The report – “The Bubble Is Close to Bursting” – issued by the World Economic Forum (WEF) earlier this year warned that many places in the world are on the verge of “water bankruptcy” following a series of regional water “bubbles” over the past 50 years that fuelled economic growth. In a recent water seminar, Dominic Waughray (who is the Senior Director and Head of Environmental Initiatives of the World Economic Forum, and lead author of the report) said that increasing demands for energy and industrial development have already led to near-crisis in many cities in the United States, Australia, and China, some of which have come within 100 days of running dry. Dominic said that 70 of the world’s major rivers were close to running dry, including the Colorado River in the U.S., the Ganges in India, the Nile in Africa, the Yellow River in China, and the Murray-Darling in Australia. He went on to explain that 44% of the world’s population, or about 2.8 billion people, already live in water poverty and that number will rise to almost 4 billion by 2030 based on present trends.
According to the report, water poverty has the real possibility of spilling over into economic poverty. The report stated that the livelihoods of one in three people on the planet will be threatened by water scarcity within 15 years and shortages already lead to an annual loss to global economic growth of about 3.6%. Dominic claimed that the cost of water issues in California was 2% in 2008, and dealing with global water rights and water shortages may be even more difficult than dealing with carbon emissions. He said water-related food shortages had already led to the “breaking down” of the world’s wheat market in 2008, which in turn had led to some states, particularly in the Persian Gulf, taking long leases on land in other countries to grow food to feed their own people.
However, we believe that the gloom-and-doom mentally is vastly overblown. Aside from the fact that many of the local water issues are transitory – the multi-year drought in the U.S. Southwest has been largely alleviated by a recent upsurge in rainfall – nearly all of the water scarcity related issues are solvable through existing and improving technologies and business models. Companies like IBM and Takadu are promising to add sensors and intelligent controls to water distribution systems that will slash the 20% to 30% leaking out today. Rainwater catchment, residential home recycling technologies, and smart landscape irrigation systems will cut residential water use by as much as 30%, and municipal water recycling technology returns up to 90% of the wastewater back into potable water. Similarly, improved irrigation technologies from companies such as Netafilm promise to reduce agricultural water use by 40%. What is lacking, however, are stable governments in developing nations that would encourage investment in expensive water infrastructure. In addition, nations around the world are generally unwilling to encourage free trade of foodstuffs from regions blessed with ample water. What is particularly egregious is governmental interference that precludes the rise of water prices in the face of scarcity. Not only does this contribute to overuse, but undermines the economic value proposition of implementing new water-saving technologies. The WEF would be wise to point the finger at government’s complicity in growing water issues; it should insist on market-based water pricing, free trade, and property rights to alleviate increasing water scarcity.
