Water in Todays Economy

More than 70 percent of the world's water is used for food and fiber production in agriculture (see Table 8-1), a source of livelihood for some 80 percent of the world's poor. Industry consumes an additional 20 percent, and less than 10 percent of global freshwater abstraction is used for drinking water and sanitation. Water used to sustain ecosystem services is left out of these global calculations, as are navigational, recreational, and other direct and indirect uses that do not involve monitorable withdrawals of water from rivers, lakes, or groundwater reserves.4 As the primary user of water, agriculture is at the heart of the water management challenge. While the average person requires two to five liters of water a day for drinking, average daily food intakes embody some 3,000 liters of water. Diets in wealthier countries involve even higher water usage. A single hamburger requires over 10,000 liters of water, taking into account what is used to produce corn to feed the cows. The International Water Management Institute recently completed a five-year comprehensive assessment of water management in agriculture to determine whether there will be sufficient water to grow enough food in 2050. It found that this will only be possible with real changes to the way in which the world produces food and manages the environment.5

Table 8-I.Water Use by Sector

Domestic and

Region Agriculture




Developing countries




Industrial countries








Source: See endnote 4.

Water in a Sustainable Economy SPEC

A number of global trends related to agricultural production are set to have profound effects on the global water balance. Growing populations and changing diets are the primary drivers, likely tempered to some degree by gains in land and water productivity. Trade in food and fiber products could either ease or aggravate water scarcity. A surge in biofuel production may help mitigate climate change, but it will certainly consume great volumes of water. In many places, agricultural water constraints are beginning to pinch, while in growing economies the competition for water from industries and municipalities is rising.6

As agriculture, industry, and households vie for ever larger shares of water, ecosystems risk being the greatest losers.


uted to unsafe water, sanitation, and hygiene practices—all, in theory, preventable.8

In September 2000 the global community agreed to a set of Millennium Development Goals (MDGs) that includes reducing by half the proportion of people in the world living without access to water and sanitation by 2015—at an estimated cost of some $30 billion a year. At this time it appears that this target can be achieved, although not uniformly in all countries. But the MDG goal for drinking water is not an end point. World population—today over 6.5 billion people—is expected to reach around 9 billion by 2050. Clean, potable water will need to be provided to all. Moreover, the challenge of ensuring sustainable access will remain long after the MDG investment targets are (or are not) met. In industrial countries, for example, it is estimated that $200 billion a year is needed just to replace aging water supply and sanitation systems, reduce leakage rates, and protect water quality.9

As agriculture, industry, and households vie for ever larger shares of water, ecosystems risk being the greatest losers. To continue to provide a range of provisioning, regulating, and cultural services, ecosystems need clean water. This demand, however, is often not taken into account when water is abstracted from aquifers or rivers are used as sewers. To maintain downstream ecosystems and their services, societies need to keep (semi-) natural river flows and leave water of sufficient quality in the river. This is referred to as the "environmental flow." Maintaining or restoring environmental flows forms a real challenge when economic growth and development intensify the competition for increasingly scarce water resources.10

It is clear that some level of tradeoff needs to be made between economic development and water for ecosystems. Increasingly, however, efforts to enhance economies and the

Water use for energy production, industry, and services is the next largest user of water globally and the most rapidly growing one. Typically, developing economies tend to be highly dependent on agriculture, with the relative share of industrial production rising as the economy grows. Water use patterns mirror these trends: industries in industrial economies withdraw twice the global average (over 40 percent), while those in developing countries account for roughly 10 percent of national water usage.7

While drinking water and sanitation claim a relatively modest share of the global water resource, access to safe drinking water is recognized as an urgent global priority. The challenge of providing these services, however, is daunting. Worldwide, more than 1.1 billion people currently lack access to improved water supplies, and over 2.7 billion lack sanitation. These people are, of course, the very poor. Two thirds of those without access to water earn less than $2 a day. In 2000, at least 1.7 million deaths were attrib-

SPECIAL SECTION: PAYING FOR NATURE'S SERVICES Water in a Sustainable Economy environment go hand in hand. People are now defining dual benefits from keeping rivers alive and investing in economic sectors toward greater water use efficiency. Citizens are calling for action to protect water, air, and forests. Consumers are demanding "greener" businesses practices, which creates direct economic returns for sustainable management of natural resources and ecosystems. Growing recognition of the value of ecosystems and their services for economies is often behind these changes.

Managing water across scales. Water shortages are most clearly seen at local levels, but managing water is a challenge at all scales. Because water is bulky and expensive to store and move, it is generally managed and allocated at a fairly local level. Integrated water resources management—a process promoting the coordinated development and management of water, land, and related resources— focuses on the basin level and tries to reconcile various water users and demands to arrive at a sustainable system. Working at basin level is often difficult, however, because political and administrative boundaries rarely correspond with hydrological ones.11

At the national level, reservoirs and pipelines are built that store and transport water to where it is needed, potentially enabling water management on a countrywide scale. Most countries aspire to integrated water resources management at the national level, but this requires significant coordination across a range of institutions and stakeholders.

At the international level, integrated approaches are being proposed in trans-boundary river basins. Transboundary rivers join countries, so uses in one country are likely to have direct impacts on others. There are more than 260 such rivers in the world, posing potential conflicts over water but also real potential for cooperation. Transbound-

ary basin management initiatives are increasingly being seen, with many positive results.12

Trade in goods that embody significant amounts of water can also transcend this resource's local nature. Rather than moving water itself from scarce to plentiful regions, "virtual water" can be traded by exporting water-intensive goods from wet to dry regions. In these ways, while water is managed locally, it can have impacts on (and be affected by) water management and economic policies at many scales.13

Water management and equity. Water policies and investments can have important equity impacts through the opportunities and risks they create for different groups and individuals within an economy. The availability of and access to reliable water of good quality in a particular region will help spur that region's growth, whereas absence of water or lack of access to it can reduce economic opportunities and investments. Providing access to water of good quality at an affordable price creates incentives and opportunities for different sorts of economic activities in different places. Not doing so effectively forecloses opportunities or makes them unprofitable. Thus the mix and character of economic activities undertaken in a region—the structure of the regional economy, in other words—is influenced by water policies and infrastructure investments, whether intentionally or incidentally.

Great wealth has been built in many countries where early settlers and entrepreneurs obtained valuable water rights or passed the cost of pollution and natural resource degradation on to others or to future generations. In other countries, millions of people remain in poverty due in part to the burden of waterborne diseases and a lack of reliable water for agriculture or other forms of economic development.

The Human Development Report 2006


prepared by the U.N. Development Programme highlighted the fact that the water crisis is a challenge of poverty, inequality, and unequal power relationships as much as it is about physical water scarcity. The issues of equity and power, in addition to the strong spiritual and cultural associations that societies have with this vital resource, give rise to an extremely complex and often emotive political economy around water.14

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