by Elliott Morss, Morss Global Finance
Author’s note: This is the first in a three part series on global water problems. In the second part, water “experts” will be interviewed. The third part will consider investment opportunities in the water sector. See Part 2 (Opinion) and Part 3 (Investing).
We hear a lot about global crises every day – terrorism, global warming, children starving, children obese, running out of oil, and population bombs. Come to think of it, crisis mongering is not new. The media loves crises: they get more watchers and consequently mo ad revenues.
You might remember Paul R. Ehrlich, a Noble Prize winner and Stanford Professor. Back in 1980, he wrote “The Population Bomb” in which he claimed population growth would soon outrun the supply of food and natural resources – a real global crisis! Julian Simon, also an academic was skeptical, so he offered Ehrlich a wager. Erhlich could choose five commodities. Simon would bet him $200 per commodity that its price would be lower at whatever future date Ehrlich chose. Ehrlich bet that the prices of chromium, copper, nickel, tin, and tungsten would be higher in a decade – 1990. As it happened, the world’s population grew more rapidly (by 800 million) 1980 – 1990 than in any decade in history. But Erhlich lost the bet. The prices of the commodities he chose at the end of the decade were all lower.
We hear now that we have a global water crisis. In what follows, the arguments for this latest crisis will be examined with facts and analysis.
Are We Running Out of Water?
As Table 1 indicates, we have plenty of water. 70% of the earth’s surface is covered by water and with global warming; an increasing amount of it is in liquid form. Only 3% of it is not salted, but that is a lot. We are not running out. And keep in mind that whether we are running out of water is hardly a meaningful question. This is because unlike oil and other earth materials, we don’t “use up” water: in almost all applications – agriculture, industry, and human consumption – virtually all water immediately recycles.
Table 1. – Global Water Resources
Source: Meena Palaniappan and Peter H. Gleick, “Peak Water”
So let’s ask a more meaningful question: do we have enough fresh water? Estimates are that we use slightly more than 50% of all renewable and “accessible” freshwater flows annually. And of course, these data vary significantly by region and year. Table 2 provides data on the water withdrawal rates of the largest 20 countries. China and the US have acceptably low overall withdrawal rates but we hear of serious water problems in each country. Clearly, many water problems are in-country distribution issues. Egypt? A real problem country. Anyone who has flown south from Cairo has seen a narrow strip of green on both sides of the Nile – the rest – desert.
Table 2. – Water Withdrawal and Per Capita Usage, Largest Countries, 2011
Source: World Development Indicators 2013, The World Bank
Consider next the countries with the highest withdrawal rate (Table 3). How do these countries get by? Many use desalinization plants. Desalinization technologies are well-advanced and more than 10,000 desalinization plants are now in use. According to a recent study by the Pacific Institute, desalinization requires approximately twice as much power as wastewater reuse for the same volume of water. Yes, it is more expensive but it works. However, landlocked countries do not have this option, and Hungary, Turkmenistan, Uzbekistan, Moldova, and Azerbaijan are landlocked countries….
Table 3. – Countries With The Highest Withdrawal Rates
Source: World Development Indicators 2013, The World Bank
The Real Water Problem
In attempting to deal with the water problem, it is important to understand how water is used. Globally, 69% of all water is used for agricultural irrigation, 17% is used by industry, and only 13% is used domestically.
Next, I offer a few bulleted items that some people worry about:
- “The world’s population is growing by about 80 million people a year, implying increased freshwater demand of about 64 billion cubic meters a year. Competition for water exists at all levels and is forecast to increase with demands for water in almost all countries.” Source: WWDR, 2012
- “Part of the current pressure on water resources comes from increasing demands for animal feed. Meat production requires 8-10 times more water than cereal production.” Source: WWDR, 2012 How about Ethanol?
- “Water withdrawals are predicted to increase by 50 percent by 2025 in developing countries, and 18 per cent in developed countries.” Source: Global Environment Outlook: environment for development (GEO-4).
- “Over 1.4 billion people currently live in river basins where the use of water exceeds minimum recharge levels, leading to the desiccation of rivers and depletion of groundwater.” Source: Human Development Report 2006
- “In 60 percent of European cities with more than 100,000 people, groundwater is being used at a faster rate than it can be replenished.” Source: World Business Council For Sustainable Development (WBCSD).
My response to these concerns? They can be dealt with. The real problem is in the area the World Health Organization calls “Water, Sanitation and Hygiene”.
According to the World Health Organization (WHO), there are approximately 1.9 million deaths annually attributable to “water, sanitation and hygiene” problems, and most of these occur in developing nations. The WHO has also developed a health risk statistic – the Disability-Adjusted Life Years (DALYs). It measures years lost both because of a premature mortality and years lost due to time lived in less than full health. Data on how “water, sanitation and hygiene” problems compare with other problems are presented in Table 4.
Table 4. – Deaths and DALYs from Selected Problems
These data are subject to interpretation inasmuch as there is considerable discretion in deciding what something is “attributable to”. For example, the first and third leading causes of death are high blood pressure and high cholesterol, both having to do with being overweight/obese. A side note in passing. The FAO reports
“that while some 870 million people were still hungry in 2010-2012…1.4 billion are overweight, of whom 500 million are obese.”
Back to water: in short, it is clear that there is a global water problem, mostly having to do with people’s health, and most of it located in developing countries. But before getting to this problem, let’s look at the US.
US Water Problems
As Jim Thebaut portrays in his video documentary “Running Dry” there are real water availability problems in the southwest of the country. The reason is obvious – water has been treated as a free good. And where have most of the benefits gone? To agriculture – a huge subsidy. And put that together with the government subsidies to agriculture (Table 5), it is outrageous. Of particular note – the tobacco subsidies – subsidies to grow a crop that is highly addictive and a real killer.
Table 5. – US Farm Subsidies, 2012
Source: Environmental Working Group
How can this be explained? Open Secrets estimates agribusiness paid lobbyists $139 million in 2012 to work for them.
But there is a solution to the US water problem in the southwest: Come up with a regional plan to satisfy the water needs for the next 25 years (additional desalinization plants will be needed) and float a bond to finance it. Figure out how much it would cost to amortize the debt over the next 25 years. Add the annual amortization costs to annual “water” operating costs and charge water users accordingly. Water costs would increase substantially. That is what should be done.
Consider next developing countries where there is a serious water problem. The UN estimates they could be cut in half for $20 billion a year. $20 billion is 0.2% of bilateral and multilateral development assistance. $20 billion is only 0.02% of global GDP. But should more money go into ending water problems? There are certainly other problems in the developing world, and it is probably an either/or situation. Consider the seriousness and progress on some of the other UN Millenium Development Goals:
- The proportion of people living in extreme poverty has been halved at the global level. The world reached the poverty reduction target five years ahead of schedule. In developing regions, the proportion of people living on less than $1.25 a day fell from 47 per cent in 1990 to 22 per cent in 2010. About 700 million fewer people lived in conditions of extreme poverty in 2010 than in 1990.
- Remarkable gains have been made in the fight against malaria and tuberculosis. Between 2000 and 2010, mortality rates from malaria fell by more than 25 per cent globally. An estimated 1.1 million deaths from malaria were averted over this period. Death rates from tuberculosis at the global level and in several regions are likely to be halved by 2015, compared to 1990 levels. Between 1995 and 2011, a cumulative total of 51 million tuberculosis patients were successfully treated, saving 20 million lives.
- The proportion of slum dwellers in the cities and metropolises of the developing world is declining Between 2000 and 2010, over 200 million slum dwellers benefitted from improved water sources, sanitation facilities, durable housing or sufficient living space, thereby exceeding the 100 million MDG target.
- The hunger reduction target is within reach. The proportion of undernourished people in developing regions decreased from 23.2 per cent in 1990–1992 to 14.9 per cent in 2010–2012. Given reinvigorated efforts, the target of halving the percentage of people suffering from hunger by 2015 appears to be within reach.
- Environmental sustainability is under severe threat, demanding a new level of global cooperation. The growth in global emissions of carbon dioxide (CO2) is accelerating, and emissions today are more than 46 per cent higher than their 1990 level.
- Big gains have been made in child survival, but more must be done to meet our obligations to the youngest generation Worldwide, the mortality rate for children under five dropped by 41 per cent—from 87 deaths per 1,000 live births in 1990 to 51 in 2011.
- Too many children are still denied their right to primary education. Between 2000 and 2011, the number of children out of school declined by almost half—from 102 million to 57 million.
In short, there are competing claims for aid monies. So what progress has there been on the water problems? I quote from the UN:
“Over 2 billion people gained access to improved sources of drinking water. Over the last 21 years, more than 2.1 billion people gained access to improved drinking water sources. The proportion of the global population using such sources reached 89 per cent in 2010, up from 76 per cent in 1990. This means that the MDG drinking water target was met five years ahead of the target date, despite significant population growth. Gains in sanitation are impressive. From 1990 to 2011, 1.9 billion people gained access to a latrine, flush toilet or other improved sanitation facility.”
This is great progress.
Is there a global water crisis? No. We are certainly not “running out of water”. But worldwide, water is “given away”, treated as a “free good”. This should stop. Water should be sold for what it costs to provide. In developing countries, water is frequently “not clean”. But in recent years great progress has been made on this issue and it should be continued.
© Elliott R. Morss 2013 All Rights Reserved