Global leaders warn of food production risk, GDP loss over water crisis

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 said the water crisis puts at risk more than half of the world’s food production by 2050.

It also threatens an eight per cent loss of Gross Domestic Product (GDP) in countries globally on average by 2050, with as much as a 15 per cent loss in lower-income countries, and even larger economic consequences beyond.

The report called on governments to deliver a “new course for water at every scale” and reinvigorate structures of international cooperation to address shared water challenges. 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.

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 said. About 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 water loss below the ground.

The report argued 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 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 to recognise its scarcity and the many benefits it delivers,” said the Director General of the World Trade Organisation and a co-chair of the Commission, Ngozi Okonjo-Iweala.

“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.

According to them, “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 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 argued 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 also 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 called for a fundamental re-engineering 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.

“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 the Director of the Potsdam Institute for Climate Impact Research (PIK) and one of the Commission’s four co-chairs, Johan Rockström.

“For the first time in human history, we are pushing the global water cycle out of balance. Precipitation, the source of all freshwaters, 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.”

According to 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. “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.”

“We can only solve this crisis if we think broadly 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,” President of Singapore and one of the co-chairs of the Commission, Tharman Shanmugaratnam, said.