According to the latest report published by the World Bank Group (WBG) last week, the synergistic effects of rising populations, higher incomes and growing cities is leading to unprecedented water demand. This demand will be problematic given the uncertainty surrounding water supplies around the world. The WBGs ‘High and Dry: Climate Change, Water and the Economy’ report states that unless urgent action is taken, water scarcity will occur in regions where water is currently abundant (e.g. Central Africa and East Asia), and scarcity will become far worse in areas of already short supply (such as the Middle East and the Sahel region in Africa). This report estimates that the economic cost of future water shortage impacts on agriculture, health and income could be as high as 6% of each country’s GDP by 2050.

Water is critical to agricultural production, and its depletion will have significant impacts on economic growth. With climate change exacerbating the adversities faced by water shortage, the impacts of inadequate water management are disproportionately felt by the poor, who are more likely to rely on agriculture sustained by rainfall in order to feed their families. In addition, poorer agricultural populations around the world predominantly live on land that is more prone to flooding so are most at risk of water contamination and inadequate sanitation. In order to alleviate global poverty it is essential to ensure that under increasing scarcity a sufficient and constant supply of water is delivered to communities, with sanitation and sustainable processes a priority.

Climate change is recognised as increasing the likelihood of water shortage, changing population dynamics and posing risks to economic growth around the world

Climate change is recognised as increasing the likelihood of water shortage, changing population dynamics and posing risks to economic growth around the world. Heat waves and highly variable precipitation rates reduce the availability and quality of water and increase water demand. Rising seas reduce groundwater quality as a result of saltwater intrusion and can cause permanent damage to urban infrastructure. Changes in the availability of water due to either droughts or floods can induce migration, conflict and violence in areas where economic growth is linked to rainfall. In an increasingly globalised world, it is practically impossible to restrict the impacts of increased migration and violence to a particular or localised region. In areas where there is significant inequality, people will move from poverty stricken regions to more prosperous regions if they believe they have a better chance of finding long-term employment in the more prosperous regions to support their families. The annual global costs of climate change adaptation between now and 2050 are estimated to be $72 – $82 billion, depending on which climate scenario the estimate is based on. Cities could bear more than 80% of these costs.

In order to adapt to water scarcity, it is crucial to recognise the links between water, food, energy, cities and the environment. Prudent stewardship of water resources will pay significant dividends and can be cost effective, as well-reasoned policies and wise investments can realise significant benefits in terms of improved welfare and higher economic growth. According to the ‘High and Dry: Climate Change, Water and the Economy’ report there are three overarching policy priorities that countries should consider in creating a water secure and climate resilient economy:

1. Optimising the use of water through better planning and incentives

  • Creating climate resilient economies in a warming world will require better ways of allocating increasingly scarce water resources to higher value uses. Planning and regulation or market based signals through instruments (e.g. prices and permits) can facilitate a more efficient allocation of water resources
  • Water efficiency must increase. New water-saving technologies, incentives, education and awareness must be created and adopted. Changes in subsidy frameworks, public investments in infrastructure, selective forms of crop insurance and increasing access to credit may be required in order to facilitate this

2. Expanding water supply and availability where appropriate

  • This includes investments in water storage infrastructure (e.g. dams so water is available when it is required), water recycling, reuse and desalination (where it is financially viable)
  • Methods such as recycling, reuse and desalination need to be used with due diligence as other initiatives such as groundwater recharge and wetland preservation may offer lower risk, lower cost and higher returns than other approaches. Appropriate policies that promote water efficiency and improve water allocation across sectors must also accompany whichever methods are chosen

3. Reducing the impact of extremes, variability and uncertainty

  • As well as accounting for droughts, economies will need to be ‘waterproofed’ to limit the impact of extreme weather events and rainfall variability in areas subject to flooding and inundation
  • Better urban planning, risk management and public engagement will reduce the exposure of cities to flood risk. Expanding crop insurance programs in rural areas can protect farmers against rainfall shocks. Significant capital investments including seawalls, levees and dams can protect coastal cities from storm surges and floods

Read the ‘High and Dry: Climate Change, Water and the Economy’ report here

The latest World Bank Group report reinforces yet again the need for Governments to act prudently with respect to its resources in order to ensure equitable access for all its citizens in the face of climate change. It is clear from the report that Governments need to embrace innovation in four main contexts in order to demonstrate prudence: planning, technology, engagement, and financial investment. Without innovative approaches in these areas it is going to be difficult for Governments to prevent the impacts of future water shortage, costing them up to 6% of their GDP by 2050.

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