aims to establish a framework for collaboration, coordination, and decision-making to address systemic challenges and achieve common objectives. For example, a systems level agreement would be a tool to foster collaboration, transparency, and accountability between developers, water utilities, and the communities they serve, with the ultimate goal of ensuring sustainable and reliable water services for all stakeholders.

Constructing multi-value system level agreements and structured economic instruments and frameworks is essential for the sustainable development of common goods for several reasons:

1. Collective Action Problem: Common goods, such as clean air, clean water, biodiversity, and natural resources, often suffer from the tragedy of the commons. This occurs when individuals or groups, acting in their own self-interest, deplete or degrade the common resource, leading to its depletion or degradation for everyone. By establishing agreements and frameworks, we can address this collective action problem and promote sustainable use and management of common goods.
2. Long-Term Perspective: Common goods are often subject to short-term exploitation for immediate gains. However, sustainable development requires a long-term perspective, considering the needs of current and future generations. Structured economic instruments and agreements can incentivise long-term planning and investments in the preservation and proper management of common goods.
3. Equitable Distribution: Common goods are typically shared by multiple stakeholders, including communities, industries, and governments. To ensure equitable distribution and prevent monopolistic or exploitative practices, a well-designed framework is necessary. This helps prevent overexploitation by a few entities and ensures fair access and benefits for all stakeholders.
4. Environmental Protection: Sustainable development of common goods necessitates environmental protection. Economic instruments and agreements can promote environmentally friendly practices, such as pollution reduction, conservation efforts, and the adoption of renewable energy sources.
5. Incentivising Innovation: Structured economic instruments, such as carbon pricing or cap-and-trade systems, can encourage innovation in green technologies and practices. By creating economic incentives for environmentally friendly actions, these frameworks can spur the development and adoption of sustainable solutions.
6. International Cooperation: Many common goods, such as the atmosphere and the oceans, transcend national boundaries. Constructing multi-value system level agreements is crucial for international cooperation, as countries must work together to address global challenges like climate change, biodiversity loss, and marine pollution.
7. Measuring Progress and Accountability: Having structured economic instruments and agreements allows for better measurement of progress toward sustainable development goals and holding stakeholders accountable for their actions. Transparent reporting and monitoring mechanisms can help identify shortcomings and adjust strategies as needed.
8. Avoiding Tragedies of the Commons: Tragedies of the commons, where unregulated exploitation leads to the depletion of resources, can have severe consequences for societies and the environment. Establishing frameworks helps avoid or mitigate such tragedies, ensuring the continued availability of essential common goods.
9. Resilience to External Shocks: Sustainable development frameworks can enhance the resilience of common goods and the systems that depend on them. By encouraging practices that safeguard the environment and natural resources, societies can better withstand and recover from external shocks like climate-related disasters.

2. What are structured economic instruments and how they work?

Structured economic instruments, on the other hand, are policy tools or mechanisms that utilise economic incentives to influence the behaviour of stakeholders within a system. These instruments are designed to shape market forces, align individual incentives with broader goals, and promote desired outcomes. They often involve the use of financial incentives, penalties, subsidies, or market-based mechanisms to drive behaviour change and achieve specific economic, social, or environmental objectives.

Examples of structured economic instruments may include:

1. Taxes and subsidies: Governments can impose taxes on certain activities or products to discourage their use or generate revenue for addressing associated negative externalities. Subsidies, on the other hand, can be used to incentivise specific behaviours or support certain industries or initiatives.
2. Tradable permits: Also known as cap-and-trade systems, tradable permits allocate a limited number of permits for a specific activity or emission level. These permits can be bought, sold, or traded among stakeholders, allowing for flexibility and efficiency in achieving emissions reductions or resource management goals.
3. Auctions: Auctions can be used to allocate limited resources or permits to the highest bidder. This approach ensures that the allocation is based on the value stakeholders place on the resource or permits, promoting efficient use and fair distribution.
4. Performance-based contracts: Performance-based contracts involve setting specific targets or performance standards and providing financial incentives or penalties based on the achievement of those targets. This approach aligns incentives and rewards desired outcomes.
5. Green bonds and other sustainable finance mechanisms: These instruments, in the form of bonds or other types of investment vehicles (e.g., investment funds, finance facilities, outcomes financing contracts) provide financing for projects or initiatives that have positive environmental or social impacts. Investors who purchase green bonds or invest in sustainable finance vehicles receive financial returns while supporting sustainable development.

Structured economic instruments are designed to shape the behaviour of stakeholders by incorporating economic incentives or disincentives that encourage them to align their actions with broader objectives.

3. Combining structured economic instruments with systems-level agreements

Combining structured economic instruments with systems-level agreements can create powerful incentives for stakeholders to collaborate, make sustainable choices, and work towards shared goals. This approach leverages both financial incentives and collaborative frameworks to drive positive change. Some key examples include:

• Performance-Based Incentives: Tie financial incentives to performance metrics outlined in the systems-level agreement. For example, stakeholders could receive monetary rewards for achieving specific targets related to water conservation, reduced emissions, or ecosystem restoration.
• Penalties for Non-Compliance: Implement financial penalties for stakeholders who fail to meet their commitments under the systems-level agreement. Penalties can act as a deterrent and encourage active participation and adherence to sustainability goals.
• Subsidies and Grants: Provide subsidies or grants to stakeholders who invest in sustainable practices or technologies that align with the shared goals. These financial incentives can help offset initial costs and encourage widespread adoption of sustainable approaches.
• Cap-and-Trade or Emissions Trading: For industries with significant environmental impacts, a cap-and-trade system can be established. This involves setting a limit (cap) on emissions or resource usage and allowing stakeholders to buy and sell permits within that limit. Those who can reduce emissions efficiently can sell their surplus permits, providing an economic incentive for sustainability.
• Eco-Taxation: Introduce eco-taxes on activities that have negative environmental impacts. The revenue generated can be reinvested in sustainability projects or used to support stakeholders in adopting greener practices. Payment for Ecosystem Services (PES): Implement a PES program where stakeholders are compensated for the environmental services they provide. For example, landowners could receive payments for maintaining forests that contribute to watershed protection or carbon sequestration.
• Shared Investment Fund: Establish a shared investment fund using contributions from stakeholders. The fund can finance projects that benefit the entire system, such as renewable energy infrastructure, habitat restoration, or water conservation initiatives.
• Socially Responsible Procurement: Government agencies or larger corporations can use their purchasing power to incentivise sustainable choices. They can preferentially contract with suppliers who adhere to the systems-level agreement’s principles and sustainability criteria.
• Transparency and Reporting: Ensure transparency in financial incentives and their distribution. Publicly report on the progress of projects and the allocation of funds to build trust among stakeholders and the public. Capacity Building and Training: Invest in capacity building and training programs to support stakeholders in adopting sustainable practices. Providing the knowledge and resources needed for implementation can enhance collaboration and collective action.
• Stakeholder Engagement: Regularly engage stakeholders in discussions and decision-making processes related to financial incentives. This involvement helps build a sense of ownership and commitment to the shared goals.

By combining structured economic instruments with systems-level agreements, stakeholders are more likely to align their individual interests with the broader sustainability objectives. This synergy creates a conducive environment for collaboration, promotes sustainable choices, and fosters a sense of shared responsibility in achieving the common goals for the benefit of all involved parties and the environment.

4. What is a gift economy?

A gift economy is a system or social arrangement where goods, services, and resources are given and shared without explicit expectations of immediate or direct compensation or exchange. In a gift economy, individuals contribute to the well-being of others through acts of giving, generosity, and reciprocity.

Some key characteristics and principles of a gift economy include:

1. Non-Market Exchange: In a gift economy, exchanges are not mediated by formal markets or monetary transactions. Instead, gifts are given freely, often driven by social, cultural, or personal motivations rather than economic gain.
2. Reciprocity: Gift giving is typically accompanied by a sense of reciprocity, where recipients are encouraged to reciprocate or pass on gifts in some form. This can create a cycle of giving and receiving that strengthens social bonds and fosters community cooperation.
3. Social Cohesion and Trust: Gift economies rely on social connections, trust, and a sense of belonging within a community. Gift giving helps build and maintain social relationships, creating a sense of mutual support and interdependence.
4. Non-Hierarchical Relationships: Gift economies often challenge hierarchical power structures and promote egalitarianism. Gifts are seen as expressions of care and solidarity, rather than a means of accumulating wealth or asserting dominance.
5. Intangible and Non-Material Gifts: In addition to physical goods, gift economies may involve the exchange of intangible gifts, such as knowledge, skills, time, or emotional support. These non-material contributions can be highly valued and form the basis of reciprocal relationships.
6. Common Good and Social Benefit: The focus of a gift economy is often on the well-being of the collective or community rather than individual gain. Gifts are given with the intention of benefiting others and contributing to the common good.

Gift economies have existed in various cultures and communities throughout history. They can be found in indigenous societies, informal sharing networks, grassroots movements, and certain online communities. For example, many indigenous cultures around the world have practiced gift economies for generations. For instance, the potlatch ceremonies of the Indigenous peoples of the Pacific Northwest of North America (Haida People in Canada) involved elaborate gift-giving and feasting to mark important events, redistribute wealth, and strengthen social bonds. The Iroquois Confederacy North America is another example — Native American groups within the Iroquois Confederacy, such as the Haudenosaunee, practiced gift-giving as a way of building relationships, resolving conflicts, and maintaining peace among different tribes.

While gift economies have been historically prevalent in various cultures, many of these societies have experienced changes due to colonisation, globalisation, and other external influences. As a result, the practices of gift economies may have evolved or diminished in some regions over time. However, the underlying principles of reciprocity, social bonding, and non-material wealth remain influential aspects in these cultures.

Some elements of the decentralised finance (DeFi) community may also be considered as examples of a gift economy, although the underlying principles and motivations driving DeFi are different from those of a gift economy. DeFi platforms are designed to function based on predefined rules and smart contracts, and users typically expect specific returns or rewards for their participation, often in the form of interest, trading profits, or governance tokens. For example, governance tokens are often distributed to participants, allowing them to have a say in protocol decisions and collectively manage the platform’s future development. In this sense, there might be a resemblance to some aspects of a gift economy, where community members are given a voice and influence over the project.

While gift economies may operate alongside market-based systems, they offer an alternative approach to economic exchange, emphasising social bonds, trust, and cooperation. A gift economy does not necessarily reject or exclude market-based transactions but rather provides an alternative mode of exchange that values non-material contributions, reciprocity, and community well-being.

Watercolor by James G. Swan depicting the Klallam people of chief Chetzemoka at Port Townsend, with one of Chetzemoka’s wives distributing potlatch. Image Source: Wikipedia, 2023.

5. Agent-Based Models, a tool for complex systems

It will also be useful at this stage to introduce agent-based models (ABMs), which are computational models that simulate the behaviour and interactions of individual agents within a system. In ABMs, agents are autonomous entities that possess certain characteristics, make decisions based on specific rules, and interact with other agents and their environment. These models are used to study complex systems, understand emergent phenomena, and analyse the effects of individual behaviour on the overall system. The following link is an excellent example provided by the Bank of England in understanding ABMs: Agent-based models: understanding the economy from the bottom up.

Schematic of the typical elements of an agent-based model. From the Agent-based models: understanding the economy from the Bottom up Report. Image Source: Bank of England, 2016.

Some key characteristics and components of agent-based models include:

1. Agents: Agents can be individuals (human or other biological system), groups, organisations, or even abstract entities, depending on the context of the study. Each agent has attributes that define its characteristics, states, preferences, and decision-making rules.
2. Interactions: Agents interact with other agents and their environment, leading to dynamic and complex patterns of behaviour. These interactions can be based on predefined rules, social norms, or learning mechanisms. The interactions may include cooperation, competition, communication, or exchange of resources.
3. Rules and Decision-making: Agents have rules or algorithms that govern their behaviour and decision-making. These rules can be based on simple heuristics, learning algorithms, or complex decision models. Agents make decisions based on their internal state, perceptions of the environment, and interactions with other agents.
4. Environment: The environment represents the context or system within which the agents operate. It includes the physical space, resources, constraints, and external factors that influence the agents’ behaviour. The environment can be static or dynamic, and it may evolve over time.
5. Emergent Phenomena: Agent-based models are particularly useful for studying emergent phenomena, which are outcomes or patterns that emerge from the interactions of individual agents. These emergent phenomena often arise as a result of complex, nonlinear interactions that are not easily predictable by analysing individual agents in isolation. Climate Change is a very good example of an emergent and systemic phenomenon.
6. Simulation and Analysis: Agent-based models are typically implemented as computer simulations. The models simulate the behaviour of agents and their interactions over time to observe the system-level outcomes and dynamics. Analysis of the model results involves studying aggregate measures, patterns, trends, and sensitivity to parameter changes.

6. Constructing a Pathway to Systems-level agreement

Combining ABMs with elements of Game Theory can be a powerful framework for constructing multi-value system-level agreements. Game theory is a branch of mathematics and social science that studies the strategic interactions between rational decision-makers, referred to as “players,” who may have conflicting interests and make choices based on the actions of others. It provides a formal framework to analyse and model decision-making in situations where the outcome of one player’s choice depends on the choices made by other players. Game theory provides valuable insights into the decision-making processes of rational actors in complex and strategic situations, helping to predict and understand behaviours and outcomes in diverse real-world scenarios.

Here is a generic high-level example for constructing a system-level agreement framework for a Water Smart Communities — let’s call it “Eco Town” by combining Agent-Based Modelling (ABM) with Game Theory. It involves designing a model that simulates the behaviour of various agents (developers, water utilities, communities, etc.) in a community and their interactions concerning water usage and conservation.

Here’s a step-by-step approach to developing such a framework:

Step 1: Define Agents and Game Scenario Identify the key agents involved in water management and conservation in the community. These may include:

• Developers: Responsible for constructing buildings, residential areas, and commercial properties.
• Water Utilities: Provide water supply and manage distribution networks.
• Communities: Consist of residents, businesses, and local organisations within the community.

Define the roles, decision-making capabilities, and objectives of each agent. For example, developers aim to build and sell properties profitably, water utilities seek to ensure efficient water supply and revenue, while communities want sustainable water usage and a high quality of life.

Step 2: Define Actions and Payoffs Determine the possible actions that each agent can take in the water management game. These actions could include:

• Developers: Implementing water-saving features in buildings, promoting sustainable architecture, and using rainwater harvesting systems.
• Water Utilities: Implementing water pricing structures that incentivise conservation, investing in water infrastructure, and promoting water-saving practices.
• Communities: Adopting water conservation behaviours, participating in community-level water management initiatives, and providing feedback to water utilities.

Establish the payoffs for each agent corresponding to different combinations of actions, considering factors such as water availability, construction costs, customer satisfaction, and overall community well-being.

Step 3: Develop the Agent-Based Model Create an Agent-Based Model that simulates the interactions between agents based on the defined actions and payoffs. The model should incorporate factors such as agent decision-making rules, environmental feedback, water demand patterns, and external influences like weather changes.

Step 4: Implement Game Theory Incorporate game-theoretic concepts into the model to analyse strategic interactions among agents. Game theory will help identify Nash equilibria, where no agent can improve their payoff by changing their strategy given the other agents’ choices. These equilibria represent potential stable solutions for the water management game.

Step 5: Validate and Refine the Model Test the Agent-Based Model with real-world data to validate its accuracy and usefulness. Adjust parameters and rules as necessary to ensure the model captures the dynamics of water usage and decision-making in the community.

Step 6: Apply the Framework to an Actual Example Consider an actual example of a Water Smart Community, let’s call it “EcoTown,” which is experiencing rapid urban development and increasing water demand. EcoTown aims to achieve sustainable water management while accommodating population growth and economic prosperity.

Agents:

• Developers: Focus on constructing properties with water-efficient features, sustainable design, and green spaces.
• Water Utilities: Seek to balance water supply and demand, optimise distribution, and promote conservation.
• Communities: Embrace water-saving behaviours, participate in local water management programs, and provide feedback on water-related issues.

Actions:

• Developers: Implement water-efficient building designs, use reclaimed water for irrigation, and promote sustainable practices.
• Water Utilities: Adjust water pricing based on supply-demand dynamics, invest in water recycling infrastructure, and offer incentives for conservation.
• Communities: Adopt water-saving practices, participate in community-level water conservation campaigns, and report water leaks promptly.

Payoffs:

• Developers: High payoff if their water-efficient properties attract buyers and receive positive feedback from the community and water utilities.
• Water Utilities: High payoff if water demand is met, water distribution is efficient, and the community actively engages in conservation efforts.
• Communities: High payoff if they experience a high quality of life, lower water bills, and a sustainable water supply.

By simulating various scenarios and interactions between agents using the ABM with Game Theory, Eco Town can identify potential stable agreements or Nash equilibria as they are called in Game Theory, that lead to sustainable water management and a thriving community. The framework can help Eco Town make informed policy decisions, encourage collaboration between stakeholders, and promote a water-smart approach to development and living.

7. Case Study: Tree Canopy Value Model

Systems level agreements for the development of urban tree canopies provide a good use case. The Tree Canopy Value model provides a foundational framework for the development of common goods such as an urban forest (i.e., tree canopies). By combining structured economic systems with gift economy principles, system-level agreements can be constructed to integrate funding and development of an urban forest, thereby leveraging financial resources while fostering community involvement, stewardship, and a sense of collective ownership. This integrated approach promotes the ideals of gifting, reciprocity, and shared responsibility, resulting in a vibrant and sustainable urban forest that benefits both the environment and the community.

The core element of a multi-value tree canopy system is Natural Assets Trust — where structured economic instruments, systems level agreements, the financing vehicle for example, a natural assets company), and stewardship agreements combine under a structured economic system around tree canopy value flows.

The Natural Assets Trust, in the context of environmental services and liabilities, would operate by managing and balancing the benefits derived from natural assets against the potential liabilities or negative impacts associated with those assets.

A highly generalised framework of how such a trust could run a matched book of environmental services, benefits, and outcomes against liabilities:

1. Identify and Assess Natural Assets: The Natural Assets Trust would first identify and assess the natural assets within its jurisdiction, such as forests, wetlands, rivers, or green spaces. These assets provide a range of ecosystem services like carbon sequestration, flood mitigation, air purification, and biodiversity conservation.
2. Quantify and Value Environmental Services: The trust would quantify and assign economic values to the environmental services provided by the natural assets. This could involve assessing the carbon sequestration capacity, floodwater retention potential, air quality improvements, and other ecosystem services associated with each asset. Quantifying and valuing environmental services can be a complex task as many of these services do not have direct market prices. However, various methods and approaches have been developed to estimate their economic value. For example, the Replacement Cost Method — this method estimates the value of environmental services by considering the cost of replacing or reproducing them artificially, in this the value of carbon sequestration by a forest can be estimated by calculating the cost of implementing carbon capture and storage technologies. Others include Contingent Valuation — this method involves conducting surveys or questionnaires to determine the willingness of individuals or communities to pay for environmental services. For example, people may be asked how much they are willing to pay for the preservation of a forest ecosystem or a clean water source. Hedonic Pricing — this method assesses the value of an environmental service by observing how it affects the price of related goods, i.e., the value of clean air or a scenic view can be estimated by examining how property prices differ between areas with differing air quality or landscapes.
3. Determine Beneficiaries and Stakeholders: The trust would identify the beneficiaries and stakeholders who directly or indirectly benefit from the environmental services. This may include local communities, businesses, residents, and other relevant parties that rely on the natural assets for their well-being or economic activities.
4. Establish Liabilities and Risks: The trust would also assess the potential liabilities or risks associated with the natural assets. For example, if a forested area faces the risk of wildfires or disease outbreak, it would be considered a liability. Similarly, if a wetland is at risk of being drained or polluted, it would be deemed a liability.
5. Match Benefits and Liabilities: The Natural Assets Trust would then match the benefits derived from the environmental services against the liabilities and risks. It would aim to maximise the positive outcomes while minimising or mitigating the negative impacts. This could involve strategic planning, implementing conservation measures, and promoting sustainable land use practices.
6. Investment and Funding Mechanisms: To manage the matched book, the trust would develop investment and funding mechanisms. This could include seeking public and private funding, establishing partnerships with relevant organisations, and exploring innovative financing models such as environmental impact bonds or green infrastructure investments.
7. Monitoring and Evaluation: The trust would implement a robust monitoring and evaluation system to assess the effectiveness of its actions. It would track the environmental outcomes, the reduction of liabilities, and the overall impact on the well-being of the beneficiaries and stakeholders. This information would help inform future decision-making and ensure accountability.

Tree Canopy Value Flow Map as a Structured Economic System. Image by DML.

The diagram above illustrates a more detailed model — catalysed by the gifting of trees to local communities through an integrated Natural Asset Trust (NAT). The NAT generates stewardship value flows through the development of multi-beneficiary common assets (tree canopies) which in turn generates shared outcomes and benefits services as well as risk mitigation services. As the NAT is the provider of these services, it receives payments through the financing vehicle — the Natural Assets Company for performing these functions that generate value at the system level. The model also contains other key elements the description of which is beyond the scope of the article.

The pooling of risks of liability holders is also crucial in this model. Pooling risks of liability holders in a system-level agreement involves creating mechanisms to distribute and share the risks associated with potential liabilities among the involved parties. There are a number of ways this can be achieved:

1. Risk Assessment and Mitigation: Conduct a comprehensive risk assessment to identify potential liabilities and their associated risks.
2. Develop strategies and mechanisms to mitigate those risks through preventive measures, risk management practices, and the implementation of appropriate safeguards.
3. Insurance and Risk Transfer: Insurance coverage to transfer and distribute the risks associated with potential liabilities. This can involve procuring liability insurance policies that provide financial protection and coverage against specific risks. The costs of insurance can be distributed among the liability holders, with each party contributing based on their level of exposure.
4. Indemnification Clauses: Include indemnification clauses in the system-level agreement to allocate responsibilities for liabilities and establish the obligations of the parties involved. These clauses outline the indemnitor’s commitment to compensate the indemnitee for any losses, damages, or liabilities arising from specific circumstances or events.
5. Risk Sharing and Contribution Mechanisms: Establish risk-sharing mechanisms where liability holders contribute to a pooled fund or reserve to cover potential liabilities collectively. This can be achieved through regular contributions, payments based on risk exposure or transaction volume, or a predetermined allocation formula.
6. Liability Caps and Limits: Define liability caps or limits within the system-level agreement to cap the maximum financial exposure of individual liability holders. This can help prevent disproportionate burdens and ensure a fair distribution of risks among the parties involved.
7. Joint and Several Liability: implementing joint and several liability, where each liability holder is individually responsible for the entire liability. This approach allows for the pooling of risks among the liability holders, ensuring that any party can be held accountable for the full liability amount if necessary.
8. Risk Communication and Transparency: Promote effective communication and transparency among the liability holders regarding potential risks and liabilities. This includes sharing information, providing regular updates, and maintaining an open dialogue to ensure all parties are aware of the risks involved and can actively participate in risk pooling efforts.
9. Legal and Regulatory Compliance: Ensure that the system-level agreement adheres to applicable legal and regulatory requirements regarding liability, risk management, and risk sharing. Seek legal advice to ensure the agreement is legally enforceable and protects the rights and obligations of all parties involved.

It is also important to note that system level agreements go beyond typical Public-Private-Partnership agreements (PPP), as constructing a systems-level agreement involves a more comprehensive and collaborative approach to address complex challenges and achieve shared objectives among multiple stakeholders. Identification of system boundaries and interdependencies is critical at the outset, considering both the physical and social aspects, as well as identifying the interconnectedness and interdependencies between various components and actors within the system to understand the broader context. System-level agreements in the water sector can take various forms and can be seen in different countries worldwide. These agreements often involve multiple stakeholders and aim to address complex water-related challenges at a broader scale.

Here are a few examples of such agreements:

• The Paris Agreement (2015): While not specifically focused on water, the Paris Agreement is a global accord that aims to combat climate change. It recognises the importance of water in adaptation and mitigation efforts. Several countries have committed to reducing greenhouse gas emissions to limit global temperature rise and reduce the impacts of climate change on water resources.
• The Colorado River Compact (1922): The Colorado River Compact is a system-level agreement in the United States that allocates the waters of the Colorado River between seven western states: Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming. It addresses the water needs of different states and ensures the sustainable management of the river’s water resources.
• The Murray-Darling Basin Agreement (1987): The Murray-Darling Basin Agreement is an intergovernmental agreement in Australia that governs the management and allocation of water resources in the Murray-Darling Basin. It involves four Australian states and the Australian Capital Territory and aims to balance water extraction for irrigation, urban use, and environmental sustainability in one of Australia’s most important river systems.
• The Danube River Protection Convention (1994): The Danube River Protection Convention is a regional agreement between countries in Europe that aims to protect and improve the water quality of the Danube River and its tributaries. It sets objectives and measures for reducing pollution, managing water resources sustainably, and safeguarding the ecological integrity of the river system.
• The Water Framework Directive (WFD) (2000): The Water Framework Directive is an agreement of the European Union that establishes a common framework for water management across member states. It aims to achieve good ecological status for all EU surface waters and protect groundwater resources. The WFD emphasises a holistic and integrated approach to water management.
• The African Great Lakes Region (AGLR) Protocol (2006): The AGLR Protocol is an agreement among the countries in the African Great Lakes Region, which includes Burundi, the Democratic Republic of the Congo, Kenya, Rwanda, Tanzania, and Uganda. The protocol aims to promote sustainable and equitable management of the region’s water resources and address water-related challenges, such as pollution and conflicts over water use.

These examples highlight the importance of system-level agreements in addressing water-related challenges across different regions and scales. Such agreements involve cooperation and collaboration among multiple stakeholders, including governments, communities, and international organisations, to ensure the sustainable and equitable management of water resources.

Heads of delegations at the 2015 United Nations Climate Change Conference in Paris. Image Source: Wikipedia, 2023.

This article is written by Dark Matter Labs (DLM). DLM contributed towards developing a transition model pathway, given its experience in building and orchestrating systemic transitions. This article is one of five produced by DML, see: How to implement and benefit from a multi-value flow in local communities, Essential frameworks for the sustainable development of common goods, Mitigating water-related risks through integrated asset management, and Enhancing stewardship and decision-making for sustainable water management for more.

As Discovery research lead and series editor, Arup’s Transformation & Design Studio led the multi-partner research effort contributing public innovation and strategic design expertise.

This is one of a series of insight articles produced as part of the EWSC innovation programme, exploring how integrated water management can be delivered through innovative housing and stewardship models. For an overview of the project, latest news or to get in touch visit https://www.ewsc.org.uk/.