image: The water crisis puts at risk more than half of the world’s food production by 2050. It also threatens an 8% loss of GDP in countries around the world on average by 2050, with as much as a 15% loss in lower-income countries, and even larger economic consequences beyond: World Commission on Economics of Water
Credit: World Commission on the Economics of Water
Paris — An international group of leaders and experts warns that unless humanity acts with greater boldness and urgency, an increasingly out-of-balance water cycle will wreak havoc on economies and humanity worldwide.
In a landmark report, The Economics of Water: Valuing the Hydrological Cycle as a Global Common Good, the Global Commission on the Economics of Water says the water crisis puts at risk more than half of the world’s food production by 2050. It also threatens an 8% loss of GDP in countries around the world on average by 2050, with as much as a 15% loss in lower-income countries, and even larger economic consequences beyond.
Weak economics, destructive land use, and the persistent mismanagement of water resources have combined with the worsening climate crisis to put the global water cycle under unprecedented stress, the Commission says.
Nearly three billion people and over half of the world’s food production are in areas experiencing drying, or unstable trends in total water availability. Further, several cities are sinking due to the loss of water below the ground.
“Today, half of the world's population faces water scarcity. As this vital resource becomes increasingly scarce, food security and human development are at risk — and we are allowing this to happen,” observed Johan Rockström, Director of the Potsdam Institute for Climate Impact Research (PIK) and one of the Commission’s four co-chairs. “For the first time in human history, we are pushing the global water cycle out of balance. Precipitation, the source of all freshwater, can no longer be relied upon due to human caused climate and land use change, undermining the basis for human wellbeing and the global economy."
A new economics of water
The report argues that existing approaches have led to the water crisis. They ignore the multiple values of water across whole economies and in preserving nature’s critical ecosystems. The widespread under-pricing of water today also encourages its profligate use across the economy and skews the locations of the most water-intensive crops and industries, such as data centres and coal-fired power plants, to areas most at risk of water stress. Proper pricing, subsidies and other incentives must be used to ensure water is used more efficiently in every sector, more equitably in every population, and more sustainably.
“The global water crisis is a tragedy but is also an opportunity to transform the economics of water – and to start by valuing water properly so as to recognize its scarcity and the many benefits it delivers,” said Ngozi Okonjo-Iweala, Director General of the World Trade Organization and a co-chair of the Commission.
Current approaches also deal predominantly with the water we can see – the “blue water” in our rivers, lakes, and aquifers. They typically overlook a critical freshwater resource, namely “green water” – the moisture in our soils and plant life, which ultimately returns and circulates through the atmosphere, generating around half the rainfall we receive on land. A stable supply of green water is hence linked inextricably to stable patterns of rainfall, itself critical to economies and livelihoods. It also provides crucial support for the natural storage of carbon dioxide in the soil and mitigation of climate change.
The water challenge becomes even more pressing when we recognise how much water each person needs daily to live a dignified life. The Global Commission offers a new perspective on a just access to water: While 50 to 100 litres per day is required to meet essential health and hygiene needs, a dignified life – including adequate nutrition and consumption – requires a minimum of about 4,000 litres per person per day. Most regions cannot secure this much water locally. Although trade could help distribute water resources more equitably, it is hampered by misaligned policies and the water crisis itself.
The Commission argues that the crisis demands bolder, more integrated thinking, and a recasting of policy frameworks – in short, a new economics of water. It begins by recognising that the water cycle must now be governed as a global common good. This can only be done collectively, through concerted action in every country, through collaboration across boundaries and cultures, and for benefits that will be felt everywhere. Critically, we must redefine the way we value water properly to reflect its scarcity, while at the same time recognising the multiple benefits of water and a stable global hydrological cycle across economies. We must shape economies to allocate and use water properly from the start, and avoid having to fix problems such as water pollution and other “externalities” after the fact.
The report calls for a fundamental regearing of where water sits in economies, enabled by a “mission-driven” approach. This paradigm shift requires the participation of all stakeholders, from local to global, to achieve the missions that address the most important challenges of the global water crisis. Such missions would encourage innovations, capacity building and investments, and be evaluated not in terms of short-run costs and benefits but, rather, for how they can catalyse long-run, economy-wide benefits.
“We must move beyond a reactive market-fixing approach toward a proactive market-shaping one that catalyses mission-oriented innovation and builds symbiotic partnerships around our biggest water challenges. Only with a new economic mindset can governments value, govern, and finance water in a way that drives the transformation we need,” said Mariana Mazzucato, Professor at University College London where she is Founding Director of the UCL Institute for Innovation and Public Purpose (IIPP), and one of the co-chairs of the Commission.
The report recommends five such missions:
Mission 1: Launch a new revolution in food systems
Transform agriculture to sustain the planet by scaling up micro-irrigation and radically improving water productivity, reducing reliance on nitrogen-based fertilisers, spreading regenerative agriculture, and shifting progressively away from animal to plant-based diets.
Mission 2: Conserve and restore natural habitats critical to protecting green water
Conserve 30% of forests and restore 30% of degraded ecosystems by 2030. Priority should be given to protecting and restoring those areas that can best contribute to a stable water cycle.
Mission 3: Establish a circular water economy
Capture the full value of every drop by treating and reusing wastewater, reducing distribution inefficiencies and recovering valuable resources.
Mission 4: Enable a clean-energy and AI-rich era with much lower water intensity
Renewable energy, semiconductors and artificial intelligence (AI) are defining a new economic era. We must spur innovation with high ambitions and secure equity, sustainability and efficiency to ensure their growth does not exacerbate global water stresses or constrain the benefits they provide.
Mission 5: Ensure no child dies from unsafe water by 2030
Currently, over 1,000 children die every day from unsafe water. Ensure access to clean water for rural and hard-to-reach communities, including investing in decentralized water treatment and sanitation systems.
The Commission has identified critical enablers for the five missions, reflecting key aspects of this new way of governing, nationally and internationally to benefit people and the planet:
● Govern partnerships, property rights, and contracts for a just and sustainable water future Forge more symbiotic partnerships and address legacy water rights using conditionalities.
● Shape finance for a safe, just and sustainable water future
Address public and private underfunding; redirect harmful subsidies; establish “Just Water Partnerships” to design, implement and finance transition towards a just and safe water future in low- and lower-middle-income countries.
● Harness data as a foundation for action
Improve global water data infrastructure; promote corporate water footprint disclosure covering green and blue water, and value water as natural capital.
● Build global water governance
Create a multi-sectoral Global Water Pact to address both green and blue water challenges and stabilise the hydrological cycle.
A just and sustainable water future: How to turn the tide
The Report calls for governments across the world to deliver a “new course for water at every scale” and reinvigorate structures of international cooperation to address shared water challenges.
Tharman Shanmugaratnam, President of Singapore and one of the co-chairs of the Commission, said: “We can only solve this crisis if we think in much broader terms about how we govern water. By recognising water’s interactions with climate change and biodiversity. By mobilising all our economic tools, and both public and private finance, to innovate and invest in water. By thinking and acting multilaterally. So we not only save countless children’s lives and improve communities’ livelihoods today, but secure a much better and safer future everywhere.”
About the Global Commission on the Economics of Water
The Global Commission on the Economics of Water (GCEW) was convened in May 2022 at the initiative of the Government of the Netherlands as co-host of the UN 2023 Water Conference, with the aim of redefining the way we value and govern water for the common good, and completing the sustainability trilogy that began with the Stern Review on the Economics of Climate Change and the Dasgupta Review on the Economics of Biodiversity.
It is co-chaired by Mariana Mazzucato, Ngozi Okonjo-Iweala, Johan Rockström, and Tharman Shanmugaratnam, and comprises an independent and diverse group of experts from science, economics and policy-making, with leadership experience at community, city, national and multilateral levels.
The Co-Chairs and Commissioners contributed in their personal capacity, the views and recommendations of the GCEW do not necessarily reflect the opinions of their institutions and are independent of the Government of the Netherlands.