Will 2015 be the turning point for water scarcity?

Over the years, there have been countless calls to action on the water crisis, yet we continue to sleepwalk towards disaster. The fact that the World Economic Forum’s Global Risks Report ranked water scarcity as the top threat to global prosperity is another reminder that the challenge is not going away any time soon. Yet solutions are far from certain, as the current droughts in São Paulo and California demonstrate.

The new Sustainable Development Goals (SDGs) could provide an opportunity for change, as Peter Brabeck-Letmathe and Carl Ganter recently noted, but success will depend on translating high-level aspirations and goals into policies that work on the ground. From the World Water Forum in Korea in April to the United Nations Summit in September, where the SDGs will be formally adopted, there will be a number of important water discussions held around the world.

Many who are involved in the World Economic Forum, including its Global Agenda Council, will be pushing for real progress. So what should we hear in those discussions? Three difficult, but critical, imperatives should be addressed if we are to confront the global water crisis head on:

1. Who gets how much when there isn’t enough? In most locations, more than 90% of water consumption is agricultural. Much of that – even if commercial – does not share the full cost of water supply. The allocation of resources is far from a Pareto optimum. Additional infrastructure and technology, without further transparency on costs of supply and a robust mechanism to share, will simply increase the productivity gap.The complexity of reforming allocation is often so daunting it can feel paralyzing, but successful examples do exist. The water-entitlement market pioneered in Australia’s Murray Darling basin overcame many challenges to transform the agricultural sector and increase the country’s resilience to drought. The government of Gujarat, India, corrected pricing distortions that were leading farmers to overuse scarce groundwater. The government adopted a dual power-cable system that rationed electricity to water pumps while making the pumping more reliable, thus indirectly changing allocations of water to agriculture.
2. Governments must be willing to plan and lead. While allocation issues are probably most urgent where resources are constrained, many countries will need more investment in infrastructure if they are to solve broader quality and variability issues. Attracting investment in water has consistently been a challenge. The capital intensity of water infrastructure means that the marginal value of services is typically much lower than the average long-run cost of providing them. Water infrastructure also provides significant public goods, from improvements in public health to the increase of a city’s resilience. These are valuable, but hard to monetize. These characteristics point to a persistent risk of chronic underinvestment, an unfortunate norm in the water sector. Long-term plans are essential to manage these complexities, and both national and local governments need to be in the driver’s seat of such planning. They must play a leadership role in reconciling economic development, the broad set of benefits of water infrastructure and investment requirements. Private-sector participation in infrastructure delivery – invoked in recent years, with much reason – does not exempt the public sector from the role of intermediating equity issues, managing the persistent free-rider problems that come with water infrastructure and explaining to citizens why they should cover the cost of additional investment. A number of examples of such leadership exist, from Singapore to New York City, and more will have to come.
3. The recognition that natural capital matters. Time and time again, we have seen that water security and natural capital – the ecological integrity of natural systems – complement rather than substitute for each other. Investments in ecological integrity often increase the returns on investment in water security, and the choice between environmental performance and sustainable economic development is often a false dichotomy.Evidence is building globally that proves investments in the ecological integrity of watersheds lead to better outcomes for people. In Quito, Ecuador, investments in watershed health have led to more secure water supply and improved economic development. This model has enormous potential for scale. The water quality for more than 700 million people could be improved by investments in nature, as shown in the Urban Water Blueprint report. Natural capital is rarely transacted through markets, and payments for ecosystem services alone may not be enough to correctly value its underlying common resource. There are sound economic reasons for integrating ecosystem integrity in the management of water resources, and we must see this reflected in the solutions that emerge at the country and regional level, from both private and public sectors.

The year 2015 may indeed be a turning point for water. From the richest nation to the smallest one, the issue now appears to be squarely at the heart of the global agenda. As countries confront challenges such as providing clean water access to residents, matters of resource allocation, public underwriting of common resources and valuing of natural capital will need to be discussed. It’s a necessity if we are to turn the corner in our relationship with the most valuable of resources.

Author: Giulio Boccaletti, Global Managing Director, Water, the Nature Conservancy, Member of the World Economic Forum’s Global Agenda Council on Water, and a Young Global Leader.

Image: Children play in a fountain during a hot and sunny summer day in Nice, southeastern France, July 31, 2014. REUTERS/Eric Gaillard