Charts of the Day: Financing water

As Blue Gold blogger Anne-Louise pointed out in an earlier post, global water infrastructure is shockingly inefficient. Governance in managing water resources is poor, particularly in emerging economies, thereby underlining the need for private financing to step in and invest in better water infrastructure. Better oversight would effectively manage the increasing competition for water between agriculture and other uses. Two graphs illustrate this shocking reality, pulled out of a recent report by the OECD.

ImageSource: OECD

This basically shows the onset of a water crisis, particularly in emerging countries due to economic development, population growth, urbanisation and climate change. Leaving aside the impact of climate change, the number of people living under “sever water stress” i.e. water shortage, is expected to rise to nearly 4bn people by 2030 — nearly half of the forecast world population! As you can see in the chart, most of those affected will be living in the BRIC countries (Brazil, Russia, India and China). ROW = rest of the world. As the OECD report says:

Water used in agriculture will face growing competition from households and from the industry and energy sectors. An expansion of biofuels production would further intensify competition for water within the agricultural sector.

Another shocking graph is how much water management has been inefficient. Put simply, how much water has been wasted. According to the OECD, leakage in well-run water utilities in OECD countries usually ranges between 10%-30% of water production. But in developing economies it frequently exceeds 40%, and sometimes up to 70%! That increases investment and production costs: infrastructure is oversized and operating costs, both in absolute terms and per unit of water sold, are higher than they should be. As a result, the OECD says even small investments can help: “Relatively small investments are needed to realise these efficiency gains, but the payback period is usually short, and the returns positive.”

ImageSource: OECD

Better management would boost the economy too, as a study by the Alliance for Water Efficiency in the US found:

The study suggests that water/energy efficiency investments programmes could be implemented quickly and that the economic benefits would be broadly distributed throughout the national economy. The study estimates that the economic output benefits would range between USD 2.5 million and USD 2.8 million per million dollars of direct investment; that GDP benefits would range between USD 1.3 million and USD 1.5 million per million dollars of direct investment; and that between 15 and 22 jobs per million dollars of direct investment could be created.

– Kimiko

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