Study Highlights Water Scarcity Threat to Business

March 1, 2011
Unless more sustainable water resource management practices are adopted by companies and individuals, almost half of the global economy ...

by James Laughlin, Managing Editor

Unless more sustainable water resource management practices are adopted by companies and individuals, almost half of the global economy and more than half of the world's population will be exposed to severe water scarcity by 2050, according to research released by Veolia Water for World Water Day, held March 22.

The study was conducted by Veolia and the International Food Policy Research Institute (IFPRI), an international agricultural research center studying sustainable solutions to reduce hunger and poverty. The study assessed water stress, measured as water use in excess of 40 percent of available resources to identify countries and regions where water scarcity will put economic development and food production at risk.

Researchers found that, by 2050, current "business as usual" water management practices will put at risk approximately $63 trillion, or 45 percent of the projected 2050 global GDP (at 2000 prices), equivalent to 1.5 times the size of today's entire global economy. Moreover, 4.8 billion people (52 percent of the world population) will live in water-stressed areas by 2050.

However, if sustainable behaviors and practices are adopted, more than 1 billion people and approximately $17 trillion of GDP could escape exposure to risks and challenges from severe water scarcity. Implementation of sustainable water management practices would also reduce by 21 percent the number of children projected to suffer from malnourishment compared to a business-as-usual approach.

To assess the impact of water on economic growth, IFPRI and Veolia Water analyzed what economic growth levels can be sustained at today's water management efficiency and to what extent gains in efficiency and water productivity (economic output per drop) can sustain higher levels of growth.

Four scenarios were developed representing four different levels of water management efficiency -- Business as Usual, Low-Carbon, Grey, and Blue.

The Blue model is centered on improving water productivity - producing more with less water. This includes greater public awareness; higher levels of water reuse; improvements in water technology; and greater energy efficiency. The Blue model would sustain higher economic growth through 2050. In addition, there would be significant social and health benefits resulting from lower food prices.

Without fundamental change in water management and behaviors, business as usual would significantly impact investment decisions and operational costs for agricultural and economic development, and affect the competitiveness of certain regions. Low-income countries will be especially impacted by water scarcity.

While carbon reduction is a popular movement these days, the Low-Carbon model remained close to business as usual levels because low-carbon energy production requires more water due to greater levels of biomass consumption and hydropower development.

The Grey Model -- growth at all cost - leads to unsustainable water practices and ultimately inhibits growth. For China, India and many other rapidly developing countries, water scarcity has already started to materially risk growth. Even many of the most advanced regions of the industrialized world such as California and Florida will have to cope with growing pressure on water resources and their effects on growth.

A White Paper on the study is available at Click on the Sustainable Development, then A Sustainable Economy to navigate to the paper, "Finding a Blue Path for a Sustainable Economy."

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