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Water scarcity threatens growth and stability, study warns

Worsening water scarcity fuelled by climate change could cost regions such as the Middle East and northern Africa up to 6% of their gross domestic product in less than 35 years, the World Bank has warned.

Even places with plenty of water at present would face problems by 2050 as bigger and richer populations in fast-growing cities drive an ‘exponential’ rise in demand for increasingly erratic supplies, the bank said in a report released on Tuesday, 3 May.

The threat is likely to be intensified by drought and other impacts of a changing climate, potentially leading to food price spikes, migration upheavals and even violent conflict.

Jim Yong Kim, the World Bank president, said the findings underlined the need for governments to manage water better.

“Water scarcity is a major threat to economic growth and stability around the world and climate change is making the problem worse,” he said. “If countries do not take action to better manage water resources, our analysis shows some regions with large populations could be living with long periods of negative economic growth.”

Pointing to conflicts in Africa, Brazil and India that have erupted after drier years or floods, the report also warned “there are sound economic reasons to expect rainfall anomalies to cascade into violence”.

The analysis suggested wealthy countries in western Europe and North America were likely to experience ‘negligible damages’, with the bulk of losses being felt in areas such as the Middle East and the Sahel region of Africa.

“Water is a vital factor of production, so diminishing water supplies can translate into slower growth that cloud economic prospects. Some regions could see their growth rates decline by as much as 6% of GDP by 2050 as a result of water-related losses in agriculture, health, income and property - sending them into sustained negative growth,” the study said.

Better water-management policies, on the other hand, could lead growth to accelerate as much as 6% in some regions.

Large parts of the world are already in a state of near-permanent water stress, meaning the net amount of water withdrawn meets or exceeds available supplies, leaving little available for future demand. This includes virtually the whole of south Asia, the Middle East and north Africa – home to 4bn people, or more than half the global population.

Cities are likely to be hit hardest. One in four cities worldwide already experiences water insecurity, and the report said availability could be cut by as much as two- thirds in urban centres by 2050 compared with 2015 levels.

Growing competition for supplies has led companies to spend billions of dollars on water conservation around the world and it has long been acknowledged that governments need to do much more to stem the problem.

The study showed how shortages are often the result of poor water management, not a lack of available water.

“Much of the world’s water is used inefficiently by industry, agriculture, and cities even in arid areas, and much of it is wasted. Some cities lose more water through leaking pipes than they deliver to households.”

Richard Damania, World Bank lead economist and author of the report, said: “When governments respond to water shortages by boosting efficiency and allocating even 25% of water to more highly valued uses, losses decline dramatically and for some regions may even vanish.”

The study suggested that putting a price on water and treating it as a valuable economic resource would alleviate the threat of future shortages. “Water that is provided free promotes and condones overuse and waste,” the report said. “Often, the most inefficient users of water are found in countries with the highest levels of water stress, where incentives are also lacking for prudent water use.”

It pointed to a market-based solution in Australia in the 1990s as an example of how water can be better allocated in a more sustainable and fairer way.

Source: Financial Times

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