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Climate Change Could Bring Water Bankruptcy With Grave Consequences

FinLogic FinLogic Quantitative Think Tank Center View Date：2025-04-09 17:33:50

The World Economic Forum warns that in less than 20 years the world may face water bankruptcy caused by mismanagement and over-leveraging of our water supplies in a manner that is as "unsustainable and fragile as that which precipitated the collapse in global financial markets."

One systemic problem is the failure of governments to recognize that water is the resource that links economic growth, food, energy and national security challenges that will be faced by the world over the next few decades. Policies for these key issues tend to ignore consideration of water availability or sustainability under the mistaken view that a renewable resource is infinite.

At the Barcelona climate negotiations this week, the Stockholm International Water Institute, environmental groups and United Nations agencies urged world leaders to recognize water’s critical role in climate change adaptation.

So far, though, their pleas have gone unanswered, says WWF International. The negotiating text mentions the dangers to water resources but offers no solution for water management as a tool for adaptation.

“It is imperative that negotiators recognize the crucial importance of wetlands and freshwater as key factors in any climate adaptation plan,” said Denis Landenbergue, manger of wetlands conservation for WWF International. “To ignore the role of water is to cripple any climate change adaptation plans.”

Economic Growth

Access to freshwater supplies is related to increased economic growth and, conversely, limited water access has been linked to minimal growth, the World Economic Forum writes.

"Those countries, which 25 years ago had low incomes (below US$750 per year per person) yet had access to adequate safe water and sanitation, grew on average 3.7% per year, whereas countries with the same per capita income and limited water access grew at only 0.1% per year in the same period."

Today, water shortages are threatening economic growth in China, India, Indonesia, Australia and the western United States. Drought has decreased Australia’s GDP by 1% in prior years while the U.S. agricultural industry lost $4 billion a year during a two–year drought.

Food

An assessment of water management in agriculture, published by 700 leading scientists, concluded that there will not be sufficient land, water and human capacity to produce food for increasing populations over the next 50 years unless water use for agriculture is improved.

The assessment evaluated water management for agriculture, which was defined to include fisheries and livestock. One problem is arising from a change to diets of higher caloric consumption and more meat, as well as increasing populations that require more water for food production.

"Imagine a canal 10 metres deep, 100 metres wide and 7.1 million kilometres long — long enough to encircle the globe 180 times. This is the amount of water it takes each year to produce food for today’s 6.5 billion people," the authors write.
"Add 2-3 billion more people and accommodate their changing diets from cereals to more meat and vegetables, and that could add another 5 million kilometres to the channel of water needed to feed the world’s people."

Another problem is the governmental mindset to seek new water supplies rather than conserve and manage existing supplies. For example, several countries, such as Saudi Arabia, China and Egypt, are now buying or leasing lands overseas to grow food because of insufficient water supplies at home.

Energy

Water and energy are intertwined, yet the necessity for water resources in energy production is often taken for granted in policy-making discussions.

According to the World Economic Forum, U.S. energy production requires 39 percent of water withdrawals in the country. Water not consumed in production may be returned to a river or lake as thermal pollution that increases the ambient water temperature. The report shows the water consumption required for the production of one megawatt-hour of electricity for each energy source (see chart).

A Department of Energy Report to Congress on the interdependency of energy and water noted how the focus on alternative domestic energy supplies may simply exchange dependency on foreign oil with a dependency on domestic water:

"Operation of some energy facilities has been curtailed due to water concerns, and siting and operation of new energy facilities must take into account the value of water resources.
"U.S. efforts to replace imported energy supplies with nonconventional domestic energy sources have the potential to further increase demand for water."

The failure to manage and conserve water has led to conflicts today regarding whether the limited water supplies should be allocated to energy uses. These conflicts have included droughts preventing the availability of sufficient water supplies for operational needs, low water levels leading to shutdowns of power plants, power plants denied permits to withdraw water, and states opposing the construction of new power plants.

National Security

Historically, water has been a tool or weapon used by the military of nations, and often the right of use or access to water has been the source of conflicts.

Today, we know that our existing global water shortages will worsen with climate change, and that if conservation and management policies are not implemented, more choices will need to be made as to whether water is allocated to people, food, energy or economic growth.

Civil conflicts are exacerbated by water shortages, as the world has seen in drought-stricken Sudan. Add into the mix that 40 percent of the world’s population — two in every five people — lives in lake or river basins that are shared with one or more countries.

“The world’s water resources are our lifeline for survival, and for sustainable development in the 21st century,” former UN Secretary-General Kofi Annan said in announcing the Water for Life Decade, running through 2015. “Together, we must manage them better.”