Financing water virtually

Financing of water is usually about money paid directly to get water or to get the means of providing water. But another way of effectively finance water is to pay for goods which needed a lot of water to be produced: By importing so-called water heavy goods, we in effect pay to avoid having to provide the water for the production. The Institute of Civil Engineers is estimating that more than two thirds of the UK water needs are actually met by import. As grain, cheese and beef crosses the border into Britain, the water used to produce those foods – the embedded or virtual water – in a sense crosses with it.

A WWF report on the UK water consumption writes: “While average household water use in the UK is around 150 litres per person per day, our consumption of produce from other countries means that each of us effectively soaks up a staggering 4,645 litres of the world’s water every day. Most of this is in the form of ‘virtual water’, i.e. water that has been used to grow the crops that make the food we eat, the beverages we drink and the clothes we wear.”

When looked upon as a source of finance, it makes sense to ask the usual questions demanded of a financial solution: What does it cost? How stable is the financing and what else could we do with the same money.

The cost obviously varies. As the pound strengthens compared to the main water exporters (Ireland, South America, Ghana,  import would be cheaper and in principle it might be cheap enough to make the home made products obsolete. This would save water, which would be no small feat in a country feeling the drought and where the use of water has long since ceased to be sustainable.

Should the pound weaken, the trade would be more expensive and raise the demand for home-grown goods. This would be hard on the environment.

The stability of the UK water trade is questionable. By relying on foreign sources of food, we risk being cut off if the harvest fails or for political reasons. The risk of bad harvests is ever increasing, as many of the exporting countries are actually anything but rich in water. Eventually, drought or political pressure might have to put an end to this trade.

But what else could we do? As mentioned, the UK is not exactly well watered, in spite of the past month’s rain. In fact, we are in drought and there is an ongoing and unsustainable depletion of the UK rivers, lakes and aquifers. At the moment, there is no way, we could feed ourselves.

If the world decides to price water in a manner comparable to the importance and scarcity of this resource, UK would lose out.

A way forward would be to actively start seeking out more drought resistant crops and change the UK dependence on water heavy foods like beef, grain and rice. This is much easier said than done, but as the population grows and keeps growing especially in the part of the country which can sustain further growth the least, we may have little alternative. Financing our water use through imports is an uncertain way of providing for the needs of Britain, even if the trade makes economical sense. Maybe, if the emerging economies strengthen against our failing currency, this too may change.

It would be prudent for the utilities to prepare for a very different future.

– Anne-Louise

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